State budget report: More grim news with a sliver of hope

Wisconsin’s healthcare system is not the only area of government that is strained in the pandemic. The pressure on the state’s budget will be immense when lawmakers and the governor come together early in 2021 to put together the next biennial budget.

It’s another grim piece of pandemic-related news.

A Wisconsin Policy Forum report released Monday shows that putting together the 2021-23 budget appears to be the most difficult budget task in a decade — and this time it has to be produced with Democratic and Republican agreement to get it passed and signed into law.

Currently the two sides are at odds over whether the state’s health department and governor should be allowed to require people to wear a mask in public and avoid large gatherings.

The two branches have also struggled in the face of mounting COVID-19 cases to come together to produce a second bill to provide pandemic relief funding; the Legislature has not met since last April — throughout the majority of the crisis. Gov. Tony Evers and his staff are now meeting with Republican leaders Speaker Robin Vos and incoming Senate Majority Leader Devin LeMahieu to work on potential legislation, although LeMahieu has said the GOP senators don’t see a reason to convene until next year. Aid for unemployment, a vaccine administration plan and increased testing and contact tracing hang in the balance.

The Wisconsin Policy Forum’s report says the state would have to spend $373 million from its rainy day reserve fund — and that would only cover costs if every single piece of additional spending were rejected. The state has reserves of $2 billion, but any additional spending that is needed, including a predicted $1.1 billion for Medicaid, could push the amount of reserves the state would need to tap all the way up to $2 billion unless additional federal revenue, increased taxes or spending cuts occur.

Capping the increase without raising taxes would mean no additional money available for schools, the UW System, prisons, unemployment, local government or roads. The report is based on a recent document on revenues and budget requests put out by the state Department of Administration.

Adding additional fiscal pressure, tax revenues are predicted to be down, also stemming from the pandemic.

“In one bright spot, the state expects to finish the current 2021 fiscal year with reserves of roughly $2 billion – much more than was expected a year ago or was available in the past two recessions,” reads the report. “However, Evers has proposed spending $541 million on pandemic response in the coming months and GOP lawmakers have proposed up to $100 million, which if approved in either case would reduce that total.” 

That could change if federal aid is allocated for state COVID response. As the report puts it, “Further action by the federal government might improve the state’s position specifically or the economy more broadly while federal inaction and a spike in coronavirus cases could cause the economy – and state budget – to deteriorate even more.”

One solution that has always been embraced by Democrats and staunchly rejected by Republicans would be for Wisconsin to accept federal money to expand its Medicaid program, which would bring in $588 million according to the report.