Wednesday, April 6, 2011

Proposal Could Make it Harder to Balance Future Budgets

It’s taking longer than we would like for the state’s tax revenue to recover from the effects of the recession, and a provision in the Governor’s executive budget would further slow the growth of tax revenue deposited in the General Fund.

Tax revenue to the general fund took a hit in the national recession, which is one of the main factors underlying the state’s significant budget deficit. The Wisconsin Budget Project recently released an analysis showing that state revenue in Wisconsin was growing at a moderate, sustained pace in the middle of the decade. Then the national recession occurred, with devastating effects on the state’s tax revenue. The economy has started to recover, but revenues to the general fund are still down for fiscal year 2011. In fact, when inflation is taken into account, the state is on track to collect less in revenue than it did in 2001.

Revenue to the state’s general fund would taker a further hit with Governor Walker’s proposal, which would move a percentage of the sales tax generated from motor vehicles and motor vehicle parts to the transportation fund.

This percentage would start at 7.5% in fiscal year 2013 and increase annually until it reached 50% of these revenues in 2022. The dollar amount would start at $35.1 million in 2013 and increase to an estimated $292 million in 2022.

Recovery has been anemic so far for Wisconsin’s general fund tax revenues, and this provision would further slow the growth. If the Governor’s proposal is included in the budget, we will have less sales tax revenue available to support important programs like K-12 education, heath care for low-income families, and our university system, even after the economy fully recovers.

On the other hand, we’d have more to spend on roads. A Legislative Fiscal Bureau Analysis shows that the executive budget recommends increasing general fund appropriations in the Department of Transportation (DOT) by more than 100% over the base year doubled. (DOT’s all-funds appropriations are virtually flat in the proposed budget compared to the base year.)

Some legislators have raised questions about shifting part of the sales tax to the transportation fund. The Milwaukee Journal Sentinel quoted Senator Luther Olsen (R-Ripon) as expressing hesitation about the transportation budget in general, saying, “I just am concerned that the transportation budget is not sacrificing too much where all the other folks we deal with are.”

Tamarine Cornelius

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