Given a $4 billion boost in state revenues that was identified on Tuesday, Democrats and Gov. Tony Evers saw an opportunity to revive the governor’s original spending plan for the 2021-2023 state budget.
Republicans saw an opportunity for a tax cut.
Both reactions followed a report Tuesday morning from Legislative Fiscal Bureau Director Bob Lang showing that a projected increase in state tax collections for the rest of 2021 and all the way through 2023 would add up to $4.4 billion more than originally anticipated. Wisconsin experienced an “unprecedented” increase in taxes collected in the first five months of 2021, particularly in April and May, Lang wrote in a letter to Joint Finance Committee co-chairs Rep. Mark Born (R-Beaver Dam) and Sen. Howard Marklein (R-Spring Green).
“Based upon the strength of collections and the vastly improved economic forecasts for the remainder of this year and the next two years, our analysis indicates that for the three-year period, aggregate general fund tax collections will be $4,427.4 million above those of the previous estimates,” Lang wrote.
For the fiscal year ending in June alone, the state will have $2.6 billion more than expected.
Roughly $800 million of the additional revenue will, under state law, go into the budget stabilization fund, also known as the rainy day fund.
In the hours that followed the fiscal bureau letter, the Evers administration and the Legislature’s Republican leaders each weighed in with their priorities for the windfall.
Evers signaled his intent Tuesday to funnel additional dollars toward the state’s public schools, restoring cuts that finance committee Republicans made to his original budget proposal.
But for the administration, the news was also a sharp departure from the state of affairs a year ago, when the governor instructed agencies to cut $70 million out of concern that the pandemic, then ramping up, would require a much tighter budget.
Recalling that period, Department of Administration Secretary Joel Brennan told a Milwaukee Press Club audience Tuesday that “there was a really serious discussion — would we have to tap into the state’s rainy day fund, because it really was a very challenging time.”
Instead, Brennan said, when the $800 million infusion is made, Evers will be able to take credit for bringing that fund from $300 million when he took office to “roughly five times the budget stabilization fund he inherited” from former Gov. Scott Walker.
Brennan also pointed to Evers’ use of the funds the state received under the 2020 federal Coronavirus Aid, Relief and Economic Security (CARES) Act: almost $2 billion, “about half of that in the public health infrastructure, about half in the economic recovery.”
Brennan said Evers wants to continue to keep the state on sound fiscal ground, so while he will consider a tax cut — as he did in the last budget — he also views the additional revenues as “a real opportunity for us” to make investments, particularly in education, infrastructure and health care. The governor wants to grow the state’s economy, attract new residents and make sure that Wisconsinites in rural and urban areas share in the state’s prosperity and have a higher quality of life, Brennan said.
Holding up a fat binder that contained a rainbow of tabs designating the hundreds of items that Republicans threw out from the governor’s budget, Brennan said the new revenue projections should allow the legislators to reconsider some of those cuts.
“We really have now an opportunity to look back on those things and to really dig in on some of the things that the governor has proposed,” he said. “It’s been demonstrated that we’re doing pretty well in Wisconsin; we need to make sure that in order to be competitive in the Midwest, in order to be competitive nationally, that we do all the things that are necessary to build that infrastructure around economic development, education, things that are going to propel us into that future.”
In contrast to the austerity budget that the Legislature’s budget committee has been shaping over the last several weeks, Brennan said the legislators should view the revenue numbers as proof that $2 billion invested during the pandemic in health care and economic development from federal relief funds was worthwhile — and also requires continued investment to secure future stability.
“That [budget] process will continue for several weeks, but I hope that the news today and what’s been happening in the evolution of a demonstration of Wisconsin’s resilience is something that is shown in the budget that we eventually ask the governor to sign, which invests in really important aspects around education around economic development, around health care, infrastructure.”
Republicans showed no signs of following that cue — instead, staking their priorities for the increased funding on cutting taxes.
“With so much money already flowing into Wisconsin from the federal government, this additional revenue gives us an opportunity to invest in the state’s priorities and to cut taxes for hard working families,” Assembly Speaker Robin Vos (R-Rochester) stated in a joint release with three other GOP Assembly leaders — Majority Leader Jim Steineke (R-Kaukauna), Joint Finance Co-chair Rep. Mark Born (R-Beaver Dam) and Speaker Pro-Tem Tyler August (R-Lake Geneva).
The statement said plans for unspecified income and property tax cuts would be forthcoming.
About $20 million in the state’s additional revenue came from a lapse in the appropriation for the State Public Defender’s office due to a decline in caseload as crime rates dropped and courthouses were closed for public health reasons during the pandemic. Adam Plotkin, legislative liaison for the office, said the agency expects cases put aside during that time would resume, returning it to a full caseload.
But Tuesday’s fiscal bureau memo said that the bulk of the additional revenues resulted from federal stimulus money paid out to U.S. households to help bolster the economy in light of losses from the pandemic.
Republican reactions disregarded that analysis, however, instead attributing the expanded revenues to GOP policies.
“For a decade now Republicans have prioritized fiscal restraint and smart budgeting,” stated Sen. Kathy Bernier (R-Chippewa Falls). “Thanks to those reforms we are still looking at a massive surplus. In addition, we are emerging from the pandemic and learning every day about the effects of the massive federal spending coming our way from Washington.”