Fallout continues from failed "blockbuster" tax and K-12 deal, and why it went down

One week ago, we had a major announcement of a “blockbuster” deal between Governor Evers and top two Republicans in the soon-to-be completely ungerrymandered State Legislature. It was estimated to give income tax rebates to an estimated 2.1 million Wisconsin households, give $302.5 million in property tax relief for K-12 school costs, increase special education aids, and remove state taxes on pay beyond base wages that come from overtime and tips.

Then, by Wednesday, the whole deal had blown up, with all 15 Senate Democrats and 3 Senate Republicans defeating the bill 18-15. Which leaves a lot of fallout for today, and the coming 5 ½ months before a midterm election that will decide who replaces Governor Evers, and who controls each House of the State Legislature.

There is a good breakdown from Molly Beck and Jessie Opoien in Monday’s Milwaukee Journal-Sentinel on what went wrong with the budget deal, and where things go from here. Let’s start with Governor Evers’ fellow Democrats, who had almost 90% of their legislative caucus vote against the deal.

Democratic state Sen. Mark Spreitzer of Beloit said he wants the state to guarantee covering a higher percentage of schools' special education costs than the failed bill would have and doesn't oppose using state funds to pay for special education services and to drive down property taxes like the bill did.

"My biggest issue with this bill is the nearly $2 billion total price tag when we simply can’t afford it," he told the Journal Sentinel.

"Approximately half of the spending would go to a tax rebate that leaves out 1.36 million Wisconsin adults, including seniors and working families, while giving rebates to millionaires and billionaires," Spreitzer said, referring to the bill's proposed rebate checks for income tax filers.

What Sen. Spreitzer is referencing is that the rebate was set up to only be paid up to $300 for single filers and $600 for married couples if someone owed state income taxes for Tax Year 2024. And the LFB's analysis of the bill showed that a sizable amount of low-income Wisconsinites wouldn't get anything at all - especially seniors that might have Social Security as their only source of income, as Social Security is exempt from Wisconsin taxes.

On the Assembly side, Dem Leader Greta Neubauer said she didn’t think the bill did enough to solve the real problems in K-12 school financing.

“We want to pass a budget next cycle that really invests in our schools in a sustainable way and addresses the long-term cycle of referendums and lowers property taxes. It would have been great to get something done now, but we could have been in a position of cutting schools next year if we passed that bill yesterday,” she said.

Neubauer, D-Racine, said the majority of her caucus and Evers “did not see eye to eye about responsible use” of the surplus dollars.

Their primary concern, she said, was that it spent too much and could leave the state unable to adequately respond to future economic challenges.

I went off of the Legislative Fiscal Bureau's rundown of the deal, and then constructed numbers based on the budget update in that paper, and crossed it with the LFB's "structural budget" and related adjustments for the next budget. And I can see where LFB Director Bob Lang gave an estimate of $2.9 billion being neededin the next budget, as the base imbalance would have been over $1.55 billion in both years if the original Evers-Vos-LeMaheiu deal had become law.

But there are a few other variables to throw into when evaluating this bill and the overall fiscal situation. The first is that the Wisconsin Department of Revenue formally released the April tax revenue figures for the State, which includes the end of filing season for Tax Year 2025. And it shows why the Evers Administration believed there would be more funds available than what we’d seen in prior estimates for the rest of the 2025-27.

Even if you add the $200 million to the FY 2025 totals (as Note 1 mentions), that's still a nearly 4% increase in overall revenues in Fiscal Year 2026, well above the 1.4% increase that the Legislative Fiscal Bureau estimated in January. If that 4% increase holds over May and June, it would be well above the $300 million to $350 million in additional revenue that the Evers Administration estimated last week, and might be closer to $500 million.

But the state may also be seeing some expenses rise above what was budgeted for. The Wisconsin Department of Health Services has estimated that $263.5 million will be needed to cover a deficit in the state’s Medicaid program.

That deficit also seems likely to get larger in the coming months, as costs of care continue to go up and fewer Wisconsinites can access health insurance through the Obamacare exchanges, due to the Big Bunch of Bollocks that Trump/GOP pushed into law.

Let’s also point out that there is a structural deficit in the state’s Transportation Fund, which currently spends hundreds of millions of dollars more than it takes in for base revenues, and required $580 million of additional money from the General Fund to make ends meet for the 2025-27 biennium.

With road construction likely to cost more in two years and gas taxes being based on consumption instead of price, this Transportation Fund imbalance in Wisconsin is likely to grow. And they can't expect more infrastructure funds to be coming from DC with deficits continuing to climb and the Trump Administration showing no inclination to increase infrastructure spending beyond the boosted levels we have enjoyed in recent years (in fact, it's likely that Federal aids decline for the next budget).

Why Dems in the Legislature disapproved of the deal is very different to what GOP Guv candidate Tom Tiffany didn’t like about it. Tiffany apparently does want to give any additional money to schools, and would blow an even larger budget hole on more (unspecified) income tax cuts.

“Governor Evers chose to protect his 400-year property tax hike instead of the people of Wisconsin, and now we’re learning he didn’t even want to directly return any surplus money to taxpayers," Tiffany said in a statement to the Journal Sentinel. "As governor, I will repeal the 400-year property tax hike, return the full surplus to you, and deliver lasting property tax relief."

Tiffany was referring to a post on X from Evers spokeswoman Britt Cudaback, who said the governor agreed to include a tax rebate provision at the request of Senate Republicans in exchange for their support.

This is clown show stuff from Toxic Tommy.

1. HEY TIFFANY, Robin Vos, Devin LeMahieu and about 95% of the GOP caucus in the Legislature just showed that Evers did not do a “400-year property tax hike”. Because the deal that those people voted for WOULD HAVE REDUCED PROPERTY TAXES FOR K-12 AND KEPT THAT VETO IN PLACE.

The first part of that statement also makes Tom Tiffany today’s contestant on the longtime game show of “GOP, LYING OR STUPID?”

2. HEY TIFFANY, you got a way to “deliver lasting property tax relief” when your permanent income tax cuts would reduce the amount of money available from the state that could help local communities cut property taxes? The only mathematical way you’re doing that is by forcing massive service cuts on top of what Wisconsinites have already had to deal with over these 15+ years of GOP-imposed austerity.

Or, will you continue with the old WisGOP game of passing the buck to more referendums, while claiming you weren’t the ones that chose to raise property taxes, it was the voters? Good luck selling that as your strategy for the future when most Wisconsinites are already sick and tired of it.

I think the fact that we're still unpacking the numbers of the Evers-Vos-LeMahieu deal and Wisconsin's potential to afford it may be part of the reason it went down in the State Senate. It's clear that Governor Evers didn't talk to Dems in the Legislature about this before it became a bill, and some of the opposition could have been as simple as that turf war. But it does seem like the attempt to bum rush this through in 3 days was a bad way to do it, because there were some flaws that legislators brought up in the bill's debate.

On the other hand, while I understand that this wouldn't solve the real long-term issues of how we finance this state's K-12 schools, and the state's fiscal health would become more endangered if the $1.8 billion deal were to become law, that doesn't mean that waiting until next January is necessarily the solution in what are increasingly tough and frustrating times for a lot of Wisconsinites. And it's a big gamble by both Legislative Dems and Tom Tiffany to oppose this in the hopes that their respective sides win in November, and get to use a larger amount of money in the next state budget to impose bigger changes.