Now that I'm back in the state, I wanted to finally break down Wisconsin's March revenue numbers, and the ramifications for the rest of the state budget, which will have an explosive amount of activity over the next month.
The topline numbers seem great- up by 17.6% on an adjusted basis vs. March 2014, and Fiscal Year 2015's numbers are finally above 2014's on a year-over-year basis (up 1.6%). But there are two unusual figures into these March revenue numbers that I want to break down. The first involves the 32.1% increase in March Individual Income taxes, which is misleading for 2 reasons.
1. March is one of the lowest months for income taxes, because it reflects a large amount of the refunds that are part of tax season, so that 32.1% increase is only a total increase of $66.2 million.
2.$110 million of that difference can be chalked up due to the effects of smaller tax refunds and lower withholdings vs March 2014. Take that away, and income taxes go DOWN by nearly $44 million.
The other odd item in the March revenue estimates is a 22.2% growth in Corporate taxes, from $196.6 million in 2014 to $240.2 million in 2015. This is a shocking increase, as Corporate taxes had massively lagged in Fiscal Year 2015 until that point. Now, corporate taxes are only 0.8% below last year, and now in line to exceed the revenue estimates that the Leigslative Fiscal Bureau came out with last January.
So where do we now stand? Well, if you adjust for the lower tax refunds that'll be coming with April's numbers, it looks like income taxes are up at 3.03%. Sounds good, but the January revenue estimates had the income tax increase at 4.1%, and even with the $165 million boost that those lower refunds have for April, it still means we are on pace to fall short in the largest category of state revenues. And other small increases will not make up the difference, as it stands today.
Adjusted pace of FY 2015 revenues vs. Jan 2015 estimates
Income taxes DOWN $74.6 million
Sales taxes UP $13.5 million
Corporate taxes UP $25.5 million
Excise taxes UP $4.3 million
Other taxes in line
TOTAL PROJECTION VS JAN ESTIMATES - DOWN $31.3 MILLION
This certainly can be made up in the next three months, but it also explains why Gov Scott Walker and Legislative GOPs recently stopped talking up the possibility of "upside revenue surprises" when the LFB comes out with their updated estimates later this week. The stakes involved in that report are obviously huge, as it will be near impossible to fill in Gov Walker's many budget cuts if the revenues aren't there.
In addition, if the future estimates are revised down, and fall short of the $1.25 billion in increased revenue that the budget already relies upon (possible, since the LFB's estimates of GDP and job growth were above the weak numbers reported in the 1st Quarter of 2015), then there may be even more of a mess to clean up. Stay tuned.