News Column

Wis. Budget Debate Will Focus on $467 Million in Reserves

Nov. 20, 2012

Jason Stein

Gov. Scott Walker

Wis. Gov. Scott Walker's administration said Tuesday that the state is heading into its 2013-2015 budget with a $467 million in reserves, setting up a debate over priorities in the next budget ranging from tax cuts to education to further strengthening of the state's finances.

The money is a substantial sum -- the largest opening balance for the state since the 2001 fiscal year -- but is still less than a 3% cushion on the requested spending by state agencies of state tax money running to $15.85 billion in the final year of the budget.

Plus, those opening reserves mask the fact that the state budget still has a modest imbalance between its revenues and the money that agencies want to spend, though the problem is more manageable than when Walker took office two years ago. Over the two-year budget period, state agencies still want to spend $171 million more in state money than the state expects to take in through taxes and other revenues, according to a report released by the state Department of Administration.

Finally, the state faces a substantial unknown from the ongoing federal budget negotiations that are seeking to avoid substantial spending cuts and tax increases at the national level as well as from an uncertain global economy still tied to the financial problems in Europe.

"In the first time in a decade, Governor Walker and this administration have set the standard that government will not spend more money than it has," Administration Secretary Mike Huebsch said. "We will continue our frugal management of taxpayer dollars so we're in the best position to help the state grow and create jobs for our hardworking families."

The state had a roughly $3 billion budget deficit over two years when Walker took office, and the Republican governor fixed it mainly through spending cuts rather than tax increases.

The projections released Tuesday bring together the tax revenues the state is expecting to receive over the next two fiscal years running from July 2013 to June 2015 along with the money that state agencies are requesting to spend during that period. That allows Walker and lawmakers to see whether they will have enough money to sustain existing programs such as health care and education and whether they have money to increase spending or cut taxes.

Over the two-year budget, state agencies are requesting a total of $67.62 billion in spending in state and federal money, an increase of 2.8% in the first year and 1.4% in the second year.

In just state tax dollars, the agencies are requesting larger increases of 3.6% in the first year and 3.5% in the second, for a total of more than $1 billion in new money.

Over the next two years, state taxes alone are expected to grow 3.8% and 3.5%, respectively.

But the report notes that there are many risks to the estimates, including the so-called fiscal cliff of federal spending cuts and tax increases scheduled to ramp up sharply at the end of 2012 if President Barack Obama and Senate Democrats don't reach a deal with House Republicans. That could affect both the national economy -- and with it state tax revenues -- and federal aid to Wisconsin, the report noted.

Initial reports show that Wisconsin has about $94 million at stake during the fiscal cliff negotiations, though the amount could potentially increase if other programs such as Medicaid health care for the needy are affected, according to the memo.

Democratic legislative leaders had no immediate comment since they were still reviewing the report.

The Walker administration said that no repair bill will be needed to balance the state's current budget ending in June -- the first time for the state in six years. The state will end the fiscal year in June with a surplus of $342 million, not counting another $125 million sitting in a state rainy day fund, the administration said.

The latest surplus numbers are an improvement since May, when the administration projected that the state would finish the current fiscal year in June with a roughly $200 million surplus.

The new money, however, already has a long line of possible uses.

Before a sold-out crowd at the Ronald Reagan Library and Museum near Los Angeles on Friday, Walker offered an agenda for the budget that included an income-tax cut, funding increases for public K-12 schools and colleges based on their performance, and potentially ending same-day voter registration, which would require setting up a motor-voter program in the state.

Democratic lawmakers favor increased funding for schools -- which have been cut over the last four years of budgets -- rather than a tax cut, while some Republican lawmakers have emphasized the importance of making sure the state's budget doesn't revert to shortfalls in the future.

Source: (c)2012 the Milwaukee Journal Sentinel Distributed by MCT Information Services

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