WI: Weekly Political and Legislative Update

Members of the Wisconsin State Legislature received two rounds of bad news this week as it relates to the state's fiscal condition.

On Monday, the Legislative Fiscal Bureau (LFB) released a report forecasting the projected budget deficit that the state will be facing through June 30, 2011, at $6.6 billion, an additional $1.6 billion greater than was anticipated when Governor Jim Doyle submitted his budget to the legislature.

Based on a review of year-to-date tax collection data, 8.3% below last year's level, and new economic forecasts which are more pessimistic than the January forecasts that were used to project the last round of revenue estimates, the LFB now believes that general tax fund revenues will be lower than previous estimates by $408 million in the current fiscal year, $573 million in FY 09-10 and $622 million in FY10-11. The three year total is $1.6 billion.

Most of the net decrease is due to the individual income tax (86% of the total three year reduction in tax revenue) and corporate income and franchise tax.

Individual income tax receipts are estimated to decrease $400 million in 2008-09, $465 million in 2009-10 and $517 million in 2010-11. The change is based on economic forecasts that originally had U.S. personal income increasing by 0.8% in 2009, 2.5% in 2010 and 4.5% in 2011. The May forecast projects personal income to decrease 0.2% in 2009 and increase by only 1.8% in 2010 and 3.9% in 2011.

On Thursday, the LFB revised their estimate downward by an additional $50.7 million during the 2009-11 biennium because of the impact of the general fund tax reestimate on individual income tax provisions contained in the Governor's budget proposal and anticipated lower tribal gaming revenues paid to the state.

2009 Assembly Bill 75, the Governor's budget bill, contains two revenue enhancing proposals that are impacted by the projected economic conditions; a proposal to create a 5th income tax bracket and decreasing the capital gains exclusion from 60% to 40%. LFB's new estimates revises down the revenue created by these two proposals by $34.8 million in 2009-11.

LFB also revised down the estimated tribal gaming revenue that the state will receive based on declines in casino gaming nationally and in the state by $15.9 million over the biennium.

Governor Doyle and legislative leaders have been communicating on a plan to address the additional $1.6 billion budget deficit and the Governor has said he hopes to announce the plan shortly. Last week he announced his plan will include wage freezes, eight-day furloughs for state employees, layoffs (which he noted this week will "certainly exceed 1,000 and may go significantly higher") and cuts to shared revenue and education. Governor Doyle has stated that he is against additional tax increases to address the increased budget deficit.

Joint Finance Committee Co-Chair Marc Pocan (D-Madison), noted in an interview on WisconsinEye this week that furloughs and pulling back a 2 percent pay raise for state employees only amounts to $230 million of the $1.6 billion shortfall. Co-Chair Pocan said that cuts to education, shared revenue and state services will have to be made to "bridge the gap." Pocan also noted that the goal of Assembly Democrats is not to put any additional burden on "working families," and doesn't expect any across the board income or sales tax increases, or increases to the payroll or property taxes to fix the deficit situation.

Assembly Speaker Mike Sheridan (D-Janesville) and Minority Leader Jeff Fitzgerald (R-Horicon) announced in a joint statement this week that Assembly staff will be furloughed 16 days over the next two years and that Assembly leaders will give back 16 days of pay over the next two years to assist in dealing with the $1.6 billion deficit. Senate leaders said they are considering a similar move.