Monday, June 28, 2021

So where does the Wisconsin budget stand today, and for the next 2 years?

As the Legislature prepares to vote on the state budget in the next couple of days, I wanted to give a step back to see where we've been, and where we are.

I'm going to start the Evers budget from March, which includes the early tax cuts put in to match up tax codes to many of the Federal changes put in through CARES and other COVID stimulus measures. And if you begin from that point, you'll see where the LFB estimated a jump in revenues of $1.1 billion for 2021 in June, and then how that translated into a sizable bump in revenues for the 2022 and 2023 Fiscal Years.

You'll also see how the WisGOPs on Joint Finance used that improved situation to cut revenues back to levels similar to what Evers' original budget projected a few months ago.

On the expense side, we see where the increased federal spending in 2020 and beyond combined with an improving economy to lessen the need for expenses from what the Evers budget thought we were going to see. The WisGOPs on Finance first removed many of Evers' spending initiatives (reflected in the silver LFB totals for 2022 and 2023), and then added back some spending of their own.

But what the WisGOPs spent state funds on was very different than what Evers wanted to spend on. Some of this is related to variables that didn't exist when Evers first submitted the budget in February - particularly the ARPA stimulus and the huge projected increase in revenues. But much of the increased "spending" by WisGOP are one-time transfers that trades surplus funds for the normal method of spending.

GPR transfers in WisGOP budget, 2021-23

To Unemployment Insurance Fund $120.0 million
To Transportation Fund $276.2 million
To Budget Stabilization Fund $550.0 million
To Medicaid Trust Fund $702.8 million

LFB says that due to the moves made under the WisGOP budget, most of the $2.5 billion that is projected to be carried over into the next budget will be gone by the time the 2-year cycle ends on June 30, 2023. And under the LFB's projections of laws that would carry over into 2023-25, a structural deficit appears that would have to be filled through increased revenues or other means.

In theory, Governor Evers could veto some or all of these changes, but all that would do is to "bank" the funds. Not necessarily a bad idea, as Evers could use the extra funds to call for items that Republicans threw out of this budget, such as more funds for Special Education or the UW System, more shared revenues for local governments to lessen the pressure on property taxdes, or in having WisGOP take up tax cuts for the working poor that Evers wanted, but the Republicans rejected.

But given that WisGOP allows little debate in public among its members, I would guess the budget would largely pass as-is over the next couple of days, and then the guessing game will begin as to how Evers will react.

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