The Wisconsin State Capitol reflected in the glass windows of Park Bank on the Capitol Square in Madison. (Wisconsin Examiner photo)
A new state analysis released Monday forecasts slightly lower Wisconsin tax collections and a correspondingly smaller state surplus than previous forecasts.
The report, issued by the Legislative Fiscal Bureau, finds that weaker state tax collections — down by $365.2 million for the 2022-23 fiscal year — outpaced new expenditure reductions, which total $141.7 million. The result would shrink the state’s surplus as of June 30 by $223.5 million from the January forecast — a 3% drop, to just under $6.9 billion.
Unlike the January forecast, the new forecast predicts no recession in 2023, the fiscal bureau’s director, Bob Lang, wrote in a memo Monday to the chairs of the Legislature’s Joint Finance Committee. The committee is spending May and June drawing up the next state budget.
The January forecast had anticipated a recession in the first half of this year. The bureau now forecasts stronger economic growth this year and lower growth rates in 2024 and 2025 than previously.
Weaker tax collections “more than offset” the improved economic forecast, however, Lang wrote. Over three fiscal years — 2022-23, 2023-24, and 2024-25 — the forecast anticipates a drop in tax revenues of $755.1 million, a 1.16% decline.
In the first four months of 2023, falling tax revenues were greatest in individual income tax withholding, estimated tax payments and refunds for corporate income and franchise taxes, and reduced cigarette tax revenues, according to the fiscal bureau.
The fiscal bureau report doesn’t directly explain the decline in individual and corporate tax revenues, but it says the drop in cigarette taxes “reflects the ongoing trend of larger declines in cigarette consumption.”
Republican leaders in the state Legislature said the new forecast justified their plans to cut many of the programs that Gov. Tony Evers had sought in his 2023-25 state budget proposal.
“The LFB’s re-estimate confirms that the legislature is on the right track as we craft a cautious budget that funds our priorities, addresses our obligations and prepares for the future,” Sen. Howard Marklein (R-Spring Green) and Rep. Mark Born (R-Beaver Dam), the co-chairs of the Joint Finance Committee, said in a statement. “The re-estimates reflect the current economic environment we are in and the reality we face over the next three years. In response to this reality, we will continue to craft a responsible budget that is made for Wisconsin.”
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