The state of Wisconsin would see a $1.1 billion budget shortfall over the next two-year budget cycle if Democratic Gov.-elect Tony Evers were to approve in full each state agency’s budget request, according to a new state report.
Evers is unlikely to approve all agency requests, and revenue projections are slated to be updated before he submits his budget proposal after taking office. For example, the Legislative Fiscal Bureau will submit its own revenue estimates for the 2019-21 budget cycle in mid- to late-January.
Still, the fresh Department of Administration numbers released Tuesday provide an early glimpse of the challenges ahead as Evers navigates the current fiscal environment. They come as DOA touts the state’s fiscal shape as “the best in at least a generation.”
The state ended the 2017-18 fiscal year with a general fund balance of $589 million, the second-largest annual balance since 2000. The report projects the state will have $623 million available when it begins the next budget cycle in July.
Agencies in September submitted requests to Gov. Scott Walker’s DOA asking him for an increase of $2.2 billion over current general fund spending levels for the next two-year budget. The request for an increase was in spite of Walker asking agencies to submit budgets with no spending increase.
The DOA figures estimate the state will have roughly $2.1 billion in new revenue to work with over the next two and a half years, ending in 2021. That number is based on the agency’s projection that tax revenues will increase by 4.2 percent this fiscal year, 3.5 percent next year and 2.5 percent in the last year of the 2019-21 budget cycle.
One of the largest requests for spending came from Evers’ Department of Public Instruction, which requested about $1.4 billion in additional state funds in the next budget cycle over the current year. Assembly Speaker Robin Vos, R-Rochester, told reporters the day after the election it would be impossible to approve Evers’ request without imposing significant tax hikes.
Another significant request is from the Department of Health Services, which is requesting a spending bump of $624 million from taxpayers, mostly to cover the increasing cost of Medicaid.
Evers, at a stop in Milwaukee Tuesday, told reporters it was premature to address how to make up the budget shortfall. But he said he’s likely to propose the DPI budget in full and will look for ways to shift spending in other areas.
During the campaign Evers called for accepting federal Medicaid expansion dollars that Walker has repeatedly rejected and scaling back a tax credit for manufacturers and farmers, which combined could generate nearly $1 billion in additional revenue over the biennium. He also called for cutting income taxes for those making less than $100,000 a year, a proposal that would cost $340 million over the biennium.
Meanwhile, Sen. Alberta Darling, R-River Hills, and Rep. John Nygren, R-Marinette, the leaders of the state’s budget-writing Joint Finance Committee, lauded the revenue projections as the best since 2002, even while the state was able to cut taxes.
“Wisconsin is on the right track and this report proves it,” they wrote in a joint statement. “With the amount of money coming into the state, we can continue to fund priorities like education, continue to cut taxes, and balance the budget.”
Sen. Jon Erpenbach, D-Middleton, praised Evers for pushing more spending for K-12 education, and said he remains hopeful GOP members and Evers can compromise despite the possibility Republicans could ignore the governor-elect’s request.
“I know there will be some pressure on Republicans to work with the governor because he’s got some good ideas,” Erpenbach said.