Weekly Fiscal Facts are provided to Wisconsin Newspaper Association members by the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. The Wisconsin Policy Forum logo can be downloaded here.
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The upcoming state budget cycle starting in July is on track to continue a recent trend of ever-larger state budget surpluses, creating an unprecedented opportunity to boost government services with additional spending, reduce taxes, or both.
But elected officials must factor in how rampant inflation is increasing the cost to maintain existing service levels, the risk of recession, and mounting needs at the local level. Of course, there is also the fact that recent projections have missed the mark and could do so again.
Using figures from the state’s Nov. 20 budget report, the Forum seeks to offer a starting place for the next state budget process — before most tax and spending decisions are actually made. To do so, the Forum started with the projected increases in tax collections combined with the base spending levels within the state’s main fund.
After including certain routine adjustments — but excluding all new spending requests by state agencies — we find general fund revenues are currently projected to exceed budgeted spending by a staggering $6.8 billion over the two-year cycle running from July 2023 to June 2025. The excess revenues amount to just under $3 billion, or 15.3% of spending, in year one of the budget and more than $3.8 billion, or 19.6% of spending, in year two.
For various reasons, including that these numbers fail to account for the rising cost for state and local government to maintain existing services amid current inflation levels, they should not be seen as representing the state’s actual surplus for the 2023-25 budget cycle.
Yet the numbers do show how much stronger the state budget appears now compared to this point in past cycles. The state is in a much better position to shoulder the increasing costs of ongoing state and local services and make new commitments.
That’s especially true since the above numbers for the upcoming budget do not even include the billions of dollars in the state’s general and rainy day fund balances that have built up from past annual surpluses. The state expects to have a $6.6 billion general fund budget balance at the end of the current fiscal year on June 30 and an additional $1.7 billion rainy day fund balance – or more than $8 billion in total reserves.
Previous Forum reports have noted just a few of the state’s many options: they include providing additional aid for schools and local governments or even overhauling the state systems for funding these local services; reshaping the income tax or eliminating the personal property tax; or increasing state support for higher education. Other options include strengthening infrastructure such as roads and rural broadband; and improving state finances by retiring debt and maintaining ample reserves to prepare for the potential recession that lies ahead.
When writing budgets, lawmakers typically face agonizing choices between meeting the needs of the present and preparing for future challenges that are hard to predict. This time, state officials may have the financial wherewithal to accomplish both.
This information is a service of the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. Learn more at wispolicyforum.org.
