Legislators Hope Tax Windfall Rescues Them
If state tax collections don’t go up -- soon -- lawmakers must swallow Walker’s unappetizing budget cuts.
Every Wisconsin legislator knows how they want to spend any unexpected windfall in tax collections in the two-year budget cycle that ends in mid-2017. Their wish lists include more money for K-12 schools, especially rural schools; reducing Gov. Scott Walker’s proposed $300-million cut in state aid to the UW System; borrowing less to put more cash into highway construction and maintenance statewide, and maintaining current programs that help seniors and the disabled.
That amounts to 133 elected officials, including Walker, with crossed fingers, eagerly anticipating sharply higher estimates of projected tax collections through mid-2017. Those estimates will come in mid-May.
But here’s a reality check: What if there is no – or not much – additional tax collections in the May report of the Legislative Fiscal Bureau? Those are the numbers on which the 16-member Joint Finance Committee, which started making decisions last week, will base its 2015-17 budget. Sorry to burst anyone’s bubble, but if there’s no unexpected tax-collection windfall in the fiscal bureau’s May report, it will be one grim budget – the ugliest one since 2011, in fact.
It would mean Republican legislators will have to suck it up and go along with Walker’s proposed $127-million cut in state aid for K-12 schools and the governor’s proposed two-year $300-million cut in state aid to the UW System.
Why raise that bad news scenario? Four reasons:
*July-through-February total general-fund tax collections only rose an anemic 0.2 percent, according to the state Department of Revenue (DOR).
Personal income tax collections make up more than half of all general-fund-tax collections, and they actually dropped by 1.8 percent between July and February, DOR reported. Corporate income taxes, the third largest source of tax funds, fell 9.3 percent between July and February.
DOR’s next report, covering July-through-March tax collections, will be made public soon. But it won’t include estimates of personal income taxes paid by the April 15 deadline. Any report that doesn’t include personal income tax totals is unreliable.
*On the verge of formally announcing his campaign for President, Walker and Republicans who control the Legislature will have to cut 2015-17 spending to balance the budget. Why? Republicans refuse to raise taxes or approve the Medicaid expansion that Democrats say could bring in more than $345 million in additional federal dollars.
*The February jobs-created report of the state Department of Workforce Development said Wisconsin gained 27,489 private-sector jobs over the last year – one of the slowest rates of all states.
“If there is no additional windfall, we have some really tough decisions to make,” Sen. Alberta Darling, cochairman of the Finance Committee, said in a WisconsinEye interview last week. “But I am estimating that we are going to have increases in revenues. Everything we have seen to date indicates that we’re going to have some increases. The amount is undetermined.”
Darling said $2 billion in tax cuts approved over the last two years will stimulate the economy, resulting in higher tax collections. Republican Rep. John Nygren, Assembly co-chair of the Finance Committee, also said he expects some additional tax collections to be forecast in May.
Leaders admit they are nervous, however. “So much is really waiting on those (May) revenue numbers,” Assembly Speaker Robin Vos said last week.
But Democratic Senate Leader Jennifer Shilling said it’s irresponsible for Republicans to wait for “May fairy dust” to fall to pay for critical education programs and help for the elderly and disabled.Start with accepting the federal government’s offer to pay for a Medicaid expansion, Shilling said. “That would bring in a lot of general purpose revenue,” she told WisconsinEye. “That would allow us some flexibility, and a little bit of wiggle room.”
Democratic Rep. Chris Taylor said any additional tax collections may have to pay current bills. For example, she said, Walker’s original budget failed to include six months of the cost for the workers’ compensation program – a $15.6 million shortfall.
Can you help? Sure. Buy all those items you’ve been coveting – a newer car, Apple watch, furniture, etc – on which the 5 percent sales tax is charged. Legislators will then use that cash to avoid painful cuts in existing programs.