by Senator Howard Marklein
September 4, 2020
The State of Our State's Finances
I have been eagerly awaiting the General Purpose Revenue (GPR) Tax Collections data for fiscal year 2020, which ended on June 30, 2020. This data is extremely important to understand the state of our state’s finances and fiscal condition. In light of the economic impacts of the COVID-19 pandemic, my colleagues and I have been anticipating the potential challenges we may face in the future.
I am relieved to report that the Wisconsin Department of Revenue (DOR) and the nonpartisan Legislative Fiscal Bureau (LFB) estimate that GPR tax collections increased 1.1% in fiscal year 2020 (FY20) to $17,532.2 million. Compared to the original budget, we collected 1.32% more than budgeted or $228,561,500 more than we planned when we crafted the state budget in 2019. A significant contributing factor to this increase is a much larger collection of Corporate Income taxes than budgeted.
Thank goodness the economy was extremely strong for the first nine months of the fiscal year (July 2019-March 2020). The strength of our state’s economy and very positive tax collections placed us in a terrific position when the COVID-19 storm hit us in March. Tax collections for April-June were softer than expected when we wrote the budget last year.
While we are in a good position right now and have beat our estimates, we have not fully realized the fiscal impact of the COVID-19 statewide shutdown. We do not know how long the tail will be on our economic recovery.
Fortunately, the Wisconsin legislature’s reforms and prudence over the last 10 years has built up a Rainy Day Fund of nearly $761.8 million. State law requires us to transfer half of any excess of actual general fund tax collections over the amount estimated in the budget to the Rainy Day Fund.
As we look toward the next state budget, it is clear that we may need to utilize the Rainy Day Fund. This will require an act of the legislature. It will also require us to set our priorities, analyze our state’s needs and make tough decisions.
We also must recognize the tax revenues that will never be recovered. The state’s Transportation Fund, which pays for our roads, was significantly impacted. When our world shut-down in March, we stopped driving. We consumed significantly fewer gallons of gas this year, compared to last year, during the COVID-19 shutdown. The revenue we collect from gas will never be made-up. We will not drive more now to make-up for the driving we did not do this spring. To date this year, we have purchased 110,584,128 fewer gallons than we did at this time in 2019. It remains to be seen what impact the reduction in fuel sales will have on 2021 construction projects.
Tough decisions have put us in a good position despite the challenges created by the COVID-19 pandemic. I am proud of our work to steward your tax dollars and I will continue to watch our states’ checkbook. I take this job very seriously.
As always, please do not hesitate to connect with me to provide input, ideas or to seek assistance. Send an email to email@example.com or call 608-266-0703.