Finance director warns of multi‑million dollar gap, directs 2% reduction plans for all agencies

David Schmidke, the city’s finance director, told the Madison Common Council on July 7 that the city faces a significant budget gap heading into the 2027 operating budget and outlined a set of constraints and required actions to close it.

Schmidke said the city is constrained by state limits on property‑tax levy growth and an expenditure restraint program. “When we take a look at the projected revenue growth and compare it to the expenditures through that cost‑to‑continue exercise, we have about an $11,000,000 gap between the allowable growth and revenues,” Schmidke said, and cautioned the council that the city is also above the allowable rate of increase in expenditures by roughly $7,200,000.

Those shortfalls, he said, reflect a mix of drivers: investments and interest earnings that have increased, but faster growth in wages and benefits, rising metro transit costs and higher fuel and maintenance expenses. “The metro subsidy is up 9 and a half million dollars, so to a total of 34 and a half million,” Schmidke said, citing overtime, diesel fuel, contract increases and insurance as major components of that rise.

To constrain spending, Schmidke said the mayor’s guidance requires every agency to submit 2% reduction plans and maintain a salary‑savings assumption of about 3 percent. “Agencies cannot ask for any new positions or any supplemental requests above their cost‑to‑continue needs,” he said. He also told departments to look for efficiencies, interagency collaboration and to reallocate existing budgets where possible.

Council members questioned specific drivers and trade‑offs. Alder Lieberman pressed Schmidke on how much of the metro increase was diesel versus personnel; Schmidke said most of the growth was people‑related, but that diesel fuel was up roughly 55% and overtime was up 16% on a budget basis. Alder Vittiver asked what mechanisms exist to avoid breaching the expenditure restraint limit; Schmidke pointed to a $2 million contingent reserve, central appropriations such as a compensated‑absence escrow and careful midyear budget monitoring.

Schmidke said the city’s general fund balance sits near 30 percent of the budget and the administration is contemplating applying roughly $40 million to balance 2027 in the near term — a level that would draw the reserve down toward the council’s 15 percent target.

The finance director closed by reviewing next steps and deadlines: agency requests are due in about 10 days, the executive budget will be introduced in early October, and finance committee briefings are scheduled in mid‑October for amendments ahead of final mid‑November council action.

The council did not take a final vote on budget measures at the meeting; Schmidke’s presentation established guidance and prompted follow‑up questions and staff actions ahead of later budget decisions.