CHICAGO — Wisconsin now expects to collect at least $600 million more in tax revenues over the next three years than previously projected, but Gov. Scott Walker said most of the increase would go to pay off existing obligations, not to ease deep education and local government spending cuts proposed in his next budget.
The revised estimates released by the Legislature Fiscal Bureau this week for the current biennium and next reflect tax collections through April and the latest economic forecast from IHS Global Insight Inc. The bureau now projects that the state will collect an additional $636 million, or 1.6 % more, over the next three years, including $204 million in fiscal 2011, which ends June 30, $204 million in fiscal 2012, and $199 million in fiscal 2013.
The bureau raised individual income tax estimates, but also lowered sales taxes and corporate income taxes. “The collections data shows considerable strength in the individual income tax, but lower than expected revenues from the sales tax and the corporate income and franchise tax,” the bureau wrote. “However, the strength in income tax collections significantly exceeds the weakness in the other two major taxes.”
Bureau director Robert Lang wrote that the state should close out the fiscal year with a general fund balance of $214.6 million, which would rise to $659.9 million at the close of the next biennium June 30, 2013. The projections are based on current enacted legislation and could change based on the outcome of pending legislation.
Walker said the higher revenues would pay off existing obligations, including $60 million due to Minnesota after the cancellation of a tax reciprocity agreement and $200 million that the courts have said must be returned to a medical malpractice fund.
Some could eventually go to ease some of the cuts in his proposed budget to address legislative concerns over their impact, but most of his proposed reductions would be left in place. The Republican governor said he won’t back away from legislation – now before the courts – to raise employee health care premiums and pension contributions and to curtail collective bargaining rights.
“The revenue numbers released today are the latest sign that the economy is improving and Wisconsin is on the right track,” he said. “We are going to do what families have been doing all across Wisconsin. We are going to pay our bills.”
Walker has proposed a $59 billion budget that would eliminate a $3.6 billion deficit with steep cuts. The budget trims $1.2 billion in local government assistance, $494 million from Medicaid, and $250 million to higher education. It includes $439 million of debt restructuring that pushes off debt service due in fiscal 2012 and 2013.
Ahead of the general obligation bond refunding deal this week, Fitch Ratings and Standard & Poor’s affirmed the state’s AA rating and Moody’s Investors Service affirmed its Aa2 on the new deal and $4.6 billion of outstanding GOs.
“The stable outlook reflects our expectation that Wisconsin’s trend of fiscal discipline, which has significantly reduced structural budget deficits in the past several years, will continue, and that the state will act purposefully and quickly to address any budget imbalances,” analyst John Kenward wrote in Standard & Poor’s new report.
Moody’s said the rating is supported by the state’s improved liquidity position as well as its fully funded pension system and limited other post-employment benefit liabilities, which “eliminate long-term budgetary pressure that other states will have.”