Next week will tell a significant tale on the state of Wisconsin’s budget, as the Annual Financial Report is due out on Wednesday. Here’s a look at the FY2013 AFR, which lists pretty much all expenses and revenues for the state in the July 1-June 30 fiscal year. With a budget crisis looming and the second and final Walker vs Burke debate on Friday night, the numbers in this report will be sure to get a lot of attention, and I wanted to give you a quick review of what to look for when the numbers come out.
After the WisGOP-headed State Legislature passed tax cuts in early 2014 and Gov. Walker signed onto them, the projected year-end balance for FY 2014 was supposed to be $724 million, and $165 million for the year ending June 30, 2015. Since then, we know that revenues fell short by more than $281 million in the last fiscal year, which would reduce the year-end balance to $443 million, and throw year 2 of the budget into deficit.
So what this means is if everything stays at predicted revenue growth and budgeted expense levels, we’d have to make up just a bit less than $400 million by the end of June in some way, let alone the billions in other deficits that are looming for the 2015-17 budget. But that number doesn’t take into account expenses in FY 2014, or other revenues. If those numbers are also different than what was budgeted, then that obviously changes the calculation for how much might (or might not) be made up in year 2.
That being said, early indications are that the FY 2015 budget hole may be closing a bit. The best indicator we have so far is the state’s Monthly Statement of Receipts & Disbursements. It’s really nerdy stuff, but throughout the course of a year, the state will take in more money than it gets back in certain months, while paying out more than it gets in for others (it seems to be largely based on aids to and from other levels of government, as well as timing of tax payments). And the state’s Department of Administration’s tracks it in this monthly report that no one other than total geeks would pay attention to.
So what we can do is look at the month-end balance, compare it to the same months in 2013, and then do some projections based on that.
Change in cash balance in millions, July-Sept 2013 and 2014.
July- -$867.3 2013, -$879.4 2014 (DOWN $12.1)
Aug.- +$137.1 2013, +$135.1 2014 (DOWN $2.0)
Sept- +$879.9 2013, +$972.9 2013 (UP $93.0)
NET CHANGE 2014 VS. 2013 +$78.9 million
$78.9 million is pretty good, but it’s even better when you consider that about $165 million should be added to that total because it accounts for the lesser withholding amounts compared to 2013 (amounts that’ll be “paid back” through lower state tax refunds in early 2015- you’ve been warned). So add $165 million for an apples-to-apples comparison, and you’re looking at $243.9 million to the good.
Now, this is far from an exact number, as it doesn’t exactly match what ends up in the General Fund totals, but for example, if we ended up with adjusted revenues $243.9 million higher than the tax revenues for July-September 2013, that’s an increase of 8.74%. Obviously, a long way to go, but if that type of 8.74% increase held up for the next 9 months, that would be enough to close the $400 million budget hole that we’re facing between now and June 30, 2015.
But of course, we still don’t know exactly how big of a hole we have to dig out of. We’re only assuming the $400 million figure based on 2013-14’s General Fund tax revenues. If expenses rise (very possible given higher-than-expected Medicaid enrollments in early 2014) or other revenues fall short (remember how the Potawatomi got tired of Walker jerking them around and refused to pay $20+ million, and how the state said that endangered its finances?), the amount that has to be made up goes even higher.
Which is why the next week will feature big budget news, for both the current and future budgets. And you can bet there will be plenty of spin on the numbers when they come out. So be ready for it, and be ready to call “BULLSHIT!”