Wisconsin’s surplus projection grows by $2.9 billion

Wisconsin’s projected budget surplus swelled by $2.9 billion according estimates published by the non-partisan Legislative Fiscal Bureau, setting the stage for a fresh partisan fight over where to direct the windfall.

The annual January review projects that the state will now close out the fiscal biennium June 30, 2023 with a $3.8 billion net balance. That represents a $2.9 billion hike from a June estimate that incorporates the fiscal 2021 ending balance, tax collection projections that have grown rosier, and a $339 million decrease in appropriations.

The new numbers raise estimates for sales tax, income tax and other revenues by $2.5 billion and also incorporate an income tax cut approved by lawmakers last year. They reflect current economic forecasts and tax collections through December but the report also comes with a warning that the national economy and the COVID-19 pandemic’s course could cloud projections.

While a portion of surpluses typically goes into the state’s budget stabilization fund, no transfer will occur because the state’s $1.73 billion rainy day fund has hit a statutorily based cap of 5% of estimated general fund expenses.

“These unprecedented revenue projections are great news for our state on top of reaching record-low unemployment and having the fewest number of people unemployed in our state’s history,” Gov. Tony Evers said in statement. “Wisconsinites need help making ends meet and can’t wait until the next biennial budget—they need relief now.”

Republicans took credit. Some want to wait till the next budget is crafted in 2023, after statewide elections in November, to see if the numbers pan out and say most should be directed to tax cuts.

“My colleagues and I continue to look out for the best interests of the taxpayers of Wisconsin and while Democrats would love to go on a spending spree, now is not the time,” House Speaker Robin Vos, R-Rochester, said in a statement.

“Much of this is the result of a one-time influx of federal money into our state. We will not be foolish with these tax dollars by spending them into the future. Rather, we will focus on further tax relief in the next budget to continue our state on a positive trajectory,” Senate Majority Leader Devin LeMahieu, R-Oostburg, said in a statement.

Republicans have butted heads frequently with the Democratic governor over his spending proposals and COVID-19 public health mandates including stay at home orders early in the pandemic. Democrats have pitched raising spending on education and putting more toward the local government revenue sharing program with the surplus.

The revised estimates marked the latest good fiscal news for the state. The state late last year reported that it had closed out the last fiscal year with a record $1.18 billion positive balance based on accounting measurements that had long showed the state in the red.

Fiscal 2021 performance fueled by rising tax collections led to a more than $2 billion budget surplus for fiscal 2021 which closed June 30. That drove a record deposit of $967 million into the state’s rainy day fund, formally known as the budget stabilization fund, pushing it up to a record $1.73 billion The account had long held a meager amount of funds amid the state’s narrow ending general revenue fund balances. The state is operating on a two-year $87 billion budget.

The fiscal progress drew upgrades last year from Kroll Bond Rating Agency, which raised the state’s general obligation rating to AAA from AA-plus, and S&P Global Ratings, which raised it to AA-plus from AA. The state’s credit profile also benefits from a fully funded pension system.

The state’s GOs are rated Aa1 with a stable outlook by Moody’s Investors Service and AA-plus with a stable outlook by Fitch Ratings. All four ratings carry a stable outlook.