Wisconsin Budget

State Revenue Declines in May

Numbers make it more likely there will be shortfall in projected budget for fiscal year.

By , Wisconsin Budget Project - Jun 21st, 2016 03:33 pm
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American Cash by Psychonaught. Photo of money

American Cash by Psychonaught. Photo of money

Wisconsin got a very positive jobs report last week, but the apparent good news from the preliminary May data did not carry over to last month’s tax collections. As a result, the state may finish the current fiscal year well below the revenue target included in the budget bill – creating a more precarious situation in the second half of the 2015-17 biennial budget.

The Department of Revenue (DOR) released the May tax collections figures at about 4:00 on Friday, June 17. As is often the case when those numbers are released late on a Friday, the news wasn’t good. The new DOR figures show the following:

    • Tax collections fell by $17.5 million (1.5%) in May, relative to the amount in May 2015.
    • Although sales tax collections increased by $25 million compared to the same month of 2015, individual income tax revenue dropped by 6.3% ($31.5 million) last month, and corporate income tax revenue was off by $8.5 million (almost 35%).
    • For the first 11 months of the current fiscal year, General Fund tax collections are up by 4.0%, which isn’t bad, but the biennial budget bill approved about a year ago assumed tax growth of 4.6%.

The May figures make it more likely that revenue will be less than anticipated in the fiscal year that ends on June 30. Growth of 4.0% for the year would leave the state about $90 million short of what was projected when the budget bill was developed a year ago, and about $60 million below the lower estimate made by the Legislative Fiscal Bureau in January.

There is still a full year left in the 2015-17 biennium, but the latest figures suggest that the state might have a significantly smaller balance than lawmakers thought would be carried into the new fiscal year, which was only in balance because of the amounts expected to be carried forward. A blog post written on Friday by “Jake Formerly of LP” put it this way:

“We’re not in immediate need of a budget repair bill with this potential revenue shortfall – the sizable cushion put into the budget [for the first year only] and Scott Walker’s skipped debt payment of $101 million should keep the balance well above $0 for this year. But with a built-in deficit of $151 million for Fiscal Year 2017, and revenues more likely to be revised down than up as the year moves on (both due to the shortfall and the slowing US economy), an already-tenuous state budget may be getting even more tricky going forward.” 

It’s very disappointing that the May revenue numbers didn’t grow along with the estimated job growth last month (a net increase of 5,500 jobs), but that isn’t shocking. Both sets of figures tend to fluctuate, and there are many other variables that affect tax collections. Nevertheless, the revenue decline in May makes one wonder whether the preliminary jobs numbers are off the mark. The blog post written by “Jake Formerly of LP” suggests two possibilities:

“…either we really aren’t adding that many jobs and those rosy numbers will be revised down, or the jobs that are being added are lower-wage ones and not adding much to income taxes.

The June job numbers released next month will revise the preliminary estimates for May and shed some more light on the number and quality of new jobs. But I suspect it will be late August or early September before we get a good update on state tax collections because there is always a lag in completing the preliminary calculation of taxes collected in a year.

When we do get the initial tally of tax revenue for all of fiscal year 2015-16, don’t be surprised if it shows mediocre growth that falls well short of the amount projected in January. Still, the budget should be well in the black in the short run – thanks in part to the Governor’s decision to delay $101 million of debt payments. That decision will complicate the task of balancing future budgets, but postponing fiscal problems – rather than facing them head on during an election year – is a fairly common strategy and might prove to be a smart political choice.

4 thoughts on “Wisconsin Budget: State Revenue Declines in May”

  1. Jason says:

    I guess this would be a good time to open up the Democratic play book and get those evil “one percenters” with a steep income tax increase. Only thing is most rich people don’t pay income taxes.

  2. Casey says:

    Well if the jobs were just recently created wouldn’t it take a while for the resulting tax revenue to increase? Lets revisit this in 2 years.

    btw….I have a feeling we’ll still come up short.

  3. Jake formerly of the LP says:

    Casey- Actually, if we really were adding jobs this fast, you wouldn’t see May 2016 revenues go down vs May 2015. More people working should equal more revenue in a given month, but it didn’t happen.

    So something doesn’t add up there, and I’m guessing it’s because we really haven’t gained 46,000 jobs in the last 12 months like the Walker DWD is claiming.

  4. Jeff says:

    I wonder if there is any corrolation between the lower tax receipts and the data in this report? http://www.wisconsinbudgetproject.org/wp-content/uploads/2016/06/Pulling-Apart-2016-press-release.pdf
    All I can say is thanks Tea Party, just keep on thinking that trickle down is really working.

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