How Solid Is the State’s Projected Budget Balance?
New Budget Project Report Cautions Lawmakers Not to Count on a Significant Balance in the Next Budget
Sometime in the next week or two, the Wisconsin Department of Revenue will release a new Quarterly Economic Outlook report. That report will include revised assumptions about economic growth, which could look considerably different than the growth projections contained in the May report that was used as the basis for increased revenue projections in the 2011-13 budget. (A Bloomberg article today illustrates the downward revisions in the latest national economic projections.)
The Wisconsin Budget Project released a new issue brief today that examines some of the implications of the 2011-13 budget for the state’s fiscal health in the following biennium: What’s Passed Is Prologue: Looking Ahead to 2013-15. The new brief cautions legislators not to make plans for using state tax revenue before taking a much closer look at the soon-to-be-revised economic projections, as well as some of the political developments that could turn a projected balance into a structural deficit in the 2013-15 budget.
The Budget Project issue brief examines assumptions underlying projections that Wisconsin’s budget will be in the black in 2013-15. It concludes that the some of those assumptions, such as restoration of the state estate tax, are unlikely to come to pass, which makes the fiscal picture for the next biennium less rosy than some lawmakers have suggested. Those sorts of political assumptions will become even more important if the new quarterly economic report indicates slower growth over the next two years than was previously assumed.