Governor Signs Property Tax Relief Bill; Assembly Shelves Dem Amendment with Much More Relief for Most Homeowners
Today Governor Walker signed a bill that provides $100 million of property tax relief over the next two years. The bill will do the following:
- Reduce property taxes by an average of $13 this year and $20 next year for people owning median value homes.
- Increase to $725 million the fiscal hole or structural imbalance in the next biennium (which means that first $725 million of new revenue is needed just to maintain flat funding).
- Reduce the projected balance at the end of the current biennium to $125 million, which is enough to cover three days of state spending.
The bill was approved by a lopsided vote in each house of the legislature. In the Assembly, all but 12 Democrats voted for passage of the bill, but not before they offered a substitute amendment that would have provide substantially more property tax relief and would have targeted much more of that relief to residential property owners. Read more
The Dept. of Administration released the Annual Fiscal Report today for fiscal year 2012-13, and the news is mostly positive. However, I think some of the spin about a “$760 million surplus” is a bit misleading.
One example of that spin is that the DOA letter to the Governor notes that the $759.2 million balance at the end of June is $274.5 million higher than the balance of $485 million projected by the Legislative Fiscal Bureau (LFB) in January. That’s true, but I think the more relevant comparison is to the estimate made by the LFB in June, because that’s what the budget was based on. That’s important because the budget bill has already used the previous revenue increase to help pay for the increased tax cuts that were enacted.
Compared to the estimates made by the LFB in the budget bill, the $759 million balance that was carried over into the current fiscal year represents an increase of $90 million (after taking into account an increase to the Rainy Day Fund). Read more
Governor Walker proposed a $100 million property tax cut at a hastily-called press conference today. The tax relief would be delivered through the school aid formula – by adding $40 million this year and $60 million next year. Because the school spending caps aren’t being raised, schools will have to reduce property taxes to offset the increased state aid. The Governor is calling a special session for next week to expedite legislative action on the plan.
According to a story on Channel 3000.com, Assembly Speaker Robin Vos said the bill will be introduced tomorrow, and he would like the legislature to pass it by the end of next week. The Governor is pushing for fast action on the proposal so the tax cut would be in effect when property tax bills are being calculated later this year.
Walker said that the funding for the property tax cut would come from the state budget surplus. Read more
Good Budget News, but Growth Falls Short of Rumored Expectations
Tax collections were $71.5 million higher than anticipated in fiscal year 2012-13, according to figures released Friday by the Wisconsin Department of Revenue. That’s very good news, although the size of the increase (0.5% above the amount projected in May) isn’t as large as rumors in the Capitol grapevine seemed to suggest. Some lawmakers are probably a bit disappointed if they were anticipating enough additional funding to bolster arguments for even deeper income tax cuts or to mitigate some of the spending cuts in the last two budgets.
I hope legislators aren’t disappointed to learn that half of the increased revenue ($35.75 million) will be deposited in the state’s “rainy day fund” (aka the budget stabilization fund). Under current state law, half of any increase in tax collections in a fiscal year, relative to the amount estimated when the biennial budget bill was enacted, must be deposited in the rainy day fund. Read more
Will Lawmakers Use the Increased Revenue in Ways that Reduce the Structural Deficit or Exacerbate It?
State legislators working on the 2013-15 budget got some very good news today. A new paper from the Legislative Fiscal Bureau estimates that tax collections in the current fiscal year (which ends on June 30) will be $215 million more than previously anticipated. That stronger base of revenue is pushing up the amount anticipated in each of the next two years by $180 million, for a total (three-year) increase by the end of the 2013-15 biennium of $575 million.
Although today’s news could trigger fights about the best ways to use the increased revenue, the rosier revenue picture should nonetheless make it easier for the majority party to fashion a compromise that addresses the competing priorities of various Republicans, including adding to the meager K-12 education funding increase recommended by the Governor.
The biggest question in my mind is whether lawmakers will use the added revenue in ways that reduce the $664 million budget hole (“structural imbalance”) that the Legislative Fiscal Bureau said the Governor’s budget would create for the 2015-17 biennium. Read more
State Finishes Fiscal Year with $342 Million Balance
The annual fiscal report released Monday by the state’s Department of Administration (DOA) contains some good news, as expected. It confirms the Department of Revenue report from early September that General Fund tax collections of $13.5 billion were $126.6 million (0.9%) above the department’s May projections for fiscal year 2011-12.
