Congress is on the verge of passing a tax cut plan that would prioritize tax breaks for corporations over middle-income and low-wage working parents, while significantly increasing the federal deficit. As the New York Times reported this morning, President Obama has threatened to veto the bill if it reaches him in its current form.
The bill in question is referred to as “tax extender” legislation, which comes up on a regular basis as the start of the next tax year approaches. In his On the Economy blog today, Jared Bernstein describes this annual process as follows:
“Tax extenders are a series of allegedly temporary tax breaks that are conventionally extended, unpaid for, year after year. These include tax credits for research and development, expensing deductions for small businesses, deductions for state and local sales taxes, and more. To put them in the annual budgets that Congress and the President construct each year would mean they’d either have to be paid for with higher taxes or spending cuts elsewhere or added to the deficit. Read more
State Faces Gap of More than $2.4 Billion between Now and June 2017
State officials confirmed today what we have feared for many months – that Wisconsin’s spending needs in the next biennium far exceed the projected revenue, and the state must also close a very substantial budget hole in the current fiscal year. As a result, lawmakers are likely to make cuts that have harmful consequences for Wisconsin children and families and for the investments needed to keep Wisconsin economically competitive.
Despite the assurances of Walker administration officials over the last couple of months that the state is in strong fiscal shape, the figures contained in a report released by the Department of Administration (DOA) today confirm that balancing the state budget in 2015-17 will require very deep spending cuts or significant tax increases. Specifically, the DOA document reveals the following:
- Tax revenue for the current fiscal year is now expected to be $82 million below the amount estimated in May (on top of a $281 million tax shortfall in the first half of the biennium), and net appropriations are estimated to be $43 million less.
An economic forecast issued Monday by the Department of Revenue (DOR) provides more evidence that Wisconsin will face substantial budget challenges in the current fiscal year and the next biennium. According to that document, which is the fall 2014 Wisconsin Economic Outlook, the nation’s economic growth will fall well short of what DOR assumed in its last report, which was issued in January. (These used to be known as the quarterly economic reports, but for some reason are now issued irregularly and just once or twice a year.)
The January economic report was issued in conjunction with increased state revenue projections, which helped persuade state lawmakers to enact substantial tax cuts. But over the last 10 months the estimates of the national* economy, i.e. the “gross domestic product” (GDP), have changed as follows:
- The anticipated GDP in 2014 is now $152 billion less (-0.9%) than assumed in January.
- The estimate for 2015 is $210 billion lower than previously anticipated (-1.1%).
Spending on corrections has increased dramatically in Wisconsin in recent decades, reducing the resources available for quality schools, safe communities, and health care.
Wisconsin state spending on corrections rose by 308% between 1986 and 2013, when dollar amounts are adjusted for inflation. Only eight states had larger increases in prison costs, measured as a percentage increase. Nationally, state corrections spending averaged an increase of 141% over this period, less than half of Wisconsin’s increase. Figures are from a new report released by the Center on Budget and Policy Priorities.
Wisconsin’s increase in spending on corrections has outpaced the increase in all our neighboring states. Corrections spending in Wisconsin increased twice as fast as spending in Minnesota since the mid-1980s, and nearly five times as fast as in Illinois.
This significant increase in corrections spending comes with very large opportunity costs. As corrections spending has increased, it takes up an increasingly large share of the state’s public resources. Read more
SNAP benefits, also known as food stamps, help put food on the table for nearly half a million Wisconsin children in families with low incomes. Efforts to restrict access to SNAP, such as the changes Governor Walker has proposed, could harm children by making it harder for families to make ends meet.
SNAP provides a modest but important boost to many Wisconsin families with children. In 2013, 452,000 children across Wisconsin benefitted from SNAP – about 1 out of every 3 children in the state. In four counties – Milwaukee, Sawyer, Adams, and Burnett – more than half the children benefitted from SNAP at some point during the year.
Governor Walker has said that he wants to make it harder to receive SNAP benefits, by requiring people to pass a drug test before they can receive assistance. We don’t have the details yet on what Governor Walker is proposing, but we do know that his plan would likely be cost inefficient and conflict with federal requirements that bar wide-spread drug testing for SNAP recipients. Read more
Wisconsin voters approved ballot initiatives in 27 school districts on Tuesday, voluntarily raising property taxes in order to fund services or improve infrastructure in their districts.
