Wisconsin now has another $3.8 billion to play with?

After seeing December's numbers, I had predicted that the Legislative Fiscal Bureau would show a big jump in available funds for the state of Wisconsin when it released their revenue estimates for the next 2 fiscal years.

Sure enough today....JACKPOT! And that's even after a $709 million decline in projected revenues due to the Evers Administration deciding to have withholding tables catch up to 8 years of tax changes at the start of this month, increasing take-home pay for workers.

BREAKING: The Legislative Fiscal Bureau today projected the state will finish the 2021-23 budget with a $3.8 billion surplus, nearly $2.9 billion more than was expected just several months ago.

— JR Ross (@jrrosswrites) January 25, 2022

Here are the LFB estimates. Most of the increased funds have to do with another 2-and-a-half billion in projected revenues over the next 17 months, along with some stimulus help.

The $2,881.7 million is the net result of: (1) an increase of $2,509.2 million in estimated tax collections; (2) an increase of $33.1 million in departmental revenues (non-tax receipts deposited into the general fund); and (3) a decrease of $339.4 million in net appropriations.

The $339.4 million reduction in net appropriations is primarily due to the following: (1) an estimated lapse of $270 million in the appropriation for medical assistance benefits because of an enhanced federal medical assistance (MA) matching rate; (2) a reduction of $34.2 million in the sum sufficient appropriation of state funding for the Wisconsin Healthcare Stability Plan due to modifications made in the American Rescue Plan Act of 2021 (ARPA); and (3) an estimated reduction of $23.4 million in the amounts necessary to fund general fund debt service. A further State of Wisconsin explanation of the MA and Healthcare Stability Plan appropriations is presented after Table 1. In addition, the status of the state's budget stabilization fund is discussed.

As I mentioned last week, the LFB notes that income tax revenues were still rising throughout the state in the last half of 2021, but LFB expects the growth to quickly reverse in the first half of this year.

…Total individual income tax collections were $9,283.4 million in 2020-21, an increase of 6.2% over the prior year. Actual revenues in 2020-21 were 0.4% ($33.4 million) higher than this office's previous estimate. Based on preliminary collections information through December, 2021, total year-to-date income tax collections are higher by 13.7% ($562.3 million) than such receipts during the same time period one year ago.

However, revenues are projected to decline over the rest of 2021-22 by $1,626 million (31.4%) relative to the same time period in the prior year. This estimated revenue decrease over the rest of the year is driven primarily by: (a) the income tax rate reduction included in 2021 Act Page 16 58, which lowered the rate in the third income tax bracket from 6.27% to 5.30%, beginning in tax year 2021; and (b) the Department of Revenue's decision to update the income tax withholding tables beginning January 1, 2022, to reflect the income tax rates, brackets, and sliding scale standard deduction (SSSD) in effect under current law for tax year 2022. Together, these two provisions are estimated to reduce income tax collections by $1,729 million in 2021-22. On a year-over-year basis, total income tax revenues are estimated to decline by 11.5% to $8,220 million in 2021-22 ($249.3 million higher than the previous estimate).

But the LFB adds that the projected decline in income tax revenues will be smaller than originally expected for this year, and the LFB expects the number to return near 2021's levels for 2023.

Sales taxes also continue to rise. The recovering economy is already giving a big boost, and on top of that, the LFB notes that the state is getting a whole lot more in sales taxes from online sales than they thought they would.

Sales tax collections through December, 2021, are 13.2% ($332 million) higher than the same period in the prior year. The strong year-to-date growth in collections reflects growth over months in the previous year in which COVID-19 vaccines were not yet available and consumers engaged in less in-person economic activity. It is estimated that, over the rest of 2021-22, sales tax revenue will increase at a slower rate of 5.7%.

Prior to the start of the pandemic, it was estimated that Wisconsin would collect $146.3 million in 2020-21 in sales tax from remote sellers and marketplace providers. Actual sales tax collections from these sellers amounted to $401.4 million in 2020-21, which is $255.1 million more than the 2020-21 estimate. It is believed that the pandemic resulted in a large and continuing shift in consumer spending from physical stores to online stores, which is reflected in this data. Year-to-date sales tax collected by marketplace providers and remote sellers in 2021-22 has increased 31.2% ($42.2 million) compared to the same period in the previous year. If sales tax collections were adjusted to exclude the increased collections from marketplace providers and remote sellers, year-to-date growth in collections would have been 11.5%.

The LFB also mentions that corporate tax revenues are expected to remain near the high levels that they hit in Fiscal Year 2021, partially due to Wisconsin companies deciding to become "corporations" because they received such a write-off at the federal level due to the GOP Tax Scam of 2017.

Put it together, and it offers an opportunity to make real structural changes and/or allow for funding at the state and local levels that allow us to regain the economic advantages and services that we have lost over the last decade-plus. If we choose to.