Tax cut, rebate and K-12 deal, by the numbers

Even though the Legislature has adjourned for this session and Governor Evers has decided not to run for a third term, we found out on Monday that there is some work that could still be done at the State Capitol.

Democratic Gov. Tony Evers and Republican legislative leaders have struck a $1.8 billion deal to deliver new funding to schools, lower property taxes and send direct payments to income tax filers across the state.

The bipartisan spending package comes two months after state lawmakers ended their regular session for the year and at a time when the cost of living has become central to Wisconsin voters' decision-making ahead of the midterm elections, when control of the state Legislature and the governor's office are up for grabs.

"It's a historic day for Wisconsin’s kids and our schools, and I’m jazzed we were able to get this done," Evers said in a statement....

The proposed deal will spend down the state's projected $2.5 billion surplus that, until now, lawmakers have been unable to agree on how to spend. An Evers spokeswoman told reporters there will still be funds left in the surplus, and the deal does not tap into the state's rainy day fund of more than $2 billion.

Ok, so what’s in the school funding and tax break deal?

First off, the bill would give another boost to aids for K-12 special education, allowing for the state to cover an estimated 50% of costs instead of the 30.6% it was covering last year and the 35% it is projected to cover this year.

This bill provides an additional $85,000,000 in fiscal year 2025-26 and $230,000,000 in fiscal year 2026-27 for special education and school age parents programs. Under current law, the state reimburses the full cost of special education for children in hospitals and convalescent homes for orthopedically disabled children. After those costs are paid, the state reimburses school boards, operators of independent charter schools, cooperative educational service agencies (CESAs), and county children with disabilities education boards (CCDEBs) for costs incurred to provide special education and related services to children with disabilities and for school age parents programs (eligible costs) from the amount remaining in the appropriation at a rate that distributes the full amount appropriated.

In addition, there is a bump in “regular” state aids that will allow the state to pay more for everyday expenses.

The bill creates a second per pupil aid for school districts that is funded from a sum certain appropriation and is considered state aid for purposes of revenue limits (per pupil state aid). Under the bill, beginning in the 2026-27 school year, the per pupil amount of per pupil state aid is determined by dividing the amount appropriated for per pupil state aid for the current school year by a three-year average of the number of pupils enrolled statewide. The per pupil amount is then multiplied by a three-year average of the number of pupils enrolled in a school district. For purposes of per pupil state aid, the number of pupils enrolled in a school district includes pupils enrolled in an independent charter school other than a legacy independent charter school. The bill appropriates $302,500,000 for per pupil state aid in the 2026-27 school year. Finally, the bill requires per pupil state aid to be paid on a schedule that is similar to the distribution schedule for equalization aids.

So schools still can’t increase their revenue limits beyond the $325-per-student increase that was laid out in Gov Evers’ creative veto from a couple of years ago (at least without going to referendum). But this additional $302.5 million in per pupil aids are intended to cut December property taxes for K-12 schools by the same amount statewide.

There is another $50 million trade of state aids for property taxes when it comes to the state’s technical college system. This adds on to an earlier $406 million “state dollars for property taxes” swap that was done in 2015, and in both cases, the tech college system was not allowed to use the state dollars to add resources (take from that what you will).

The bill also includes the provisions of GOP Tax Scam 2.0 that deducts tips and the extra pay above regular pay that people get from overtime. But there’s a main difference in the Wisconsin deduction, as it would continue at the state level beyond the 2028 expiration of the federal end tax break on tips and OT.

For “regular” income, the Evers and the outgoing GOP legislative leaders decided against cutting tax rates, and instead went with a one-time tax rebate for those who lived here in 2024.

The bill provides a surplus refund payment to taxpayers who filed a Wisconsin individual income tax return for tax year 2024 and who owed Wisconsin individual income tax for that year. The payment is $600 for married persons filing a joint return and $300 for all other individuals. The payment may not exceed the amount of the taxpayer’s 2024 net income tax liability. No payment may be paid to any of the following: 1) taxpayers who were a dependent of another taxpayer iyn tax year 2024; 2) certain taxpayers who are deceased; or 3) part-year residents or nonresidents whose Wisconsin income in tax year 2024 was less than 90 percent of total income.

Under the bill, the Department of Revenue must identify taxpayers who are eligible to receive the payments and the Department of Administration must issue the payments without taxpayers having to take any further action. The bill requires that DOA issue the payments no later than September 15, 2026. A taxpayer who does not receive the amount of payment for which he or she is eligible may file a claim by using a portal on DOR’s website. No claims may be filed after December 15, 2026.

