DOA Estimates a $2.2 Billion Deficit at the End of 2011-13
It seems strange to hail as positive news that Wisconsin faces a budget deficit of $2.2 billion over the 2011-13 biennium. But that estimate, released today by the Wisconsin Department of Administration (DOA), is less than we would have guessed and less than the $3.1 billion estimated by a prominent Wisconsin economist two months ago.
However, before we breathe a big sigh of relief, it should be noted that the DOA calculations leave out a number of factors that are likely to increase the size of the state’s revenue shortfall — even without factoring in the proposals by incoming lawmakers to cut taxes.
Although the DOA report is sobering, it’s generally better news than we were expecting – in the following ways:
- DOA projects that the state will finish the current fiscal year with a balance of $10 million.
- The projected shortfall of $2.2 billion at the end of 2012-13 (based on a slightly adjusted comparison of the projected revenue and agency requests) is far below the $5.4 billion figure in the comparable DOA report two years ago.
Though we’re relieved that the figures aren’t worse, it’s important to note that several factors which haven’t been included will probably increase the size of the potential deficit. First, the DOA calculations assume that the state estate tax will return next year, which seems highly unlikely. Assuming it doesn’t, the deficit will grow by about $200 million. Second, as the report notes on p. 8, the budget requests at this stage of the process don’t include a number of significant items, including increased costs for: debt service, fuel and utilities, state employee compensation and benefits, and UW faculty pay adjustments.
The Governor-elect’s Transition director, John Hiller, complained that the DOA report “assumes $800 million in agency lapses requested by DOA that will have to be administered by the Walker Administration.” His press release concludes, ““When all of these measures are fully accounted for, we believe the true budget shortfall to be in excess of $3.3 billion.”