Economic slowdown could lurk ahead
State officials want to budget more cash to offset potential downturn
MADISON - Top Wisconsin Republicans are calling for setting aside more cash in the state budget, acknowledging the possibility of an economic slowdown ahead.
The news comes as Gov. Scott Walker and lawmakers are considering a 15-year deal to make up to to $2.85 billion in cash payments to a Taiwanese company to persuade it to site a flat screen display plant and up to 13,000 jobs in Racine or Kenosha counties.
The concern about a possible slowdown comes from several factors, including state tax collections running slightly below target and a lack of action so far in Congress on tax cut and infrastructure legislation.
So far, top GOP leaders like Senate Majority Leader Scott Fitzgerald of Juneau haven’t indicated how much extra cash they want to sock away, saying only that they want to be careful.
“We’re continually hearing that there’s a possibility that the economy could soften,” Fitzgerald said last week. “We don’t want to be in a position where we have to revisit the budget.”
In sounding the note of caution, Fitzgerald said he hoped to restart work the week of Aug. 21 on the budget, which is now a month and a half late. The GOP senator said he has heard from other Midwest leaders that they aren’t seeing as much growth in tax revenue as expected in their states.
In response to questions, both the Assembly co-chairman of the Legislature’s budget committee and a spokesman for Walker agreed in principle with Fitzgerald.
Forecasts for state tax revenue in Wisconsin were based in part on assumptions that President Donald Trump and Congress could pass major tax cuts and investments in infrastructure over the next year. It’s now less clear whether Congress will take these actions.
In May, the nonpartisan Legislative Fiscal Bureau projected state revenue growth of 2.7% for the fiscal year that ended in June.
Final tax collection numbers including the month of June have not yet been released by the Walker administration. But as of the end of May state revenues were at 2.5% growth for the year.
That modest difference — if sustained through June — could total millions of dollars. What’s more, lower tax collections for last year would drive down estimates for each of the next two years within the next state budget, compounding the effect.
Rep. John Nygren (RMarinette) said that the state was better off playing it safe and trying to avoid the budget repair bills that were more common in Wisconsin a decade ago.
“(We) want to keep it that way,” Nygren said in a text message.
Rep. Gordon Hintz (DOshkosh), another member of the budget committee, agreed on the need to be cautious but said he was skeptical Republicans would do enough to make that happen.
Hintz noted that under Walker’s bill the state would wrap up its twoyear budget in June 2019 with $87 million in its main account. That would be a lot of money for a city or school district, but it would not enough to fund the state’s large operations for two full days.
“That was one of the first things we highlighted about the bill,” Hintz said.
On the other hand, under Walker’s bill the state would have an additional $302 million in its rainy day fund that could be tapped in the event of a slowdown in the economy. In addition, construction of a Foxconn plant could provide a net boost in state tax collections for the first two years, though for the following 14 years it’s expected to be a net annual cost to state taxpayers because of the subsidies.
For his part, a spokesman for Walker said that the governor was committed to working with his fellow Republicans to ensure the budget stays stable over the next two years.
“Governor Walker is working with legislative leaders to reach a budget agreement, and he agrees we should be as prudent as possible with taxpayer dollars,” Tom Evenson said.