Capitol Connection
By Senator Joe Leibham
May 13, 2009
Governor Delivers Bad News Regarding His Budget Plan
Over the past couple of months, I have shared with you factual information regarding Governor Jim Doyle’s 2009-11 state budget plan. As you may recall, the Governor introduced his $63 billion fiscal proposal back in February and the legislature has been reviewing the plan and considering various amendments and changes ever since. The new budget is set to begin on July 1.
Last week, the Governor’s budget proposal took a major hit when he announced that, if the legislature approved his plan as introduced, the budget would fall $1.6 billion short of the revenue needed to cover expenditures. This should be especially concerning to state taxpayers when you consider the fact that the Governor and a majority of legislators ( I voted “no”) approved $1.2 billion in new taxes back in February as part of there Wisconsin Stimulus Bill and are considering another $1.7 billion in additional taxes to balance the budget. The new $1.6 billion shortfall would exist after the imposition of these new taxes.
Even more concerning are the factors behind the projected shortfall. The Legislative Fiscal Bureau (LFB) made the sobering announcement that Wisconsin’s April 2009 tax collection report showed a decrease of 35.8 percent (-$317 million) in monthly individual income tax revenues as compared to one year ago, April 2008. Year-to-date income tax collections are now 8.3 percent below 2008 levels.
Along with these actual reductions in tax collections comes an even more pessimistic economic forecast. Back in January, the LFB forecasted that real Gross Domestic Product (GDP) would fall by 5.6 percent in the fourth quarter of 2008, and anticipated another decline of 5.4 percent in the first quarter of 2009 and a smaller decline in the second quarter, with slow growth returning later this year. The new LFB forecast, released on May 11, now estimates that general fund tax revenues will be $408 million less in the final months of Fiscal Year (FY) 2008-09, $573 million less in FY 2009-10 and $622 million less in FY 2010-11. Thus, the three-year shortfall is projected at $1.6 billion, or a reduction of about 4.3 percent.
Most of the net decrease is due to projected decreases in revenues from the individual income tax and corporate income and franchise taxes. Individual income tax collections are expected to decline by a concerning $1.3 billion, 86 percent of the new shortfall. Corporate taxes are likely to decline by a total of $282 million over the three fiscal years. The new estimates reflect year-to-date corporate tax collections, which are 29.1 percent lower than 2007-08. Similarly, corporate estimated tax payments have decreased 28 percent compared to the same period last year.
Deliberations on the Governor’s budget plan came to a screeching halt upon the release of this news. Without a doubt, Wisconsin is facing some tough times. Our unemployment rate now stands at 9.4 percent and we have to manage a budget deficit that is the largest our state has ever faced – and is one of the worst among all 50 states.
Discussions are now taking place as to how we move forward. Should the legislature work to fix the Governor’s flawed budget plan or should we send it back to him and ask that he submit a new proposal? State law requires that the legislature approve a balanced budget plan, so we all have a lot of work to do over the next couple of weeks. Hopefully, the Governor and my colleagues will recognize the link between unemployment and the budget mess. Record tax increases on the businesses located in our state will actually kill jobs and further reduce overall tax collections.
To view the LFB memo detailing the new revenue estimates and expanded budget deficit, please visit the following Internet link or contact my office:
http://www.legis.state.wi.us/lfb/Misc/2009_05_11Miller&Pocan_revenue%20estimates.pdf
As always, it has been a pleasure communicating with you. Please remember to communicate with me and share your input by calling 888-295-8750, writing to me at P.O. Box 7882, Madison, WI 53707-7882, or by e-mailing me at Sen.Leibham@legis.wi.gov. You can also log on to the 9th Senate District on-line office at www.leibhamsenate.com.
It is an honor representing the residents of the 9th District in the State Senate.