Tax collections increased 4.7% relative to the amount in 2010-11. That’s by no means an exceptional year, but the improvement since the May projection will allow the DOA to deposit almost $109 million into the state’s rainy day fund. And the combination of higher than expected taxes and almost $27 million (GPR) less in the “gross appropriations” line of the General Fund budget yields a closing balance of $342 million GPR (after accounting for the transfer to the rainy day fund).
A copy of the Annual Fiscal Report is available online.
Wisconsin got some very good fiscal news last week. In a May 10th memo to the Governor, Department of Administration (DOA) Secretary Mike Huebsch said that the Department of Revenue (DOR) now estimates that state tax revenue will be $265 million higher in the current biennium than the February estimate by the Legislative Fiscal Bureau (LFB).
Even with the increase, total revenue will be $65.5 million below the amount assumed in the 2011-13 biennial budget bill. Nevertheless, the increase in projected tax revenue and a decrease in projected spending mean that the state is now expected to finish the biennium with a balance of about $154.5 million (which is $89.5 million above the required cushion of $65 million, known as the required “statutory balance”). Those figures assume that the state proceeds with plans to lapse $51 million from agency budgets to the General Fund in the second year of the biennium. Read more
This week Wisconsin is a step closer to enshrining poorly-designed fiscal policy in the state’s constitution. The Legislature is considering a constitutional amendment that would require the state to make contributions to a rainy day fund, and the amendment (AJR 21) cleared the Assembly Wednesday by a vote of 57 to 37, with one Democrat joining the Republicans in voting for the measure.
A rainy day fund is a great concept, and can help cushion the effects of an economic downturn. This particular rainy day fund, however, would be set up in a way to actually worsen the fiscal effects of some very deep recessions. In all but the most severe recessions, the money in this rainy day fund would be inaccessible without a two-thirds vote of the Legislature. (And it’s extremely difficult to get two-thirds of the Legislature to agree on anything, including that water is wet.) We’d have to make contributions to the rainy day fund even when the recovery was lagging. Read more
Will Procedural Delay Shed Some Sunlight on Rainy Day Fund?
The proposed constitutional amendment (AJR 21) to establish a “fiscal responsibility” fund for Wisconsin was debated on the Assembly floor Thursday, and the measure’s proponents got most of what they hoped for. They fended off all 6 amendments that were offered by Democrats, and the measure was moved to the “third reading” stage on a party-line vote of 56-39 (with Rep. Zigelbauer, an Independent, joining the Democrats in voting “no.”).
The only disappointment for the authors of the measure (AJR 21), was that they were unable to muster a two-thirds vote to suspend the rules and advance the bill to a final Assembly vote. As a result, the fast-tracked bill has been sidetracked temporarily – until the next floorperiod begins on May 10. Although I expect the measure to be approved then, the 3-week delay creates a least a modest hope for shedding some light on the concerns we have about the very restrictive standards for using the rainy day fund. Read more
Hurry Up and Wait: Assembly Unnecessarily Rushes Passage of Constitutional Amendment for a Rainy Day Fund
Recently Introduced Resolution Gets Floor Vote Today
Amending the Wisconsin Constitution involves a long and deliberative process. A joint resolution must be approved by both houses of the legislature in one biennial session, and then reintroduced and approved again (without any changes) in the next two-year session. It must then be ratified by Wisconsin voters in a statewide referendum. Thus, a constitutional amendment proposed now can’t receive final approval any sooner than the first statewide election in 2013.
In light of the importance of constitutional changes, the long process is intended to ensure careful consideration of a proposed amendment. With that in mind, it is very surprising and disappointing that a recently proposed constitutional change requiring contributions into a rainy day fund is being rushed through the Assembly. The proposal, Assembly Joint Resolution 21, was introduced on April 1 and is scheduled for a vote on the Assembly floor today. Although establishing a robust rainy day fund is a laudable endeavor, the proposed standards for taking money out of the fund are so strict that a majority of legislators wouldn’t have been able to tap the fund (without a two-thirds vote in each house) during either the 2009-11 biennial budget or the current 2011-13 budget process – despite the dire effects of the Great Recession on state revenue and safety net programs. Read more