To review, we ended 2014 Fiscal Year on June 30 at a net balance of $516.9 million. And now with the DOA report, the deficit blows up this way.
ENDING FY 2014 BALANCE +$516.9 million
ENDING FY 2015 BALANCE -$132.1 million
MINUS required reserves -$65 million
TOTAL TO BE MADE UP BY JUNE 30, 2015 $197.1 million
FY 2016 REVENUES $15,540.4 million
TOTAL EXPENSES $16,636.4 million
DEFICIT IN 2015-16- $1.096 BILLION
FY 2017 REVENUES $16,125.5 million
TOTAL EXPENSES $17,243.6 million
DEFICIT IN 2016-17 $1.118 BILLION
TOTAL DEFICIT TO BE MADE UP IN 2015-17 $2.214 BILLION
And by the way, those revenue numbers from DOA are quite rosy. They anticipate a 4.98% increase in revenues for Fiscal Year 2015, while the Legislative Fiscal Bureau has only estimated a figure near 3.5%. I estimated adjusted revenues to be up 3.74% based on the figures through September (we’ll see October’s numbers tomorrow), and if that 3.74% holds up for the rest of the fiscal year, the amount that needs to be filled by June 30, 2015 increases to around $391 million - above the $279 million in the state's rainy day fund.
With that in mind, I’ll take you back to a document that the LFB wrote two months ago, in light of the $281 million revenue shortfall that hit in Fiscal Year 2014, which followed two rounds of Koo-Koo tax cuts that Gov Walker signed onto.
Revenue Shortfall Provision. Section 16.50(7) establishes a separate process that must be followed if there is a larger revenue shortfall. Under this provision, if at any time after enactment of the biennial budget, the Secretary of Administration determines that previously authorized expenditures will exceed revenues in either year of the biennium by more than 0.5% of the estimated GPR appropriations for that fiscal year…the Secretary is required to immediately notify the Governor, the presiding officer of each house of the Legislature, and the Joint Committee on Finance of the revenue shortfall.But don't fear, Walker DOA Secretary Mike Huebsch is claiming that there won’t be a need for such a budget repair bill in the coming months, because they’ll use currently-undisclosed methods to close the budget gap.
Following this notification, the Governor is required to submit a bill to the Legislature containing recommendations for correcting the imbalance between projected revenues and authorized expenditures. Further, if the Legislature is not in a floor period at the time of the Secretary's notification, the Governor is required to call a special session of the Legislature to take up the matter of the projected revenue shortfall and to submit a bill dealing with the shortfall to the Legislature for consideration at that special session.
It is important to note that s. 16.50(7) gives the Secretary of DOA discretion as to how and when the determination of a revenue shortfall is to take place. Once that determination is made, the Governor is required to submit recommendations correcting the imbalance between revenues and expenditures. However, the statutes do not specify a time frame for either the DOA Secretary’s determination or the submission of the Governor’s recommendations.
The challenges of fiscal year 2014-15 are largely a result of adverse federal tax law changes commonly referred to as the federal fiscal cliff, which impacted many states. This led to tax planning distortions that were a consequence of both the 3.8 percent surcharge on investment income included in the Affordable Care Act and the expiration of capital gains tax reductions, both of which took effect in 2013 (both moves haven’t exactly crashed the stock market, now have they?). This meant that in 2012 taxpayers divested at the expense of future years, negatively impacting state tax revenues. This was a risk my department highlighted in this report two years ago (this didn’t stop Walker and the WisGOPs from cutting taxes based on that one-time bump in revenues), and referenced in the Annual Fiscal Report last month.Huebsch uses the always-fun “uncertainty” excuse, which gets a double “BULLSHIT” because it not only does it blame tax changes due to the implementation of Obamacare that have already been in effect for more than one fiscal year, but in addition, federal tax revenues went up by 8.9% in the just-completed federal fiscal year, and the country's having its best job growth in the last 15 years. Yeah, not really buying into that one.
However, through continued prudent management of agency resources, the shortfall noted above will be addressed and the current biennium will end in balance.
And oh yeah, the state has to give an additional transfer of $25.75 million to the Transportation Fund this fiscal year (because Walker's DOA held it back in the last fiscal year to make the FY 2014 balance look better ahead of the election), and has passed a 4% increase in many local road and transit aids that has to be paid off. So the real question is how will the Walker folks intend to make up the few hundred million dollars in unspecified cuts that will undoubted have to happen, and when will they tap the rainy day fund to pay off some of their fiscal recklessness.
Hmm, maybe some national reporters might want to ask that of our fair Governor as he’s galavanting around the country while his state goes broke, claiming he hasn't raised taxes while Walker's DOT asks for $750 million+ in tax increases and higher fees to expand expressways as a payback his buddies at the Road Builders. There are a lot of us in Wisconsin who pay Scott Walker’s salary that’ll be interested in these answers.