Thursday, October 16, 2014

A few thoughts on the budget release

Here is a snap analysis from the State of Wisconsin's Annual Fiscal Report (AFR), which came out yesterday afternoon. The surface number was slightly better than what we projected based on revenues (+$517 million for FY2014 vs. $481 million based solely on revenues), albeit well below the $724 million that the original budget projected when the second round of tax cuts were passed earlier in the year. And a look under the surface leaves the budget situation as bad as we feared.

First off, let's use the One Wisconsin Now whiteboard as a visual aid.

Now let's see what the AFR reported.

Gross Appropriations 15,043
Transfers 35
Compensation Reserves 58
Less Lapses -345
TOTAL 14,796

We ended up lapsing more money than expected, and also paid workers extra pay and bonuses $20 million less than projected (that's the Compensation Reserves). But also there's this note that you can find on Page 13 in the AFR.
TRANSFERS. Certain transfers were delayed until the second year of the biennium, resulting in a positive variance or transfers.
Whoa, what's that? Well, I looked at the Appendix to the AFR and went to the Transportation Fund information, and sure enough, it says there was only $35 million sent to the Transportation Fund from the General Fund. Now compare that to what was expected when the budget was passed last year.
Governor: Transfer $23,000,000 during the 2013-15 biennium from the general fund to the transportation fund. Although the bill does not specify the year in which the transfer must be made, the fund condition statement submitted with the budget indicates that the transfer would be made in 2013-14, thus having the effect of increasing transportation fund revenues by $23,000,000 in that year. This transfer is in addition to the current law, annual transfer of 0.25% of general fund taxes made from the general fund to the transportation fund, estimated at $35,127,000 in 2013-14 and $36,302,500 in 2014-15. During the 2011-13 biennium, a transfer of $125,000,000 was made from the general fund to the transportation fund ($22,500,000 in 2011-12 and $102,500,000 in 2012-13) and the 0.25% of general fund taxes provision was created, with the first transfer of $35,127,000 occurring in 2012-13.

Joint Finance/Legislature: Increase the transfer by $110,293,200, to provide a total transfer of $133,293,200 under this item. The fund condition statement for the substitute amendment anticipates that $25,750,000 would be transferred in 2013-14 and $107,543,200 would be transferred in 2014-15.
I bolded that part under the Governor's proposal, because they were SUPPOSED to transfer another $25.75 million to the Transportation Fund....but the AFR shows they didn't do that. Gov Walker's Administration held it back till this fiscal year in order to make 2014's budget balance look better before the election. Tricky move there, Governor! But it also means that we're sending nearly $170 million to the Transportation Fund in Fiscal Year 2015. So that drives up expenses even further in this fiscal year.

With that in mind, here's the progression of our surplus-into-deficit trend under this 2013-15 budget, and for the 2015-17 budget. This assumes the 3.5% revenue growth that Legislative Fiscal Bureau projected for this fiscal year.

FY 2013 end balance +$759 million
FY 2014 end balance +$517 million (-$242 million for year)
FY 2015 end balance -$356 million (-$873 million for year)
FY 2015 required reserves +$65 million
AMOUNT TO BE MADE UP BY JUNE 30 $421 million

2015-17 projected deficit- $1.316 BILLION


Same as it ever was. Still a mess.

1 comment:

  1. Ok, so the oneoff general fund transfer to the transportation fund for FY14+FY15 was meant to be $133,293,200, of which as far as I can tell the LFB reckoned on $25,707,000 being in FY14 in addition to the $35,127,000 already specified for a total of $60,877,000, while footnote D on page 5 of the appendix (page 7 of pdf) indicates the total transfer was $35.1 million.

    So the general fund balance has been inflated by a little over $25 million by this shenanigans.

    On the other hand, we should also note that page 17 of the AFR (page 19 of the pdf) indicates that $23,704,000 of anticipated Indian Gaming Revenue did not materialize. That might not materialize in FY15 either, or FY14's might materialize in FY15, depending on how many games Walker is willing to play with the Kenosha casino decision.


    Also, did you notice that FY15Q1 tax collection data is out? I have it on the authority of the Department of Revenue that the impact of the withholding table changes for the 2 1/2 months of the quarter was $123 million, so adjusting for that the total tax revenue growth would be up 2.1% year-on-year.

    That would suggest that (given the net impact of the withholding table changes is ultimately nigh-identical last FY and this) FY15 is on course to end with about $14,237m of tax revenue, down $207m from the LFB's vanilla take on the impact of the lower FY14 base and down $488m on their May estimate following the GOP's bonanza of giving away money the state didn't have.

    Given that net appropriations for FY15 are projected to be $15,843 and considering the transportation fund non-transfer and lack of casino revenue a wash, we'd end FY15 some $530m in the hole, thus having to make up $595m before June 30th next year.

    For the 2015-17 structural deficit calculation from that May LFB memo, the FY15 base revenues would instead be $14,796m and so the structural deficit $1,618m, making the total needed to be made up from somewhere over the next 2 1/2 years some $2.213 billion. The impact of the GOP's profligacy in the January special session for was $278m in FY14 and $698m in the fully-impacted FY15 and accounting for the one-time nature of the fiscal impact of the withholding table changes, so the total impact of Act 145 through FY17 is about $2,041m. In other words, this fiscal hole is entirely the fault of Governor Walker and his Legislative allies.

    Plus, as ever, the $1 billion Transportation Fund hole for 2015-17...