Capitol Update
by Senator Howard Marklein
May 8, 2020

A Day of Fiscal Reckoning Is Coming
 

We all know that the COVID-19 Pandemic is going to severely impact our economy and the fiscal health of all levels of government throughout the country. But this week, we saw the first actual numbers. This discussion has been speculative until now. We are now dealing with real dollars and cents.
 
Bob Lang, the Director of the non-partisan Wisconsin Legislative Fiscal Bureau (LFB) released a memo on May 6, 2020 to share preliminary April tax collection information and to provide some background on why it appears as it does and what we might expect in the future. According to Lang, “First, the coronavirus pandemic has severely impacted the state’s economy and tax collections. Second, the extension of income and franchise tax filing deadlines from April to July 15 in 2020 has affected collections.” Read the memo here: http://docs.legis.wisconsin.gov/misc/lfb/misc/207_april_2020_general_fund_tax_collections_5_6_20.pdf
 
Tax collections for April, 2020, were $1.145 billion.  This is $870 million below collections of April, 2019.  For the first 10 months of the current fiscal year, collections are down $313 million as compared to the same 10 month period in the 2018-19 fiscal year.
 
What does this mean?  It means that a day of fiscal reckoning is coming for Wisconsin.
 
I cannot predict exactly what we will have to do and who will be impacted, but it is important for all citizens to know that there will be a fiscal impact to state finances from the COVID-19 Pandemic response. And the longer a restrictive response lasts, the worse it gets.
 
An impact to state finances will touch every taxpayer-funded entity in Wisconsin. It will impact local governments, public schools, universities, roads, hospitals and more. Already, UW Platteville has decided to furlough 70 employees for three-months starting May 18. According to Chancellor Dennis Shields, the university is managing a $16.1 million shortfall. The University of Wisconsin System has projected a $170 million impact in the spring semester alone.
 
We know that Governor Tony Evers told Vice President Mike Pence that he expects Wisconsin to lose $2 billion in revenue this year. The state of Minnesota is already projecting a $4 billion swing in state finances.  Prior to the pandemic, they projected a $1.9 billion surplus. Now, they are projecting a $2 billion deficit.  The state of Illinois recently asked the Federal government for $700 million to shore up their transportation fund because of lost gas tax revenues.
 
Wisconsin’s transportation fund is also suffering. I recently asked Department of Transportation (DOT) Secretary-Designee Craig Thompson when the DOT will have to make changes for road projects due to funding impacts. He told me that projects for the 2019-20 fiscal year are proceeding as planned. However, projects for the 2020-21 fiscal year will likely be impacted. They will begin these discussions in mid-May. 
 
Fortunately, through a lot of very strong fiscal responsibility, Wisconsin has a Rainy Day Fund, also known as the Budget Stabilization Fund. As you may remember, we were planning to transfer $189 million from General Purpose Revenue (GPR) tax collections to the budget stabilization fund from a surplus before the pandemic. The fund already has a projected balance of $655 million at the close of the 2019-20 fiscal year.  We will probably not transfer these dollars and they will remain in the general fund.  The legislature will need to act if we need to tap into the $655 million Rainy Day fund in the future.
 
The bottom-line is that the COVID-19 Pandemic is impacting every fiscal and financial facet of our lives. Our private-sector economy is damaged, which directly impacts our public-sector tax collections. In turn, tax collections will significantly impact the services and programming provided by our government at all levels. Our schools, universities, local governments and other institutions will be impacted. It is in the best interest of the private AND the public sector to re-open our economy. Our future depends on it.
 
For more information and to connect with me, visit my website http://legis.wisconsin.gov/senate/17/marklein and subscribe to my weekly E-Update by sending an email to Sen.Marklein@legis.wisconsin.gov. Do not hesitate to call 800-978-8008 if you have input, ideas or need assistance with any state-related matters.