Late this afternoon, the long-awaited final tax revenue figures for Fiscal Year 2016 were released. I suspected this might be dumped tomorrow right before the Labor Day Weekend, because previous months indicated the numbers would come up short. And the state did come up short, but not by enough to warrant an emergency, so maybe it makes sense that they dropped this today.
Wisconsin ended up $85.1 million below what was projected by the Legislative Fiscal Bureau in January, and that January revenue figure was already revised down $29 million from the numbers that were part of the state budget was passed last year, so we really came up short $114.1 million. But while it is the 3rd straight fiscal year where revenues have ended up below what was originally projected in the budget, it's not a killer, as I will explain below.
The biggest culprit in the shortfall is lower income taxes, which fell short of projections by more than $69 million. Corporate taxes were also light, missing projections by nearly $27 million, and showing a drop of 4.17% from Fiscal Year 2015. I'd argue this points directly to tax cuts geared toward the rich and corporate by the Walker/WisGOP crowd, and that shortfall is from projections that had already been reduced. It also makes for a higher hill to climb in the 2016-17 Fiscal Year (especially in corporate taxes, which now need to go up 8.5% to hit the FY2017 estimates), which definitely should leave you seeing the flashing yellow light of caution on where this is heading.
The other taxes were largely in line. The most prominent of these were sales taxes, which actually beat projections by $7.9 million, and grew by 3.4% over the last 12 months. Not bad, and reflective of strong consumer spending that we've seen at the national level, which has been the main reason the economy has continued to expand in 2016. The good numbers on sales taxes mean we could even slow to 3.1% growth in this fiscal year, and still make the LFB's numbers.
What soothing is that there was plenty of room in the 2015-16 budget to absorb the revenue shortfall, as the most recent figures from the LFB had a $390.55 million balance built into FY 2015-16. What's not so soothing is that some of that cushion was because Governor Walker's office kicked $101 million in debt payments into future years. The lower revenues from FY 2016 cuts into that balance some, both in Year 1 and Year 2, and the 2016-17 budget has grown even tighter as a result. Even if we assume FY 2017 has strong enough growth to meet the LFB's projections (it would be around 3.75%), there still will only be $154.5 million of cushion available, or less than 1% of the total 2016-17 budget.
But the fact that there is that amount of cushion begs the question "Why the hell did Walker skip the debt payment?" If the Walker boys had simply paid their bills as they should have in May, the budget would have been able to stay in balance without any further moves required. Yes, there would only have been about $53 million left over to deal with revenue shortfalls or extra costs (like paying for natural disasters), but it certainly didn't warrant kicking debt payments into the next 8 years and making us taxpayer shell out $13 million a year instead of paying ZERO. It's such a fiscally dumb move that I'm standing by my theory that the Walker folks misread the calendar after seeing April's figures and panicked.
So to review, the 2016 revenue figures are subpar, but not awful and not something we can't survive. But any margin for error in Fiscal Year 2017 is basically gone, and this also illustrates the failure of WisGOP's trickle-down policies, as they continue to fail to reach promised revenues. The incompetence/malice of the Walker folks and their short-term "politics at all cost" thinking has led to these chronic shortfalls, and will lead to bigger gaps for future years.
Although I suppose it could be worse. We could be Kansas, and miss corporate tax projections by 97%! There you go Scotty, something to shoot for, and remind your Koch puppetmasters of home.