Middleton staff outline 2026 budget outlook: modest state aid increases but multi‑year gaps persist
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Summary
City of Middleton staff told the finance committee a recent state budget will add modest aid (including a 3.4% shared-revenue boost) and an estimated $81,000 in state funding next year, but multi-year projections still show growing gaps and a near-term shortfall of about $150,000.
Speaker 5, a city staff member presenting the City of Middleton’s Part 2 budget kickoff, told the finance committee the biannual state budget "was approved with bipartisan support and signed into law by Governor Evers on 07/03/2025," and outlined several municipal impacts relevant to the 2026 budget.
The presenter said the state package includes additional funding for transportation and municipal aid, higher EMS training cost reimbursement to support recruitment, expanded bonding authority for environmental projects, and programmatic changes to the state innovation grant intended to increase flexibility. "That requirement for a 10% reduction in cost has been replaced with a requirement that the combined cost cannot exceed 115 of the prior year cost, and it changed the minimum duration period for an agreement to 3 years," Speaker 5 said, adding that Department of Revenue rules are still forthcoming.
Among Middleton-specific estimates, Speaker 5 said shared revenue is projected to increase by 3.4% and that, across impacted programs, the city is looking at roughly an $81,000 increase in state aid for the general fund next year (about a 2.4% increase for that aid). The presenter also gave a broader estimate of approximately $561,000 in additional revenue across state aid, charges for services and investment income, representing about a 2.2% increase overall.
Staff emphasized that those additions will not fully close rising cost pressures. Speaker 5 said ongoing inflation and higher service demand mean expenditures are growing faster than revenues, producing multi‑year budget gaps. The presentation projected a near‑term gap for 2026 of about $150,000 and larger shortfalls in 2028–2029 if no other revenue sources are added.
Key cost drivers noted by staff include personnel and benefits. Baker Tilly has completed an initial market survey for a compensation and classification study for nonunion positions; staff expect a preliminary report in August or early September and an organization and staffing study to follow. Speaker 5 said the city is planning a personnel contingency of $415,000 and estimated roughly $710,000 in cost‑to‑continue increases for personnel, benefits and required operating costs.
On revenue side dynamics, Speaker 5 highlighted higher recent yields on short-term investments and said the city is conservatively budgeting interest income at about $850,000 for 2026 (roughly $500,000 below 2024 actuals). The presentation also noted an expected approximate 7% levy-limit adjustment after the planned closure of TID district 3 in 2027, which staff estimate could free a little over $1,000,000 in levy capacity for future budgets.
The presenter reviewed major projects and timelines, including upcoming collective bargaining for police and paramedic contracts (agreements run through 2025), a Group Health Cooperative renewal expected in September with rate caps in place for 2026–27, and an enterprise resource planning (ERP) procurement process with vendor selection targeted by year‑end and a 2027 go‑live.
During Q&A, Speaker 6 asked whether insurance cost increases might neutralize planned compensation gains and whether the city’s health‑insurance waiver/bonus has had a measurable effect. Speaker 6 also suggested charging for recycling services to help close next year’s gap (noting current recycling expenditures around $355,000 and an example fee of about $16–$17 per household annually). Speaker 5 said staff would explore the options.
Speaker 4 asked about a wheel tax or equivalent fee for transportation; Speaker 5 said such a fee is an available municipal option and "could generate a few 100,000" depending on fee level, and offered to provide updated revenue estimates.
Next steps: department budget forms are due in approximately one month; finance committee meetings are scheduled for Sept. 30, Oct. 7 and Oct. 21; the council’s public hearing is set for Nov. 4, with final budget adoption anticipated on Nov. 18.
