Governor Walker has delayed a payment on the state’s debt, pushing costs off into the future and increasing the amount of interest the state will have to pay. Postponing debt payments can be a helpful tool to manage budget shortfalls, but Governor Walker hasn’t released information indicating why the delay was necessary.
Instead of making a $101 debt payment that was due in May, the state skipped the payment and restructured the debt to be repaid over the next eight years. (State law allows the governor to restructure certain types of debt without getting the approval of legislators.) This move reduces spending in this fiscal year, but raises future costs in two ways:
- By increasing the amount of principal that must be repaid in future years. Spreading out the $101 million cost over the next eight years will raise payments on the debt principal by $12.6 million for each year between 2017 and 2024.
Regularly putting money into the state’s Rainy Day Fund during periods of sustained economic growth helps build up a budget cushion on which the state can rely to cushion the impact of recessions and avoid harmful budget cuts. But before 2011, Wisconsin’s Rainy Day Fund sat mostly empty.
In 2011, 2012, and 2013, the state deposited money into the Rainy Day Fund when tax revenues came in higher than anticipated, building the balance to $280 million. But lawmakers made no deposits to the fund in 2014, 2015, or in 2016 so far. They pushed aside a requirement that part of higher-than-anticipated tax revenues be deposited in the Rainy Day Fund, and instead passed new tax cuts and allowed existing tax cuts to grow. Some of those tax breaks benefitted large corporations and taxpayers with high incomes.
There’s no hard-and-fast rule about how big a state’s Rainy Day Fund should be, but the Government Finance Officers Association recommends that states have at a minimum of 5% to 15% of annual general revenues set aside. Read more
The latest quarterly report from the Department of Health Services (DHS) projects that state spending for Medicaid and related services during the current biennium will be $85.2 million less than the state budgeted. That amounts to $12.6 million less state spending than the state estimated in its last update, three months ago. (I’m focusing just on the state share of spending; the total reduction from all sources is almost $203 million, relative to the amount budgeted for 2015-17.)
Granted, Medicaid spending trends can change rapidly, but the DHS report is welcome news – particularly since other budget indicators aren’t so good. Recently reduced estimates of national economic growth in 2016 suggest the possibility of less state revenue growth than anticipated, and as we noted in a recent blog post, state tax collections dropped by $91 million in February. Against that backdrop, the latest DHS report provides a bit of positive news relating to the prospects for keeping the state budget in the black. Read more
$91 Million Decline in Tax Collections Underscores Need for Increased Transparency
The Wisconsin Department of Revenue (DOR) recently released the tax collection figures for the month of February, and the new numbers show a drop of $91 million for the month, compared to February 2015. That was a drop of 14% in General Fund tax revenue, even though February was one day longer this year.
For first 8 months of the current fiscal year, revenue is up 3.8% compared to the 2014-15 fiscal year. That’s a bit worrisome because the last revenue estimates from the Legislative Fiscal Bureau (LFB) projected tax growth of about 4.4% for the fiscal year that ends on June 30 (and that estimate had been revised down from the 4.6% increase anticipated when the budget bill was passed).
Unfortunately, the Wisconsin DOR – in contrast to its counterpart in Minnesota – almost never releases month-by-month tax collection projections in conjunction with the actual tax collection figures. Read more
During their recent session, Wisconsin lawmakers had a mixed record on holding down corrections costs, passing bills that will increase the number of people behind bars, as well as reducing obstacles that prevent people from fully contributing to their communities after leaving prison or jail.
The Wisconsin Council on Children and Families has released a new summary that describes the changes lawmakers made to Wisconsin’s criminal justice system during the legislative session that ended earlier this month, and also includes descriptions of high-profile proposals that did not pass.
The high cost of Wisconsin’s corrections system means that the time is ripe for lawmakers to make changes in policies that govern who is incarcerated, for how long, and what happens to people after they get out from behind bars. Wisconsin state and local governments spent $1.5 billion on corrections in 2013. That’s over than a tenth more — 12% — on corrections per state resident than the national average. Read more
On a party-line vote Tuesday, the Wisconsin Senate Passed a bill that will tilt the state budget process in favor of spending cuts or freezes. It does that by striving to frame budget deliberations as a choice between frozen spending and spending cuts, while shifting attention away from the question of what is needed to maintain the current level of services.
If the Assembly concurs with the Senate later this week, the proposal, SB 407 , will require state agencies to submit two additional things with their biennial budget requests: a) a proposal that would maintain the existing level of funding, and b) a proposal to cut the agency’s budget by 5%.
As I wrote in a previous blog post, I don’t necessarily have a problem with giving legislators access to information from agencies on how they would handle a budget freeze or a budget cut; shining more light on budget options is a good thing. Read more
Three proposals currently under consideration by state lawmakers have the potential to reduce the amount of money the state spends on corrections, keep people who commit minor crimes out from behind bars, and make it easier for people leaving prison or jail to get a job.
These developments to reduce the costs – financial and otherwise – of the state’s correction system are long overdue. For years, Wisconsin residents have been paying a high cost for the state’s over-reliance on prisons and jails. Part of the cost comes out of the pockets of taxpayers — nationally, only 11 states spend more per state resident than Wisconsin on corrections – and part of the cost is paid by communities, especially communities of color. Wisconsin locks up a larger share of African-American men than any other state, making it difficult for those individuals to get jobs after they are released, support their families, and make contributions to their communities. Read more
1. Compared to other states, Wisconsin has a lean public sector
Wisconsin had 4.4 percent fewer state and local government employees than the national average given our population size, according to a new analysis from the Wisconsin Budget Project. Wisconsin had a leaner public sector than all but 11 states.
2. The number of public employees in Wisconsin has declined over the last decade
Current levels of public employment in Wisconsin are significantly lower than they were a decade ago, relative to our population size. The number of public employees per Wisconsin resident has fallen about nine percent since 2001, as shown in the chart.
3. There are nearly three times as many local government employees in Wisconsin than there are state employees
There were 207,000 full-time equivalent employees working in local government in Wisconsin in 2014, compared to 72,000 in state government.
4. Most public employees in Wisconsin work in education
Six out of ten government employees work in education, mostly in K-12 schools. Read more
As you’ve probably heard or read by now, Wisconsin got some bad news today regarding state tax collections – which are now expected to be $158 million less than previously expected during the 2015-17 biennium. But the good news is that some other re-estimates partially offset the revenue loss, bringing the net change to the 2015-17 budget to -$94 million (compared to the previous estimate), and the state’s reserves can absorb that hit.
The bottom line is that the state is now expected to finish this biennium with a “net balance” in the general fund of $70.2 million, instead of the $164.5 million net balance that had been estimated a few months ago. The key lesson to be drawn from the numbers released today by the Legislative Fiscal Bureau (LFB) is that tax collections and other revenue can be volatile and are difficult to predict, so it’s important to build a sizeable “ending balance” or budget cushion into each budget. Read more
Transportation Tax Increase Shouldn’t Be Biased against Low-income Wisconsinites
Proposed legislation to fix local road repairs is a bad deal for poor Wisconsinites who don’t have cars. The proposal would authorize a sales tax increase that would fall more heavily on poorer Wisconsinites because the sales tax takes a higher percentage of their income. What makes that particularly inequitable is that the bill precludes using any of the new revenue for transit (e.g. bus and van service). Read more