Measures approved by voters included:
- Allowing the Glendale-River Hills School District to exceed revenue limits by a total of $4.9 million over the next five years. District officials said schools would be forced to cut academic offerings and extracurricular activities without the additional revenue.
- Allowing the Racine Unified School District to exceed revenue limits by a total of $127.5 million over the next 15 years. The additional revenue will be used to address maintenance issues on aging buildings. The district plans to rebuild two elementary schools and add on to a middle school.
- The issuance of $23 million debt that will allow the Altoona School District to build a new elementary school, and make maintenance, safety, and health-related improvements on existing buildings.
- Allowing the Gilman School District to exceed revenue limits by a total of $1.6 million over the next four years.
Voters in Wisconsin and across the country showed extensive support on Tuesday for increasing the minimum wage, by approving ballot measures calling for raises for the lowest-paid workers.
Across Wisconsin, 67% of voters approved raising the minimum wage to $10.10 from its current level of $7.25. The non-binding referendum was on the ballot in nine counties and four cities where local officials voted to include it.
The measure to increase Wisconsin’s minimum wage passed with flying colors even in solidly red parts of the state. For example, in Wood County, voters favored Governor Walker over Mary Burke by a wide margin, giving Walker 57% of their votes. But the Wood County electorate also showed strong support for increasing the minimum wage, with 56% of voters approving the measure.
The minimum wage proved to be a winning issue in other states as well. Voters in four states and two cities approved binding measures to increase the minimum wage and give an estimated 609,000 low-wage workers a raise next year. Read more
An efficient transportation network can’t exist entirely of one-way streets. It needs to be adaptable, with multiple modes of transportation and some areas where traffic flows in different directions. Likewise, the financing for a good transportation network needs flexibility, and it shouldn’t invariably be restricted to one-way flows of revenue.
Next week Wisconsin voters will cast ballots on a proposed constitutional amendment that we think would be too restrictive. Although it would allow state lawmakers to continue to make transfers between many state funds, such as supplementing the Transportation Fund with money from the state’s General Fund, it would prohibit ever moving Transportation Fund revenue in the opposite direction. That would create a double standard for state revenue transfers. It would be a mistake to lock an inflexible policy for state budgeting into the Wisconsin Constitution, as this editorial explains.
Some who favor a constitutional amendment point to past transfers that reduced resources for transportation programs. Read more
Expansion States Show Much Greater Improvement on Uninsured Rates and Uncompensated Care
The evidence in favor of expanding BadgerCare keeps growing as new analyses compare the experience of states that have expanded coverage and accepted the increased federal funding and the states that haven’t done so. Several new studies by national organizations show that Medicaid expansion states have seen much larger drops in the uninsured and in uncompensated care, yet their Medicaid costs are growing at a slower rate than in the non-expansion states.
The following is a brief summary of three recent reports:
Gallup data on changes in the uninsured rates – Gallup survey data from across the nation show that states that have expanded Medicaid eligibility and are operating their own insurance Marketplace have achieved a much larger drop in the percentage of uninsured people than the so-called “non-expansion” states. “The uninsured rate declined 4.0 points in the 21 states that have implemented both of these measures, compared with a 2.2-point drop across the 29 states that have implemented only one or neither of these actions.”
That difference is made more impressive by the fact that the expansion states already had much lower uninsured rates among non-elderly adults. Read more
The Department of Administration (DOA) announced last week that the state finished the 2013-14 fiscal year with a budget balance of almost $517 million, and many state lawmakers were quick to congratulate themselves for having a budget “surplus.” I don’t fault them for that; I think I would have done the same thing. However, the fleeting existence of a budget balance doesn’t support the argument some lawmakers have made that Wisconsin has turned a corner with respect to careful budget stewardship and long-term planning.
There are a number of reasons why I think it’s ironic that some lawmakers have been patting themselves on the back for getting halfway through the biennium with a relatively large budget balance. Consider the following points:
The “surplus” will be very short-lived – Because of the latest round of tax cuts, net appropriations for the current fiscal year exceed the budgeted revenue level by $569 million, so the state is very rapidly drawing down its budget reserves. Read more