Saturday, April 22, 2017

March revenue drop means Wis budget in serious danger

I was counting on the Wisconsin Department of Revenue to release its March revenue figures yesterday. They usually release them around the 3rd Friday of the month, and as the day went on, and as the Walker Administration kept tweeting out propaganda about low unemployment (while hiding the bad record of job creation), I had a feeling the numbers might not be good.

Sure enough, the revenue numbers were dumped in the late afternoon, and they were not good.

March 2017 Wis revenues vs March 2016
Income taxes DOWN 8.8%
Sales taxes UP 3.3%
Corporate taxes DOWN 10.4%
Excise taxes DOWN 10.6%
Other DOWN 4.2%

That’s not good, given that March is the height of tax season, which gives an indication about the refunds and payments that set the tone for the rest of the year. Now, relatively decent numbers in February kept state finances from being a full-fledged crisis at this point, but the drop for March is still a bad sign.

This is particularly true given that there were extra days to file taxes (and get refunds) at this point in 2016, meaning that it is likely that more refunds are to be given out in April this year vs last, and limit any growth that we might see.

Even if we assume that income taxes hold up at its FY 2017 rate of growth for the last 3 months of the year (which would get us to slightly beat January’s estimates from the Legislative Fiscal Bureau), we’d still fall short, mostly due to the continued shortfall in corporate taxes.

2017 Wisconsin revenues vs estimates (current FY17 growth rates)
Income tax +$31.75 million
Sales tax -$2.4 million
Corporate tax -$64.0 million
Excise taxes +$3.0 million
Other taxes -$18.4 million
TOTAL SHORTFALL $50.05 million

$50 million in a General Fund that is projected to have $15.5 billion in taxes seems small, but the problem is that Scott Walker’s 2017-19 budget spends $366 million more than it takes in, and only allows $12 million in breathing room. So even a small miss like $50 million means that not everything Scotty wants can be funded, let alone the extra burdens from having a lower base to start from, which would drop available revenue in the budget by another $100 million or so, even if you stick with the LFB's assumptions that the "Trump Boom" somehow materializes in the next 2 years (it sure hasn't yet).

And that’s before we do anything about any of the Walker budget's gimmicks, like extra money needed to make up for his phantom savings on his health insurance scheme or the desire of legislators to find some extra money to fix our pothole-marked roads. Speaking of the DOT, did you notice Walker shift from his "no-tax, no-fee" stance this week, and now is saying that he might be OK with higher fees? It's like Gov Dropout finally figured out that there really wasn't any money in the General Fund that he could move over to fill in the holes (a move that would have driven our $1 billion structural deficit even higher, by the way).

The LFB will re-figure its revenue estimates in a couple of weeks, after it gets an indication of the April revenue numbers. If those April numbers come in light, the 2017-19 budget debate will change drastically, because the house of cards that Walker's pre-election boost to programs is based on will rapidly collapse.

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