Yesterday, the non-partisan Legislative Fiscal Bureau (LFB) released updated revenue estimates indicating the state will end the 2017-19 budget cycle with an estimated ending balance of $928.7 million, $312.2 million higher than had been forecast earlier.
That is positive news as the additional revenue could be used to increase state aid to schools. However, because most of the additional $753 million in state revenue will be collected in the current fiscal year that ends June 30, achieving such aid increases will require strong advocacy from school leaders, parents and other education proponents.
In a memo to the JFC Co-Chairs, the LFB said: “Based on our review of collections data and the economic forecast, we now believe that general fund taxes will be higher than the previous estimates by $592 million in 2018-19, $68 million in 2019-20, and $93 million in 2020-21. The three-year increase is $753 million, or 1.5%.”
Not all of the additional revenue will be available to fund new state spending, however. Under current state law, a significant chunk—half of the increased collections in 2018-19 (or $291.2 million)—must automatically be deposited in the state’s budget stabilization fund, often referred to as the state’s “rainy day fund.”
Most of the revenue increase is one-time money attributed to a one-time uptick in corporate tax collections. The uptick reflects the business community’s response to federal tax law changes creating temporary tax incentives for businesses to shift taxable income and deductible expenses across fiscal years.
Both the LFB and the state Department of Revenue concluded it was shifting of these revenues and expenses by businesses, rather than an increase in economic activity, that generated the bulk of the additional tax revenue for the state.
Initial responses to the new state revenue projections acknowledged that the increase is mostly one-time in nature.
Assembly Speaker Robin Vos (R-Burlington) released a statement in which he said, “ “Assembly Republicans are announcing our intentions to put these dollars toward providing tax relief, growing the rainy day fund and paying down debt. Now is not the time to go on a spending spree with one-time revenues. We refuse to spend in a way that we can’t afford.”
Governor Evers responded to the new revenue projections with his own statement announcing that “he will be making an additional payment on state debt that would pay off $56 million of state debt with an estimated future debt service savings for Wisconsin taxpayers of nearly $70 million.”
Additionally, Evers asked JFC members to put an additional $15 million into worker training and an additional $18 million into the Wisconsin Technical College System. Evers also said he would support transferring the ending balance surplus into the budget stabilization fund.