No tax revenues + no Trump Boom = more Wis budget problems

With all of the Foxconn talk in Wisconsin, it’s also worth remembering that we still don’t have a state budget for the next two years. And an article today from the Milwaukee Journal-Sentinel’s Jason Stein mentioned that the budget picture is starting to concern Senate GOP Leader Scott Fitzgerald and others in WisGOP leadership, because the house of cards that this pre-election, gimmick-filled budget was based on may be starting to collapse.

The reason? One we should be used to in GOP-controlled Wisconsin - lower-than-projected tax revenues.

In May, the nonpartisan Legislative Fiscal Bureau projected state revenue growth of 2.7% for the fiscal year that ended in June.

Final tax collection numbers including the month of June have not yet been released by the Walker administration. But as of the end of May state revenues were at 2.5% growth for the year.

That modest difference — if sustained through June — could amount to up to a few hundred million dollars of smaller than expected growth. What's more, lower tax collections for last year would drive down estimates for each of the next two years within the next state budget, compounding the effect.

Actually, a 0.2% shortfall would only be around $34 million, but the point about the effect of driving down future year revenues is the real problem. And that shortfall for the net 2 years would be likely become larger if the predicted “Trump Boom” that LFB and other economists were counting on in January doesn’t happen.

Back in January, the Legislative Fiscal Bureau was basing its rosy revenue outlook on a strong GDP growth outlook on a "Trump Boom" that would include tax cuts and big increases in infrastructure.

Jan 2017 LFB estimates of real GDP growth
2017 +2.3%
2018 +2.6%
2019 +2.3%

But so far in 2017, we’ve seen real GDP growth come in at 1.2% in the 1st quarter and 2.6% for the 2nd quarter, which means growth would have to speed up to 2.7% in both the 3rd and 4th quarters of 2017 – the fastest pace in 2 ½ years. And the tax cuts and infrastructure package hasn't even gotten off the ground, and the uncertainties in health care will also hold down the economy in the coming months.


Don't bet on it, Scotty

This stagnation contributed the International Monetary Fund downgrading projected US growth in 2018 to 2.1% last month. Instead of economic stimulus, what’s now more likely to come out of DC is a fiscal crisis, as the debt ceiling and a new federal budget both have to be figured out in the next 7 weeks. Good luck getting either of these items passed in any sort of smooth manner, given the buffoons running Congress and the White House these days.

With the economic and fiscal picture getting dimmer, State Rep. Gordon Hintz noted how absurd it was for Republicans to talk about giving away massive amounts of money in corporate tax cuts while there may be less money to go around.

Hintz said that Republicans are considering cutting the personal property tax assessed on some businesses in the state and committing to up to $2.85 billion in cash payments to Foxconn Technology Group of Taiwan in exchange for a liquid crystal display plant. Both actions could make it harder to balance future state budgets, he said.

In light of the uncertainty, Hintz said he was considering asking the fiscal bureau to revisit its revenue estimates prior to the update that is currently scheduled for January.

Maybe the reality that things are going to get worse is exactly why Governor Walker and other WisGOPs are trying so hard to jam through the Fox-con, to distract people from the mediocre present and lousy outlook for both Wisconsin’s economy and its (still not-completed) budget. Why else would they lie and overpromise about what the Fox-con is about?

With another Wisconsin jobs report coming up later this week and the final 2016-17 revenue numbers likely coming out by the end of this month, what I see between the lines is a lot of concern from WisGOPs who fear that they will finally be held accountable for how Wisconsin keeps lagging behind our Midwestern neighbors and the rest of the country after 6 ½ years of the Age of Fitzwalkerstan, and an Obama Recovery that has gone on through that entire time period.

And they should be afraid.