The Very Bad Fiscal News for this Year Offsets Improved Revenue Estimates for the Next Biennium
New budget figures from the Legislative Fiscal Bureau (LFB) indicate that the state is on track to have a $283 million deficit at the end of the fiscal year. That hole is $153 million deeper than what the Department of Administration (DOA) had indicated in November.
Of course, the Fiscal Bureau isn’t predicting that the state will actually finish the fiscal year with a substantial deficit; they are sizing up the amount of red ink that the Walker administration and state legislators have to eliminate in order to meet the constitutional requirement to have a balanced budget.
On many occasions in 2014, we expressed concerns that state lawmakers were going to have to make painful budget cuts before the end of fiscal year 2014-15 because the tax cuts enacted early last year were based on overly optimistic revenue estimates and because the state was planning to draw down almost all of the anticipated balance. Read more
Governor Walker has made it clear that he wants to continue to cut property taxes. The best way to do this would be to strengthen a state tax credit that helps keep property taxes affordable for people with low incomes. Yet despite the Governor’s focus on property tax cuts, making improvements to the Homestead Credit does not seem to be part of his agenda.
Governor Walker recently said his goal is for property taxes to be lower in 2018 than when he took office in 2011. The legislature already cut property taxes by $466 million in fiscal year 2015, and given Governor Walker’s high priority on the issue, there are likely to be more property tax cuts coming.
The property tax cuts so far have been broadly distributed, meaning that even taxpayers in the top 1% received a tax cut. In fact, the top 1% – a group with an average income of $1.1 million – received an average property tax cut of more than $1,000 in 2014. Read more
The number of government workers in Wisconsin compared to the state’s population has dropped to its lowest level in at least 20 years, according to a new Wisconsin Budget Project analysis.
Public employees in Wisconsin fill many roles. They patrol country roads, drive city buses, put out fires, immunize babies, and repair roads. Most of all, they teach our children: Six out of 10 public employees in Wisconsin work in education, mostly in K-12 schools.
Public employees also work close to home. Nearly 3 out of 4 public employees in Wisconsin work at the local government level.
There are far fewer of these public employees than there used to be. The number of state and local government workers per Wisconsin resident has dropped 10% from its peak a decade ago. Now only eight states have a leaner public sector for the size of their population. For every 100 state and local government employees per capita in other states, Wisconsin has only 94 employees. Read more
The Department of Revenue (DOR) issued its report on December tax collections today, and at first blush the numbers look bad; however, I think they may actually suggest a modest upturn – relative to the November estimate for the current fiscal year (FY). Whether that assessment is accurate will become apparent later this week when officials release updated state revenue estimates for FY 2014-15 and for the next biennium, which begins on July 1.
What the short new report reveals on its face is that tax collections were down by 2.6% in December, compared to the same month in 2013, and tax collections for the first half of the current fiscal year were down by 2.7% compared to the last six months of 2013. Individual income tax collections for the last half of 2014 were down by 6.4% or $232 million, and corporate income tax revenue was down 8.0% or $38 million. Read more
Extreme Racial Disparities in Wisconsin’s Corrections System Have Worsened since King’s Death
As we contemplate the legacy of Martin Luther King Jr. and the unfinished business that needs to be tackled to achieve racial and ethnic equality, one of the issues that jump out at me is the huge growth in prison populations – particularly among African American males. That was a topic at many MLK observations across the nation today, but nowhere is it a bigger problem than in Wisconsin.
A report by the UWM Employment and Training Institute issued in 2013 pointed out the following data, most of which is derived from the 2010 Census:
- Wisconsin had a higher rate than any other state of working age African American men who were behind bars in state prisons and local jails; in fact, no other state was even close to the Wisconsin rate. (See the graph on page 8 of their report.)
- The WI incarceration rate of working age black males, 12.8%, is nearly double the national average of 6.7% of working age African American men, and 10 times the rate for white males in our state.
Wisconsin’s state and local tax system is tilted in favor of those with the highest incomes, according to a new report released today. Wisconsin taxpayers with low and middle incomes typically pay much higher rates of state and local taxes compared to taxpayers with the highest incomes. Some Wisconsin policymakers are advocating for changes that would make our tax system even less equitable, by increasing taxes for most taxpayers to pay for tax cuts for residents with the highest incomes.
Wisconsin taxpayers with the lowest incomes – less than $22,000 a year – pay 8.9% of their income in state and local taxes in 2015, as shown in the chart below, and middle-income taxpayers will pay 10.1% of their income in taxes. In contrast, the top 1% of taxpayers – a group with an average income of $1.1 million – will pay just 6.2% of their income in taxes. The effective state and local tax rate takes into account the deduction from federal taxes. Read more
Will the Governor’s Next Budget Postpone the Statute Requiring an Increased Budget Balance?
A new set of comparative fiscal data published online last week by Pew Charitable Trusts reinforces the conclusion that Wisconsin needs to build up its budget reserves. The dataset in question shows that Wisconsin was expected to rank 35th at the end of fiscal year (FY) 2014 in the relative size of its budget reserves, and that ranking was based on figures collected last summer – when the state’s budget balance was far higher than it is expected to be at the end of the current fiscal year.
One key sign of whether state policymakers are interested in addressing the problem and establishing a more prudent budget reserve will come in February, when we see if the Governor once again postpones the effective date of a statute intended to increase the minimum balance that the state must aim to have at the end of each fiscal year. Read more
New survey figures released by Gallup this week show that the number of uninsured adults dropped again in the last quarter of 2014 and is down sharply since 2013. Even as Paul Ryan and some other members of Congress argue that the Affordable Care Act is “beyond repair,” the Gallup survey data show the law has been quite successful in achieving a key objective. As the Gallup analysis concludes:
”The Affordable Care Act has accomplished one of its goals: increasing the percentage of Americans who have health insurance coverage.”
According to the new Gallup findings, the portion of Americans between 18 and 64 who are uninsured declined from 21.2% in the third quarter of 2013 to 15.5% in the fourth quarter of 2014. By my calculations, that amounts to a reduction of more than 10.8 million non-elderly adults who are uninsured – a drop of about 27%.
Here are some of the other highlights of the new Gallup data:
- The uninsured rate for adults of all ages, which peaked at 18% in the third quarter of 2013 (as shown in the graph above), declined to 13.4% a year later and to just 12.9% in the last quarter of 2014.
Low-wage workers in Ohio, Nebraska, and 18 other states got a raise at the beginning of the year when those states increased their minimum wages. Minimum-wage workers in Wisconsin got no such bump in their paychecks.
What a year!
2014 was a roller coaster period for Wisconsin. The state started off the year with a budget surplus, passed more tax cuts, and will now have to figure out how to close the resulting budget shortfall. Republicans strengthened their dominance in the state legislature, and have vowed to continue making dramatic changes to the way Wisconsin supports its families, schools, and communities.
Here at the Wisconsin Budget Project, we’ve been working all year to make sense of complex budget-related issues and explain how decisions made by lawmakers help or harm people in Wisconsin. A look back at our most-read posts and publications over the last year serves as a snapshot of budget decisions made over the course of 2014, and demonstrates the consequences of those decisions.
Thank you for reading in 2014. There are already signs that there is going to be plenty more to talk about in 2015. Read more