New Wis revenue figures also fall short. But there's still billions to work with.

I had mentioned that recent news of lower-than-expected US tax revenues during tax season combined with similar lower numbers in the state's checking account might well mean that the state of Wisconsin wouldn't maintain the lofty projections that came out earlier this year.

That prediction turned out to be true today, courtesy of the Legislative Fiscal Bureau.

On January 25, 2023, this office distributed its estimates of general fund revenues and expenditures for the 2022-23 fiscal year and tax collection projections for each year of the next biennium. Recently, tax collection data for April, 2023, became available and S&P Global released its May, 2023, forecast of the national economy.

Based upon our review of the collections data and the new economic forecast, we believe that tax collections will be lower than the January 25 report by $365.2 million in 2022-23, $148.0 million in 2023-24, and $241.9 million in 2024-25. The three-year reduction is $755.1 million, or -1.16%.

And like we're seeing at the Federal level, low income tax figures and especially a lack of capital gains are a reason behind the lower estimates.

Individual Income Tax. Total individual income tax collections are estimated at $9,450 million in 2022-23, which represents a decline of 1.7% relative to the January estimate. Growth in year-to-date adjusted withholding collections through April, 2023, relative to the same time period a year prior (-5.9%), is significantly lower than forecast in January. Year-to-date through April, final payments made by taxpayers for tax year 2022, and tax amounts withheld from nonresident members of pass-through entities, are both considerably lower than the forecasted level in January. However, adjusted withholding collections (not including pass-through withholding) are expected to grow by 7.2% over the rest of the year, buoyed by strong near-term projections for wages and salaries.

The January forecast included an assumption that capital gains realizations would decline significantly in tax year 2022 relative to tax year 2021. It appears that this trend has impacted 2022-23 estimated payments as anticipated, which are 16.8% lower through April than the same period in 2021-22. As in January, these estimates assume capital gains realizations will decline further in tax year 2023, and begin to rebound in tax year 2024.

That being said, the LFB also said expenses were going to come in lower than estimated for this year, and that there will still be billions in the state's bank on June 30.

Although general fund tax collections are estimated to be $365.2 million below the previous projection, that amount is offset by anticipated expenditure reductions of $141.7 million above those of our January report. The $141.7 million consists of a reduction in debt service payments ($8.5 million), a lapse from the appropriation of the State Public Defender ($9.7 million), and an increased lapse of $123.5 million in the GPR appropriation for the Medical Assistance (MA) program.

The net result of these estimates is that the projected gross balance in the general fund for 2022-23 will be $6,877.0 million, which is $223.5 million lower than the January projection of $7,100.5 million.

It's a big jump from 2022's already-huge balance, and reflects 2 straight years of much larger revenues than expenses in the state.

And even with the lower revenue estimates, under the base spending budget (which assumes no additional population or additonal costs/needs in current programs), revenues would still be slated to exceed expenses, and add to that cash balance. But that also means no tax cuts, and no added investments to make up for the end of COVID-era aids from the Feds, or higher costs due to inflation.

With that in mind, Governor Evers asked to expand state spending for schools by well over $2 billion vs the base levels in the 2023-25 budget, and also allocated a lot of one-time money for needs such as state building projects and roads (instead of borrowing for them), expanding broadband, and adding to the state's already-large Rainy Day Fund. This would have raised state spending well above the base levels, and the budgeted amounts of revenues.

When combined with these lower revenue figures, Evers' plans would have removed all of the billions that were in the budget, if all items were approved of.

Of course, Republicans removed many of Evers' initiatives from the budget earlier this month, and likely will reduce a lot of the added funding that Evers is asking for in current programs in the coming weeks. But you can see that there is still $9.5 billion to play with, even under the lower revenue estimates, and there should be room for some tax relief, some increase in shared revenues and other local assistance, and an ability to make significant investments to make up for the neglect of the Scott Walker era.

You know, if we had a Legislature that was willing to work with the Governor and improve this state's competitiveness instead of playing silly games and sucking up to their donors. We'll see if the threat of fairer maps can make GOPs in the Legislature be more serious with their counter-offer, but while I was born at 10pm, it wasn't last night, so I won't count on much.