So hang in there for the next 4 months, and you’ll get $300/$600! The rebate would be an estimated $870 million, but since it’s a one-timer, it won’t be cutting into available funds in the next state budget.

The Legislative Fiscal Bureau also gave a breakdown of the tax cut and K-12 spending bill. And they give a bit more context, especially on the K-12 items, starting with special education aids.

….Payments are made from a sum certain appropriation, with the dollar amount set by the Legislature during the budget process. The actual proration rate in each year is calculated by dividing the amount of appropriated funding by the total prior year aidable costs reported by districts. In 2024-25, $574,777,700 GPR was appropriated for special education aid and the final proration rate was 30.64%. Under 2025 Act 15, the appropriation for special education was increased to $782,408,800 GPR in 2025-26 and $871,826,900 GPR in 2026-27.

The bill would increase the dollar amounts in the sum certain special education aid appropriation by $85,000,000 GPR in 2025-26 and $230,000,000 GPR in 2026-27. The total amounts in the appropriation would equal $867,408,800 GPR in 2025-26 and $1,101,826,900 GPR in 2026-27. Based on costs as of March, 2026, it is estimated that this additional funding would reimburse costs at a rate of 42.7% in 2025-26, and 50.0% in 2026-27. The actual reimbursement rate could be higher or lower, depending on final prior year aidable costs.

The LFB estimates the per-pupil increase at $387 per student, more than paying for the $325-per-student increase in revenue limits that was part of Governor Evers’ creative veto. Which shows that the Tom Tiffany talking point of “400-year property tax increases” was always BS - it's just that he and his fellow Republicans didn't want state taxes to pay for the schools.

The Evers Administration says we can, as tax season filings allow the state to have an even bigger cushion than the $2.5 billion that LFB projected back in January.

Through April, fiscal year 2025-26 general fund tax collections are tracking approximately $300 million to $350 million above the Legislative Fiscal Bureau’s January estimates, which were $1,529.0 million above the net balance projected at the time of enactment of the 2025-27 biennial budget. Strength in general fund tax collections has primarily emanated from individual and corporate income tax receipts to date. Sales tax collections have also modestly exceeded estimates. Please note that overall general fund tax collections during the few remaining months of fiscal year 2025-26 may cause modest positive or negative variance from the trend so far this fiscal year.

Through April, fiscal year 2025-26 general fund tax collections have increased 5.3 percent compared to last year. Individual income tax collections have risen 4.4 percent, corporate income tax collections have increased 11.1 percent, and sales and use tax collections have risen 4.5 percent. While a portion of the gain in individual income tax collections results from a favorable comparison due to processing season anomalies in fiscal year 2024-25, growth has significantly exceeded the 1.4 percent growth rate estimated in January for fiscal year 2025-26.

I knew the revenue numbers were looking good through March, even with additional refunds from income tax cuts in the 2025-27 state budget. And now that tax filing season has ended in April, the Evers Administration says Wisconsin is running ahead of what the Legislative Fiscal Bureau estimated back in January, which was higher than what was estimated when the budget was signed into law in early July 2025.

So let's go with the assumption that revenues will end up $300 million above the LFB's estimates from January for FY 2026. And then let's assume the same rate of revenue growth that was in the LFB's estimates, so there's around $305 million more in revenues to play with in FY 2027 than originally estimated, for a total increase of $605 million. The LFB also gave updated estimates of what this tax cut, rebate and K-12 spending package would do to the available funds in the state, without assuming the extra revenues that the Evers Administration was saying Wisconsin was on track for in this Fiscal Year. Let's include those numbers as well, and see what they look like.

And when you run the numbers, it looks like there would be just under $3.1 billion projected to be available if the Evers Administration is correct and revenues continue to be above LFB estimates. And if this package were to go through, the extra revenues would provide more cushion, taking the available funds from $553 million to 1.16 billion.

Seems like there's a lot to like about this. Property taxes for K-12 schools get reduced, just under 2 million Wisconsinites will be getting checks of up to $300 or $600, and others get reduced taxes on their OT and/or tips. So why has neither house of the State Legislature passed it as I write this at 7:40 on the evening the bill was supposed to be passed?

I'll go into those hangups from members of both parties on the next post. And most of it has to do with who might be running state government in 2027 after Governor Evers, and GOP Legislative Leaders Vos and LeMaheiu are all gone, and how much money would be available to get things done.