Thursday, July 8, 2021

And the budget is official. But it isn't the end

To no surprise, Governor Evers signed the GOP-designed budget today.
Evers used his partial veto powers to eliminate or modify 50 provisions in the spending plan, but left intact $2 billion in income tax cuts proposed by Republicans, achieved by bringing the state's third income tax bracket — which applies to individuals making between $23,930 and $263,480 per year — down from 6.27% to 5.3%.

The budget — modified significantly from what the governor initially proposed in February — passed the Legislature with support from all Republican lawmakers and seven Democrats.
As I mentioned last week, Evers wasn’t going to veto the entire document, as that would have given the WisGOPs the excuse they needed to deny $2.3 billion in stimulus funds for K-12 schools. The real question was whether Evers would let the largely-regressive income tax cuts stand, and he decided it was OK to sign that and use vetoes to save other funds for later (which I’ll get to in a minute).

Even though the Wisconsin Supreme Court has said Evers couldn’t use his vetoes to rewrite the budget in a way that adds more money to schools, Evers said he would take steps to help out K-12 districts in another way – using even more federal stimulus funds.

I’m not sure if this $100 million will be sent out through some kind of formula distribution that everyone gets, or if it’ll be based on specific situations such as high levels of poverty or districts that didn’t get much from either the stimulus and in the GOP-designed budget.

Where Evers did use his veto pen was in knocking down certain GOP provisions that would have diverted a sizable amount of the available funds into the state’s Rainy Day Fund. He explained his reasoning as follows.
…I object to making these funds unavailable for supporting the needs of Wisconsinites that the Legislature failed to address. The balance of the budget stabilization fund is reserved for periods of below-normal economic activity when actual state revenues are lower than estimated revenues. This transfer removes $550,000,000 from dollars that can be immediately applied to investments in our kids, small businesses, and our state's continued economic recovery. Instead, this funding should remain in the general fund where it can be directly appropriated to address gaps and shortfalls in the Legislature's budget actions. I request the Legislature work with me to instead invest these funds to address the immediate needs of Wisconsinites.
Tamarine Cornelius of the Wisconsin Budget Project noted that the state's Rainy Day Fund is already over $1.6 billion, and that Evers' move allows for the chance for the funds to be used in the next two years.

If the state's revenues stay strong, this allows Evers to call the Legislature back into session in a few months to fund schools or pay for other needs with this extra money. And then hammer on WisGOPs if/when they fail to do so.

While Evers allowed for the income taxes to be cut, Wisconsinites will only see that reflected in the form of higher refunds in the Spring instead of seeing lower refunds and a higher amount being taken home in their 2022 paychecks.
I am vetoing this section because I object to requiring the Department of Revenue to make these withholding table adjustments at a cost of approximately $700 million while other critical priorities have not been sufficiently funded by the Legislature. This veto does not increase anyone's tax liability compared to what the Legislature passed. The reduction in the rate of the third individual income tax bracket from 6.27 percent to 5.30 percent starting in tax year 2021 will still occur, and taxpayers will receive approximately $2 billion in individual income tax relief from that reduction in this biennium. The secretary of the Department Revenue has the ability under current law to make these adjustments as appropriate and will assess whether and when these updates should be made within the full context of revenue collection trends and other state priorities.
Not only does this allow Evers’ Department of Revenue to decide if/when the withholding tables get changed (maybe closer to the election?), but it adds to the $550 million removed from the Rainy Day Fund to allow for a total of $1.25 billion to play with and/or cushion for additional needs.

Evers also vetoed an item that would have sent more money from general taxes and into the Transportation Fund long-term.
I am partially vetoing this provision to eliminate the increase in the transfer after fiscal year 2022-23 because I object to increasing the general fund's subsidy to the transportation fund on an ongoing basis. As a result of my veto, the transfer will revert to the current law amount of 0.25 percent of general fund taxes for fiscal year 2023-24 and beyond. I have made it a priority to ensure that we have a sustainable, dedicated source of transportation funding to ensure we can repair our roads and fund public transit while also investing in our schools and communities. While enhanced transfers to the transportation fund for the 2021-23 biennium are reasonable given the impact of the coronavirus pandemic on motor fuel tax collections, these increases should be temporary rather than permanent.
The current budget will still get $276.2 million in General Fund money on a one-time basis in this budget, but Evers’ move will bring it back down toward $50 million a year going forward.

In other budget-related news, Evers used today’s event to say that a separate item used for another GOP tax cut for businesses is going to be shot down.
In addition to the income tax cut, Evers kept a measure that will reduce property taxes by about $647 million — but he said he will veto separate legislation passed by Republicans that would eliminate the state's personal property tax, which applies to business equipment. Evers and other Democrats have said the legislation was too rushed.
Well, when WisGOPs farm out policy to WMC, sometimes details get missed. Let’s see if WisGOP tries to actually get this one right, or uses it as a reason to whine over the next 16 months that Evers isn’t giving everything away to their donors.

Given the nature of the gerrymandered Legislature, you knew that Evers could only get so much through for 2021-23, but today’s moves also give a lot of room for later maneuvering, or at least something to run on. Because it seems to be a pretty easy sell to say “we’re able to pay for all these things we want, and level the playing field in the process, if you vote for Democrats to run things in Wisconsin.” And with the extra state funds lying around, Evers could use the property tax cut as a springboard to reform that reduces the need for schools and local governments to levy as much in property taxes.

So I view the budget-signing as the prelude to more work and debate to be had for the rest of 2021 and likely most of 2022. And who Wisconsin's voters choose out of that debate likely will also be the ones who get to make the decisions with the next budget in 2023.

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