Wis tax revenues come in higher than expected

Lost in the shuffle of the large amount of stuff going on around Labor Day was us finding Wisconsin tax revenues for Fiscal Year 2024 came in surprisingly high.

Preliminary information regarding general fund tax collections for the 2023-24 fiscal year is now available. According to the Department of Revenue (DOR), collections totaled $21,329.6 million in 2023-24, which was 1.7% higher than the previous year.

This office's final estimate of 2023-24 tax collections (projected on January 24 and adjusted for subsequent law changes) was $21,053.9 million. Actual collections were $275.7 million, or 1.3%, above the estimated amount.

Everything I had seen in previous months indicated that the numbers were going to be in line with those January projections. But it looks like the “cleanup” for the end of FY 2024 was much larger than the end of FY 2023. Perhaps a capital gains thing or more quarterly payments due to underpayments on 2023 taxes due to capital gains? Not entirely sure.

Go back to May, the LFB projected the year-end General Fund balance to be $3.8 billion under the previous revenue estimations. So add in the $275 million+ of additional revenues, and we are over $4 billion before we account for FY 2024's expense totals and some miscellaneous revenues.

This also puts us ahead of the revenue curve for year 2 of the 2023-25 biennium, meaning we only need a revenue increase of 1.65% in FY 2025 instead of nearly 3% to meet the LFB’s projections. Even if you assume we only reach those January projections for this current fiscal year, that means we still would be well above $3.4 billion at the end of this budget cycle, and expands the cushion in the next budget.

Good spot to be in, and it certainly means that there is room for more investments into K-12 schools and/or higher education (the UW System’s administration is asking for an additional $855 million, for example), or to help pay for roads or child care services, or other needs.

It also allows for more room for tax cuts, if that’s to be an emphasis for the next budget. Although if we use the large amount of permanent tax cuts that the GOP put together from last year, it would mean there is little left in the General Fund to deal with inflation or any kind of additional spending of note in a $46 billion+ budget.

And given the large number of school and local government referenda that’s looming for November, there’s still work on shared revenues that needs to be done in the next budget, and it needs to go beyond giving more money to unincorporated towns.

Still, the state remains in great fiscal shape, and resources are not going to be a reason to avoid dealing with big issues. Hopefully a fairer-mapped Legislature is going to lead to a better chance of lawmakers being responsive to these needs.