Wisconsin Policy Forum Report: Lawmakers, governor need to find sustainable budget amid recession worries

(The Center Square) – A new report suggests both Gov. Tony Evers’ budget and the tax cut proposal from Wisconsin’s Republican Senate Majority Leader could lead to budget problems in a few years.

The Wisconsin Policy Forum released a report on Tuesday that looked at both the governor’s proposed spending plan and ideas that Republican lawmakers support.

“Senate Republicans favor a plan to shift the state’s income tax to one flat rate, a proposal which as we previously noted would lower state revenues by a projected nearly $5 billion over the 2023-25 budget and then by $9.4 billion in the 2025-27 budget, even before any cost to continue current services had been considered. This would likely make the overall budget even more difficult to sustain,” the report’s authors wrote.

The report also questioned Gov. Evers’ plan to spend $104 billion over the next two years.

“Gov. Evers’ proposed budget would draw down the state’s massive surplus and use the money to increase spending in the state’s main fund by the largest amount on record,” the report notes.

The Policy Forum’s warning is based on worries about what may happen with the national economy as well as the economy specific to Wisconsin.

“With a recession still at least a possibility at the national level in the coming year, lawmakers and the governor should consider ways to ensure any new spending and tax cuts are sustainable not simply in the upcoming budget, but in the following two years as well. A possible economic downturn also should be impetus to consider the appropriate level of state reserves,” the authors wrote.

Wisconsin is looking at a record $7.1 billion surplus in addition to $1.7 billion in the state’s rainy day fund. The Policy Forum says both are at their highest levels in 40 years.

Gov. Evers wants to spend that money on a variety of programs and positions, while Republicans want to use the surplus to fund tax cuts.

Senate Majority Leader Devin LeMahieu has suggested a 3.25% flat income tax, and many Republicans support it. But the heads of the state’s budget-writing Joint Finance Committee say they will not include that proposal in the new budget because Gov. Evers has promised to veto it.

The report goes on to detail what it calls a “critical crossroads” for school funding, and “major shift” in spending on healthcare in the state.

But the report ends by noting that Wisconsin lawmakers will have a unique challenge as they craft the new state budget.

“The state of Wisconsin’s record surplus augurs an unprecedented budget in the months ahead. This time, the most controversial parts of the debate will not necessarily be about potential cuts but instead about tax relief and new investments,” the report states in its conclusion.