State to collect $753 million more in revenue than projected

May 16, 2019 GMT

State lawmakers will have hundreds of millions more in tax revenue to work with as they wrap up work on the next state budget, according to an updated analysis by the nonpartisan Legislative Fiscal Bureau.

The analysis shows the state is set to collect $753 million more in tax revenue than previously estimated — most of it during the current fiscal year — prompting Gov. Tony Evers to pay off debt and call for small additional investments in education and worker training and transferring the rest to the state’s rainy-day fund.

Evers said in a statement he will pay down $53 million in state debt, potentially saving $70 million total including interest payments. He also wants to request an additional $15 million for worker training, $18 million for the Wisconsin Technical Colleges System and transfer the rest to the state’s budget stabilization, or “rainy day” fund. State law requires at least half of unanticipated tax collections this year be transferred to the rainy day fund, in this case $291 million.


Department of Revenue Secretary Peter Barca said the higher-than-expected revenue is largely due to businesses shifting their income across fiscal years in response to the federal tax law changes.

“This shifting of revenue, as opposed to an increase in economic activity, is the driving force behind the large corporate tax collections; other states have had similar increases,” Barca wrote in a memo to Evers.

Republican leaders appear to be split over how to use the newfound one-time revenue.

Assembly Speaker Robin Vos, R-Rochester, in a statement, said members of his caucus are interested in floating a new tax cut, growing the state’s rainy day fund or paying down debt.

“Now is not the time to go on a spending spree with one-time revenues,” Vos said. “We refuse to spend in a way that we can’t afford.”

Meanwhile, Joint Finance Committee co-chair Rep. John Nygren, R-Marinette, told reporters he wants to put the entire amount into the rainy day fund in case of a future economic recession.

“It’s not fun, but it’s the reasonable and responsible thing to do,” Nygren said.

But Senate Majority Leader Scott Fitzgerald, R-Juneau, suggested Republicans in his chamber may be more open to using at least some of the funds for investments in infrastructure.

“We find ourselves in a great position to cut taxes, make smart investments in infrastructure, and maintain a strong closing balance,” Fitzgerald said in a statement.


Fitzgerald told reporters he might also support a bill that would prevent half of the excess revenue from going into the rainy day fund, and instead use it for the projects he named or as a cushion in case the state gives out more tax refunds than anticipated.

Republicans framed the influx of one-time revenue as a sign of good fiscal management and a growing economy, but the DOR’s memo as well as the LFB analysis attribute most of the projected revenue influx to changes in the federal and state tax code.

Meanwhile, Democrats blamed Republicans for mismanaging the state’s finances over the past eight years and praised Evers for looking out for the state’s best interest with the debt payment.

“Republicans chose to rack up debt on the state’s credit card and favor corporate tax breaks over investing in the people of Wisconsin,” Assembly Minority Leader Gordon Hintz, D-Oshkosh, said in a statement. “It’s refreshing to see a governor act in the long-term best interest of our state.”

The fiscal bureau estimates general fund tax collections will be $592 million higher than previously projected in the current fiscal year, $68 million higher next year and $93 million more in the year that begins July 1, 2020. Altogether the total increase represents a 1.5% increase in general fund taxes collected over that period.

The infusion of $291 million into the state’s emergency fund would increase the total to $616.5 million, or about 3.6% of the state’s total net spending in the 2018-19 fiscal year.

The state is projected to end the current fiscal year with $929 million in its general fund balance, which is separate from the rainy day fund.