Wisconsin Receives Positive Fiscal News
Revenue Collections Are Strong and the GAAP Deficit Declines
There were a couple of pieces of positive fiscal news for Wisconsin late this week. Most noteworthy is that the latest tax collection numbers from the WI Department of Revenue (DOR) are very encouraging. Tax revenue was up 4.6% over the first five months of the fiscal year (through November), but that’s before making an adjustment relating to the timing of collections, so the 2013 and 2014 figures can be compared more precisely. After DOR makes that correction, General Fund tax revenue is up a little more than $400 million or 8.4% in the current fiscal year.
One of the promising parts of the new data is that sales taxes are up 8.3% over the first five months of fiscal year 2013-14. Sales and use taxes have been the slowest revenue source to recover from the recession, so it’s very reassuring to see that area of tax collections finally rebound. However, one thing to keep in mind in looking at the new 2013-14 figures is that revenue collections got off to a slow start in the previous fiscal year.
In a blog post last week, I discussed the very strong revenue growth recently projected in Minnesota, and I wondered if Wisconsin would enjoy similar revenue growth when new tax estimates are released for WI early next year. Though I expect the next batch of Wisconsin data to be less rosy than the latest Minnesota numbers, the November figures released today make me far more optimistic about the revised 2013-15 estimates that will be unveiled in another month or two.
Another bit of positive news was contained in the Comprehensive Annual Financial Report issued by the Department of Administration yesterday. The most notable fact from that report is a substantial decline in the state deficit measured using Generally Accepted Accounting Practices (GAAP). The new GAAP deficit is $1.7 billion, which is an improvement of $463 million. The Governor’s press release highlighted that positive trend.
On the other hand, the new annual report also shows that state general obligation (GO) bonding increased by $213 million in the last fiscal year, and that brings the GO bonding increase in Governor Walker’s first two budgets to $762 million, a jump of 11.3% over two years. The report points out that the ratio of Wisconsin’s bonded debt to personal income is quite a bit higher than it used to be – 4.5% in 2013, compared to 3.4% in fiscal year 2008.
It’s not surprising that the level of debt grew during the deep recession, but as the economy slowly recovers and state revenue rebounds, Wisconsin could strengthen its long-term fiscal position by slowing the growth in state bonding. If the latest revenue figures are a harbinger of a significantly improved revenue estimate early next year, I hope state policymakers will seriously consider measures that reduce bonding and make the state less vulnerable when another recession comes along.