Wednesday, May 18, 2016

Can the Walker Admin read revenue documents? Or are the numbers themselves misleading?

Given Governor Walker’s decision last week to “scoop and toss” $101 million in debt into future years, I surmised that it must have been a tax revenue shortfall that had emerged in Wisconsin after tax filing season ended. This made the release of April’s tax revenue report by the Wisconsin Department of Revenue a crucial one, to see if that hypothesis was correct.

Well, the DOR sent out the release late yesterday afternoon, and the result was…unclear. Here’s the reason why.

Income tax revenues, Wisconsin April 2016 vs April 2015
Actual figures -20.22% (!)
Adjusted figures +12.73% (!)

Income tax revenues, Wisconsin FY2016 vs FY2015
Actual figures +1.33%
Adjusted figures +6.46%

Total tax revenues, Wisconsin FY2016 vs FY2015
Actual figures +1.82%
Adjusted figures +4.54%

What’s with the big adjustment? The DOR document explains.
Individual income tax collections in fiscal year 2016 was affected by late postings in withholding. These occur whenever a month ends on a holiday or weekend, causing the due date for withholding payments to move to the first working day of the following month instead of the last day of the current month. Year-to-date amounts for fiscal year 2016 were also affected.
So looking at the calendar, what this means is that 2015’s income tax withholding payments were supposed to be in by April 30 (a Friday), but 2016’s didn’t have to come in until Monday, May 2. I could see a related argument that income tax filings not being due until April 18, 2016 would have a similar effect, although 11 days is a long time between mailing and having the payment hit DOR’s records.

In itself, having these adjustments is fairly common, and they snap back over the following month or two, depending on how the calendar falls. But it’s the amount of the adjustment that caught my eye. Over $296 million! And it makes all the difference in how the revenue picture looks for the rest of the fiscal year, especially since sales (only up 1.3%), corporate (down 9.3%) and excise taxes (-4.6%) all disappointed in April.

If income taxes are truly up 6.46%, then that’s pretty much in line with the Legislative Fiscal Bureau’s estimates in January of a 6.61% increase for this fiscal year. And the 4.54% increase in overall revenues is slightly over the total revenue increase of 4.36% that LFB made in January. So no revenue issues should exist if this is true.

But here’s the danger if that adjustment is overestimated, and adjusted revenues “fall” in May as a result. Let’s use the actual figures through April 30, and see what would result if that held for the rest of the year compared to the LFB’s January estimates.

Income tax +1.33% DOWN $386.8 MILLION from estimates
Sales tax +2.95% DOWN $14.5 MILLION
Corp. tax -0.05% UP $14.4 MILLION
Excise tax +1.18% UP $1.0 MILLION

This makes me wonder some more about the Walker Administration’s decision to scoop and toss last week. If revenues were truly on the mark, then there wouldn’t be any immediate budget concerns, because the 2015-16 budget has a $284 million cushion built into it. This $284 mil assumed that the state would pay the $101 million debt payment that the Walker boys decided to skip out on in favor of paying more money down the road. Which leads me to ask an obvious question.

WHY WOULD THEY SKIP MAKING THAT PAYMENT? Are they thinking there is some magic high-interest investment out there for that extra $101 million to make money off of over those 8 years. Seems like quite a gamble in exchange for having to pay $13 million in principal and interest in each of the next 8 years. This is especially true if buy into Gov Walker’s BS about “The Obama economy” making things worse off in the future, because a failing economy in the future would make it even more foolish not to pay your bills now while you can.

No, that doesn’t add up. Which leads me to conclude one of two options.

1.The Walker Administration panicked when they saw the actual revenue figures, didn’t understand the adjustment part, and thought that even with the built-in budget cushion there would be a deficit of nearly $102 million, (amazing how close the numbers work out there). So in their minds, the “scoop and toss” allowed them to avoid having to do a budget repair bill in the Summer before the 2016 elections, and hide the real damage until the next budget deliberations begin this Winter. This theory makes some sense if you realize the decision to skip the debt payment was announced right after April’s revenue numbers came in.

2.The Walker Administration knows the income tax adjustment is going to be much smaller than $296 million, and they know a budget shortfall is coming, so they took care of the “scoop and toss” now, as they didn’t want to play the “hope and pray” game on figures being better in May and June. The hoping and praying comes later, as they try to avoid a budget repair bill in the already-tight budget for 2016-17.

So the Walker fiscal people are either dumb, or they’re cynically manipulating the numbers. Either answer indicates a group of people unfit for office, but I’ll leave it up to you to decide which direction they’re taking (I truly don’t have an answer on this one).

As for the revenue picture, I guess we have to wait for May’s figures in a month, when the adjustment snaps back, and we see if the 2015-16 budget is actually on track. Stay tuned.


  1. These are two big adjustments in a row, if I remember correctly. I do wonder how they come up with their numbers.

    1. They're estimates, as far as I can tell. I dont know the model but its likely based on some past record. Then they balance it out over the next month or 2 (depending on the calendar).

      Which means May figures will be adjusted down with May 31 coming on a Tuesday. They can delay the inevitable, but they can't hide from it forever