Friday, October 16, 2020

For 2020, US has record deficit while Wisconsin ends up $1.2 trillion in the black.

We knew 2020 was going to break the record for federal budget deficit, and today the Treasury Department gave us the final numbers.
$3.13 trillion it is. As alluded to by the Treasury, most of that came from extra spending due to CARES, although revenues did drop a bit as well.

US budget, 2020 vs 2019

2019 $3.462 trillion
2020 $3.420 trillion (-$0.024 trillion)

2019 $4.445 trillion
2020 $6.552 trillion (+$2.107 trillion)

And half of that $2.1 trillion expenditure jump comes from aid that went out through the Treasury (including the $1,200/$2,400 stimulus checks and bailouts to various businesses), and from the expanded unemployment benefits that went out to tens of millions of Americans. The temporary increase in relief to student loans also was sizable, outpacing the increase in Social Security payments.
Also notice that decline in interest on the debt. That's despite a major increase of $4.2 trillion in outstanding Treasury debt, which illustrates the effect of the Federal Reserve cutting rates to near-zero.

A lot of those extra Federal expenses were funneled down to states through CARES and other programs, to help them pay for the extra services caused by the unprecedented loss of jobs and economic activity that came with the original breakout of COVID-19. And Wisconsin ended up getting by their 2020 Fiscal Year just fine as a result.

Ironically, the state's year-end budget numbers also came out this week, (in the form of the Annual Fiscal Report), and the numbers were far better than many of us imagined 6 months ago.
The General Fund has an undesignated balance of $1.172 billion as of the end of the fiscal year. General purpose revenue taxeswere $17.532 billion compared to $17.341 billion in the prior year, an increase of $191 million or 1.1 percent. General purpose revenue expenditures, excluding fund transfers, were $17.327 billion. This is $502 million less than the budgeted expenditure allocation of $17.829 billion.
We knew about the revenue numbers before, and those barely below-estimate numbers reflect the fact that unemployment benefits are taxed in Wisconisn (as well as at the federal level), so the loss in revenue on the income tax side wasn't nearly as bad as first feared.

In addition, even though many more Wisconsinites were in need of assistance, expenditures didn't spike because the Feds were taking up more of the costs of services such as Medicaid (which I explained in this post earlier in the week).

So for now, Wisconsin's General Fund budget is in decent shape, as that $1.172 billion is only $89 mil below what was projected by the Legislative Fiscal Bureau 3 weeks ago. And that projection had over $779 million left over at the end of the 2021 Fiscal Year, so even with the decline in 2020, there's still $690 million of cushion.

But 2021 still has danger looming. If the Feds stop paying for those extra expenses and jobs remain far below where they were at the start of 2020, you could see that cushion go away quickly. But for now, there's no reason for Gov Evers to pre-emptively put in additional budget cuts, and we may as well see what develops in DC and the overall economy in the next few months before we take any additional steps in regards to the Wisconsin state budget.

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