Policy Forum crunches the big numbers, shows Evers nor WisGOPs can get all they want

Wanted to draw attention to the Wisconsin Policy's Forum breakdown of the 2023-25 budget. This is a really good high-level view of the budget across a lot of areas.

We’ve talked a lot about the one-time increases in GPR spending and the trading of lower/middle-income tax cuts for the reversal of previous tax cuts to the rich and corporate. But the Policy Forum also talks about all of the funds that go into this budget, which goes beyond the state-level taxes that make up most GPR.

The proposal also calls for the biggest spending increase on record when all types of state revenues are considered. The state’s so-called “all funds budget” includes GPR revenues, federal aid, segregated revenues such as the gas tax and hunting and fishing licenses that flow into stand-alone state funds for transportation and conservation, and program revenues such as university tuition and inspection fees. As shown in Figure 3, the proposed expenditures across all state funds would rise by a historic 17.9% over base levels in 2024 to $52.1 billion, before a slight decline of 0.8% to $51.7 billion in 2025….

In the first year of the budget, while both GPR (up 23.2%) and federal revenues (21.9%) would account for by far the largest portions of the all funds spending increase, there would also be increases in program (6.2%) and segregated (2.7%) revenues. However, all types of revenue except federal would peak in FY 2024 and slightly decline in FY 2025.

The Policy Forum says both Evers’ budget and the GOP’s flat tax scheme are both unsustainable, as they will have spending exceed revenues in 2025 and future years. And that the flat tax scheme is more damaging to the budget long-term.

Under the governor’s proposal, however, the state would draw down its general fund balance to help cover new spending on education, local governments, transportation, and a variety of other priorities. As Figure 5 shows, the drawdown would occur because proposed spending exceeds revenues by nearly $5.2 billion in 2024 and $1.3 billion in 2025. That would amount to the largest imbalance of any budget on record….

Republicans have said that they will remove or reduce many of the governor’s spending increases, which on its own would lessen the drawdown of state reserves and make the budget more sustainable. However, Senate Republicans favor a plan to shift the state’s income tax to one flat rate, a proposal which as we previously noted would lower state revenues by a projected nearly $5 billion over the 2023-25 budget and then by $9.4 billion in the 2025-27 budget, even before any cost to continue current services had been considered. This would likely make the overall budget even more difficult to sustain.

Which probably explains why the WisGOP Chairs of the Joint Finance Committee are already saying they're not likely to put the flat tax in the budget, because they know what a fiscal and political loser it is.

The Policy Forum also puts numbers and pictures behind the skyrocketing amount of surplus funds that are in the state’s bank and savings accounts.

Over the past two decades, Wisconsin’s budget reserve totals have gone from being one of the very worst in the country to being well above average. The state’s general fund is projected to close the 2023 fiscal year on June 30 with a balance of nearly $7.1 billion and a rainy day fund balance of $1.7 billion. The total reserves of more than $8.8 billion would be more than 1,900 times larger than at the close of 2005 and amounted to an unprecedented 44.7% of 2023 general fund spending, or gross appropriations. That is the highest level in Forum records going back 40 years.

And that $1.7 billion in the rainy day fund also gains interest over time, which means that it could well be closer to $1.9 billion by the end of the 2023-25 budget, even without an extra deposit from the General Fund (and Evers wants to put in another $500 million to it). So even if we knock down a decent amount of the $7.1 billion that is projected to be in the General Fund on June 30 over the next two years we should have plenty of cushion to deal with any economic difficulties or needs, and can still invest a lot more than we are.

Given these parameters, the real story is what kind of compromise results during the budget debtate, since there is clearly a way to increase investment, cut taxes, and to keep the budget structurally balanced. If we want the numerical measure of having a similar amount of revenues and expenditures at the end of the 2025 Fiscal Year, then let’s shoot for that as a total number, and we can still do a lot to reverse the damage from the 12 years that we have lived under Walker/WisGOP neglect.