Madison finance officials present 2026 operating outlook; unassigned general fund balance at 27%

On June 23, 2025, the Madison Finance Committee received an update on the city’s 2026 operating budget outlook, a review of the 2024 year‑end results and a preliminary 2025 projection from Director Dave Schmidke.

Schmidke told the committee that the city’s net position for the primary government was about $2.1 billion at Dec. 31, 2024, up roughly $246 million from 2023, and that the unassigned general fund balance rose to about $111 million, or roughly 27% of the 2025 budget. "While we're at 27%, that's a very strong level of reserves," Schmidke said.

The nut graf: the stronger fund balance reflects higher investment income and underspending in several agencies, but staff project a structural gap of about $6.2 million for 2026 under cost‑to‑continue assumptions, meaning the city will need a mix of one‑time fund balance, revenue adjustments or ongoing spending changes to close next year’s budget.

Most important facts first: Schmidke summarized the city’s audited financial results and several year‑end adjustments. Key figures presented included a primary government net position of about $2.1 billion, enterprise net position near $1.1 billion (up about $260 million), net general obligation debt of about $681 million and total debt of about $928 million. Schmidke said investment income finished about $18 million above budget in 2024 and that total governmental fund balances were about $379 million.

On revenue and expenditures, Schmidke said general fund revenues finished about 6% above the adopted budget in 2024, driven largely by investment earnings and stronger‑than‑expected building permit and parking fine receipts. Expenditures ended roughly $8 million below final budget, primarily in miscellaneous appropriations (compensated absences and contingent reserve) and in several departments including fire, community development and parks. Vacancy‑related salary savings contributed to that underspending.

On the 2026 outlook, the city’s cost‑to‑continue estimate for current services is roughly $456 million (about 5.5% above the 2025 adopted budget). Schmidke said roughly $24 million of that increase is for salary and benefits, including step and longevity adjustments and placeholders for health insurance and Wisconsin Retirement System changes. He said revenues are preliminarily projected at about $450 million, leaving an approximate $6.2 million gap.

Schmidke noted several specific assumptions and drivers: a 3% assumed general municipal salary increase, a 5% placeholder for Wisconsin Retirement System cost increases, a staff estimate of an 11.5% rise in health insurance costs from the state employee trust fund, nearly $700,000 to support two additional elections in 2026, and a projected general fund subsidy for Metro Transit of about $25 million. He also said the fleet budget and interdepartmental billings rose as equipment and IT costs increased.

The presentation covered policy and calendar matters: the operating budget kickoff has occurred, operating submissions are due in mid‑July, agency briefings are scheduled for mid‑August, the capital budget will be introduced in early September and the operating budget in early October with council adoption expected in November. Schmidke said the finance staff will present a midyear projection at the July 22 Finance Committee meeting and will update the five‑year outlook before formal budget actions.

Committee members asked how the stronger 2024 results might affect the five‑year plan. Schmidke said the five‑year outlook has not yet been updated and that while additional one‑time fund balance could be applied to later years, doing so affects only one‑time balances and does not close ongoing structural gaps. "Using fund balance is a one‑time source of revenue, whereas the special charges are a permanent or an ongoing amount," he said.

Other committee questions covered the long‑term results‑based budgeting transition, a compensation study and state budget developments. Schmidke said the results‑oriented budgeting work and a planned data warehouse are multi‑year efforts, with a multi‑year horizon expected to fully implement the analytic tools. He said a compensation study contractor was finishing work and that any substantive compensation changes would likely be phased in over multiple budgets.

Ending: staff will return July 22 with midyear projections and more detailed 2025 estimates; the executive budget and formal recommendations for 2026 will follow the standard September–November schedule.