CHICAGO – Wisconsin expects to collect an additional $575 million in tax revenue over three years under new projections that fueled calls for tax relief and more spending on education.
“The surplus and increased revenue projections should be invested in aid for our schools, lowering income taxes for middle-class families, holding the line on property taxes, and building our rainy day fund,” Gov. Scott Walker, a Republican, said in a statement.
General fund tax projections from the Legislative Fiscal Bureau’s last forecast in January were used to help craft Walker’s two-year, $68 billion operating budget that is now being debated by lawmakers. The bureau’s update Thursday reflects April tax collections and the May national economic forecast provided by the state’s economic advisor, IHS Global Insight Inc.
While the national forecast did not change significantly, state collections have improved, according to the report sent to lawmakers Thursday by the bureau’s director Robert Lang. The state now expects to collect an additional $215 million of general fund revenues in the current fiscal year, an additional $180 million in fiscal 2014, and another $180 million in fiscal 2015 above the January projections. The three-year increase totals 1.4% over the prior estimate. Income taxes account for $385 million of the increase and corporate taxes account for $190 million.
Individual income tax revenue for the current year is expected to increase 5.7% over the previous year and then rise by 2% next year and 4.8% in fiscal 2015. The state expects to collect $7.4 billion of income taxes this year, $7.6 billion in the next fiscal year, and $8 billion in fiscal 2015. Total revenues for fiscal 2014 are projected at $14 billion and $15 billion in the following year.
The revenue estimates reflect existing tax rates and don’t take account Walker’s proposed income tax cut or other proposed changes at the state or national level. Under state law, half of the $215 million in additional projected revenue this year must go into the state’s rainy day fund. A total balance of $243 million is expected in the fund at the close this fiscal year June 30, the bureau said.
The state expects a net balance of $560 million at the end of this fiscal year and $525 million at the close of the next biennium based on current state tax laws. The current revenue picture marks a turnaround from two years ago when Walker in his first budget faced a $3.6 billion deficit.
Republicans who control the Legislature and Democrats both support increased education funding. Democrats want all the funds to go to education to make up for cuts enacted in the last budget. Republicans, however, also want tax relief and to cut borrowing levels in the proposed budget with pay-as-you-funding.
All three rating agencies recently affirmed the state’s mid-double-A level ratings and stable outlooks. The rating is driven by moderate debt levels, fully funded pensions, and a broad and diverse economy while challenges remain an ongoing structural imbalance and minimally funded reserves.