MADISON, Wis. (AP) — Wisconsin lawmakers and Gov. Tony Evers learned Wednesday that the state budget will have $753 million more than originally expected, thanks largely to a one-time spike in tax collections due to federal law changes.
While both Republicans and Democrats hailed the positive news, they were divided over what to do with the unexpected new money.
Evers and Assembly Republicans appeared to agree that they wanted to keep a large portion of it in reserves, but that’s where the unity ended, with Republican leaders disagreeing even with each other on what the priorities should be.
“Now is not the time to go on a spending spree,” Republican Assembly Speaker Robin Vos cautioned in a statement.
Vos appeared to be at least partially on the same page with Evers, saying he favored saving much of the money and paying down debt.
Evers said he had already tapped some of the surplus to pay off $56 million in state debt — a move that can be made without legislative approval. Evers also called on the Legislature to use $15 million on worker training and give $18 million to the technical college system, with the rest going into savings.
“Saving taxpayer money and investing in the future is a win-win,” he said.
But Vos, as well as Senate Majority Leader Scott Fitzgerald, said the surplus could be used for tax cuts.
Fitzgerald, in an apparent break with Vos, also floated the possibility of tapping some of the money to pay for capital building projects and roads.
Budget committee co-chair Rep. John Nygren, another Republican, took the most conservative approach, saying most of the money should be put into savings ahead of a likely, and overdue, recession.
“It’s not fun, but it’s the reasonable and responsible thing to do,” Nygren said. He later stressed that he had not talked with Republican senators about what should be done, and that he would also support cutting taxes.
State law requires that $291 million of the surplus — more than a third of it — be put in reserves. Most of the money, $592 million, will come in by the June 30 end of the current fiscal year. The rest is projected to arrive in the next two years.
That amounts to a 1.5 percent increase in tax collections over that period. This year the state is projected to collect $17.2 billion in taxes, followed by $17.4 billion next year and $17.8 billion in 2020-2021.
The positive news adds a new wrinkle to the ongoing budget debate. The Legislature’s Joint Finance Committee just started voting on changes to the Evers spending plan last week, voting to remove many of his biggest priorities. They plan to finish their work later this month or in early June, and Vos said he expects the Legislature to pass the budget on time before July 1.
State Revenue Department Secretary Peter Barca, in a memo describing the budget surplus, said the nearly 64% increase in corporate taxes and nearly 6% increase in personal taxes was largely the result of the business community’s reaction to federal tax law changes that provided incentives for shifting revenue across fiscal years.
The shifting of revenue, rather than increased economic activity, is the driving force behind the additional tax collections, Barca wrote. They are not expected to occur in future years, and other states are experiencing the same blip, he said.