Analysis examines potential impacts of Evers budget proposal, GOP alternatives

Gov. Tony Evers’ proposed 2023-25 state budget shifts more of the cost for building and repairing roads and other transportation projects to general taxes as growth is stalling in the state’s transportation fund, according to a new analysis.

The Wisconsin Policy Forum’s budget analysis also highlights the governor’s proposed boosts to education funding, including for special education.

Wisconsin’s record $7.1 billion surplus makes Evers’ proposals possible. At the same time, the report cautions, the plan would leave the state with a structural imbalance ahead of the 2025-27 state budget. “That would make it difficult to sustain spending at the proposed levels and the state would have less in the way of reserves to draw on,” the report states.

Republicans in the Legislature have vowed to rein in much of Evers’ proposed spending increases, which would “make the budget more sustainable,” the report adds. A GOP-proposed flat tax would more than wipe away any gain, however.

That proposal would cut state revenues by $5 billion in 2023-25 and another $9.4 billion in 2025-27, “even before any cost to continue current services had been considered,” the Wisconsin Policy Forum report states. “This would make the overall budget even more difficult to sustain.”

An economic downturn could add to the problem. “With a recession still at least a possibility at the national level in the coming year, lawmakers and the governor should consider ways to ensure any new spending and tax cuts are sustainable not simply in the upcoming budget, but in the following two years as well,” the report recommends.

In transportation funding, a mix of federal and state dollars, the state has seen growth slow down from its traditional revenue source, the gas tax — the result of increasing use of hybrid, electric and more fuel-efficient vehicles. After a 2019-21 increase to $85, auto registration fees are catching up to diminishing gas tax revenues and are expected to become the chief source of highway funds in the coming years, according to the report.

“The Evers proposal would provide a sustainable source of transportation funding by transferring sales tax revenues out of the general fund to pay for roads and other infrastructure,” the report states. At the same time, however, that shift would reduce state funding available for other state services.

The governor has also proposed paying down existing transportation bonds with about $380 million in general purpose funds.

Wisconsin will begin the budget year July 1 with the highest trove of reserves in 40 years, the analysis reports: $8.8 billion. That includes both the state’s projected $7.1 billion surplus and the $1.7 billion in the budget rainy-day fund.

Evers’ proposal would add $500 million to boost the rainy-day fund to $2.2 billion. His budget would draw down the general fund balance to $634.1 million, leaving reserves of $2.9 billion by June 30, 2025 — about 12% of general fund spending for that year, the Wisconsin Policy Forum calculates.

The Government Finance Officers Association recommends governments carry a general balance equal to 16.7% of a year’s spending, enough to cover two months of operations. States often carry much lower balances, especially after recessions, the report acknowledges.

Wisconsin had to overcome budget deficits in 2009-11 equivalent to $7.7 billion in today’s dollars and in 2011-13 equivalent to $4.9 billion — outcomes that “provide reason for caution about the extent to which the state should reduce its surplus,” the report states.