In 1 month, it's become a very different state budget situation

Good rundown here from longtime Capitol reporter Steven Walters, who notes that we are in a much different state budget situation than we were looking at 2 months ago.

Back then, the debate was over what to do with hundreds of millions of extra dollars that were projected to be around in June 2021. Instead, now we are looking at significant needs and future budget deficits. In the article, Walters talks with Assembly Speaker Robbin’ Vos, who illustrates the fiscal squeeze that is going to hit Wisconsin government.

The new reality is that state tax collections will be down “significantly,” because of COVID-19 economic shutdowns, while demand on state services – jobless benefits, for example, and health care – will increase, Vos added.

State government’s top three sources of revenue – individual and corporate income taxes and the 5 percent sales tax – had been projected to bring in an additional $400 million [compared to the original 2019-21 budget] between the current year and the one starting July 1. That now seems unlikely.

Vos says that the GOP-run Legislature will likely use up the extra money that was carried over into the current budget, in order to lessen the pain of immediate cutbacks.

First, Vos predicted, there is “no doubt” state government’s surplus accounts – which total a record $1.2 billion – will have to be tapped to make up shortfalls in tax collections and demands for more services.

Which sure makes it a good thing that Evers vetoed another tax cut that the WisGOPs passed through the Legislature earlier this year, so we have more of that money around to be tapped. Funny how Robbin’ doesn’t mention that.

Then Vos signals that the Legislature would likely cut back on many initiatives and added investments that are planned for the next Fiscal Year.

Second, Vos issued this blunt warning about the spending increases approved 10 months ago for the budget year starting July 1: “A lot of the things we had hoped to do might have to wait.”

Walters also notes that in addition to some cutbacks, other money may have to be moved around because priorities have changed so much with the COVID-19 outbreak and the related collapse in economic activity.

One more example of the innocence in the budget passed 10 months ago: It included no increase in the budget for the Wisconsin Economic Development Corporation (WEDC).

But, in the wake of the COVID-19 crisis, WEDC has been charged with helping small businesses recover. And it also received 3,900 queries seeking clarification of the governor’s open-or-closed order of “essential” and “non-essential” businesses.

While those WEDC efforts will likely have some help from DC to help pay the bills (if the new SBA Loan program actually ends up working), there’s a lot that’s going to have to be made up by the state after a few months. And those costs are going to remain elevated past June 2021, because I’m not counting on our economy to snap back to 3.5% unemployment at that point – I’d bet it would be closer to twice that.

Joint Finance Co-Chair John Nygren is also looking at what to cut, which he revealed before he and his fellow Republicans did nothing about the election that was slated to happen tomorrow.

Nygren says the state may have to freeze some spending after July 1 because of declining revenue amid the coronavirus outbreak.

— Patrick Marley (@patrickdmarley) April 6, 2020

With that in mind, I’m definitely thinking Evers’ plans to add spending to our public school districts and cutting property taxes aren’t going to happen, beyond whatever temporary help might come from the stimulus bills. And what also seems certain is that the Joint Finance Committee and the rest of the Legislature are going to have to cut short their 10 ½ month paid vacation due to the new fiscal reality, and make a lot of adjustments and decisions on how to handle the increased needs and tight budgets that are resulting from the COVID-19 breakout.