New Structural Deficit Calculation Assumes $2.15 Billion of Lapses over Three Years
The state’s fiscal health isn’t nearly as strong as the Governor and a number of other lawmakers asserted in the spring. While the Governor was courting GOP support in South Carolina for his upcoming presidential campaign, he said: “At the end of the budget we’re debating right now for our next two years in my state, we will end with a structural surplus of $499 million.” Unfortunately, the latest figures from the Legislative Fiscal Bureau (LFB) show that we need to change that plus sign to a minus sign, because the Governor’s optimistic assertion was off by about $1 billion.
A July 7th memo from the LFB projects that Wisconsin will start the 2017-19 biennium with a structural deficit of $490 million. In other words, the 2015-17 budget developed by the Joint Finance Committee (JFC) puts the state in a position where lawmakers would need to use the first $490 million of revenue growth during the 2017-19 biennium simply to maintain the spending commitments assumed in the second year of the 2015-17 budget. Read more
Legislators Can Avoid Deep Cuts without Raising Taxes
Wisconsin needs a budget that invests in the building blocks of a strong economy. Healthy families, safe and stable communities, and a well-educated workforce are assets critical to helping Wisconsin remain an attractive place to live, raise families, and do business. By strengthening these resources, the state budget can lay the groundwork for broad-based prosperity and an economy that works for everyone.
Unfortunately, the budget proposed by the Governor makes deep and unnecessary cuts to investments vital to Wisconsin’s long-term economic success. For example, the proposed budget would reduce resources for public education – a cut that would come on top of dramatic reductions in resources that have already occurred. The budget would also make deep cuts in state support for the University of Wisconsin System, giving a tremendous blow to one of the engines of Wisconsin’s long-term prosperity. The proposed budget would also make it harder for people with disabilities to get the help they need to contribute to their communities. Read more
The Governor and some proponents of the budget bill have understated the size of the proposed cuts to the University of Wisconsin System.
New figures released last week by the Census Bureau show that total state and local spending and revenue in Wisconsin is not much different in Wisconsin than the per capita figures for the nation as a whole. For example, our analysis of the new data – which is for state and local revenue and spending in 2012 – found the following:
- Wisconsin ranks 25th in total revenue (including federal aid) per capita, and was 1.5% below the national average on that measure.
- Looking at all state and local revenue per capita, but excluding federal financing, Wisconsin ranked 19th and was 1.1% above average.
- We ranked 24th in total spending per capita, 2.9% below average, and 21st (just 0.2% above average) in a slightly narrower spending measure – direct general spending – which I think is better for comparative purposes because it excludes things like state-owned enterprises.
Wisconsin’s figures are higher compared to the national averages when they are measured relative to income, because personal income in Wisconsin is well below the average nationally. 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
Resolution (SJR 5) Would Finally Make Legislative Rule on Fiscal Estimates Consistent with Statute
For far too long, legislators have been making decisions about new criminal penalties without paying much attention to cost. A Senate Joint Resolution (SJR 5),which would address that longstanding problem, is scheduled for a committee vote this Tuesday, March 26.
Under the legislature’s current rules, any bill “increasing or decreasing existing appropriations or state or general local government fiscal liability or revenues shall carry a fiscal estimate,” but that rule (Joint Rule 41) contains an exception for bills changing criminal penalties. SJR 5, introduced by Senator Taylor, would eliminate that exemption. (The resolution is in the Senate Committee on Government Operations, Public Works and Telecommunications, and you can Senator’s press release describing it here.)
One of the very surprising and disappointing things about that fiscal estimate exemption in the legislature’s rules is that it conflicts with the statute! Read more
States that follow the economic policy agenda promoted by ALEC risk weakening state economies and harming middle class families. That’s the message of a new report by the Center on Budget and Policy Priorities, which outlines American Legislative Exchange Council’s policy recommendations and their negative effects.
ALEC is a network of conservative state legislators and lobbyists that works to influence state legislation in a variety of policy areas, including budget and tax policy. According to CBPP, ALEC’s proposals would:
cut taxes deeply for wealthy individuals, investors, and corporations; shift tax burdens substantially from well-to-do to middle- and low-income households; and impose strict constitutional or legal limits on revenues or spending that would severely limit states’ ability to provide adequate funds for education, health care, and other priorities, and impair state economic growth.
Many of the recent changes made to Wisconsin’s tax and budget system follow ALEC’s recommendations. For example, the Wisconsin state legislature has passed several new tax cuts that primarily benefit corporations and well-off individuals. Read more
Modest Tax Growth Almost Matches Modest Requests – before Other Variables Are Taken into Account
A document released by the Department of Administration (DOA) Tuesday contains a revised estimate of tax revenue in the current fiscal year, and the preliminary estimates for the 2013-15 biennium. The projected tax growth – just 1.8% this fiscal year, followed by 3.8% in 2013-14 and 3.4% the following year – is okay, but uninspiring, and less than the typical increases in the past. Thanks in part to the fact that the 1.8% expected revenue increase this year builds on a higher-than-expected 2011-12 base, DOA estimates there will be a $348 million balance at the end of the 2011-13 biennium.
The lengthy DOA document summarizes the agency requests for the coming biennium, and it compares the total amount of General Purpose Revenue (GPR) requested with the estimated revenue in 2013-15. Notwithstanding the lackluster revenue growth, DOA calculates that requests only exceed the estimated 2013-15 revenue by $171 million GPR – which is a pretty manageable difference compared to past structural deficits, and is less than half of the expected balance to be carried into the next biennium. Read more
More than half the money the state spent last year supports services at the local level, but the percentage has dropped significantly over the last decade.
In fiscal year 2012, 54 cents out of every dollar of General Purpose Revenue (GPR) spent by the Wisconsin state government went to school districts, county governments, and municipal governments to educate schoolchildren, carry out human service programs, and implement other programs at the local level. That amount is down from 60 cents out of every dollar of GPR expenditures in 2002, according to figures from the state Department of Administration. The chart below shows that the remaining GPR spending is divided between aids to individuals (such as Medical Assistance), and state operations, including the UW System.
Another way to look at state spending is by program. State spending for K-12 education (both public schools and private schools in Milwaukee and Racine through the school choice programs) continues to be the single biggest program in state GPR dollars, as shown in the chart below. Read more
Wisconsin is about in the middle of the pack in government spending, according to a new analysis by the Wisconsin Budget Project. Combined state and local spending per person in Wisconsin was 1.4 percent below the per capita national average in 2010 – the latest year for which data is available – placing it 23rd among the states.
When spending is measured relative to income, Wisconsin was 2.9 percent above average in 2010, but still ranked 23rd. For this analysis we included all state and local government spending except spending in certain categories that not all states have, such as spending for state-run liquor stores. These numbers pre-date the deep cuts in government spending included in the 2011-13 state budget. The chart below shows that Wisconsin ranks just above average in state and local government spending.