Patrick Marley

Milwaukee Journal Sentinel

MADISON - Incoming Gov. Tony Evers and lawmakers would need to come up with more than $2 billion just to keep doing what the state already does and provide a healthy increase to schools, according to a new report.

Such a budget situation would be difficult in any year but could prove particularly tricky with split control of state government for the first sustained period since 2011.

In a report released Friday, the nonpartisan Wisconsin Policy Forum found the state would need an additional $2.2 billion over two years to continue its existing programs. State revenue is unlikely to increase by that much, so Evers and legislators would probably have to make cuts or raise taxes to make ends meet.

"Our broad review indicates that, absent strong growth in revenues, the next state budget may have difficulty accommodating campaign promises and rising costs in ongoing programs without a tax increase," the report noted.

A Democrat, Evers will have to work with Republican lawmakers who are opposed to many of his ideas and who hold large majorities in both houses.

Their relationship has gotten off to a rocky start because GOP leaders have said they are considering approving legislation before Evers is seated to scale back the power of the governor. That could make passing a budget next year even more difficult.

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The Wisconsin Policy Forum came up with its figures by reviewing calculations by the nonpartisan Legislative Fiscal Bureau and budget requests for some state programs. The policy forum assumed many agencies would get modest increases.

It noted state health officials have said they would need $496 million in state taxpayer funds over two years for Medicaid programs that provide health coverage to the elderly, disabled and poor. For its analysis, the policy forum assumed schools would get an additional $621 million in state aid, an increase that matches what they got in the most recent two-year state budget.

The policy forum assumed other state operations would receive 1 percent increases in each of the next two years — less than most state agencies say they need.

To take in another $2.2 billion in tax collections over the next two years, the state would need to see revenue growth of 3.8 percent the first year and 5.3 percent the second year, the policy forum found.

That would be "challenging to achieve" because the state on average has seen annual revenue growth of 2.9 percent since 2012, according to the report. The past increases are lower than they otherwise would have been because of a series of tax cuts.

For Evers, the situation is even more challenging. He has said he wants to give schools an additional $1.4 billion — more than twice as much as what the policy forum assumed schools would get. Republican lawmakers don't want to provide as much money for schools as Evers but haven't said how much less.

One way Evers hopes to solve the budget dilemma is by accepting more federal aid under the Affordable Care Act. That would allow the state to expand the BadgerCare Plus health care program and free up hundreds of millions of dollars in state funds for other services.

Republicans have said they would reject that strategy because of their opposition to the Affordable Care Act, widely known as Obamacare.

On Thursday, Senate Majority Leader Fitzgerald (R-Juneau) said he would not commit to the kind of increase in K-12 funding as Evers has proposed and suggested the two houses could ignore the budget Evers submits next year and develop their own spending plan based on current funding levels.

"I would never commit to that number," Fitzgerald said about Evers' proposed $1.4 billion boost in education spending. "We look forward to working with the Assembly to come up with a document that we think makes sense, and probably would work off of base (funding). I'm not sure exactly but it seems like that's where you would go with a Republican-controlled Legislature and a Democratic governor."

Fitzgerald also said he expects a lot of common ground to be found with Evers and said he wouldn't rule out providing a 10 percent tax cut for middle-class residents, as Evers has proposed.

"Those are significant promises," Fitzgerald said. "We'll see what the governor-elect does with that now that he'll actually be in office."

Aides to Evers did not answer whether he would approve a budget without the $1.4 billion increase in K-12 funding, or how he would address the need for $2.2 billion in additional revenue for existing costs.

Assembly Minority Leader Gordon Hintz (D-Oshkosh) blamed the budget picture on Republicans' decisions to all but eliminate income taxes for farmers and manufacturers and give up to $4 billion in state and local subsidies to induce Foxconn Technology Group to build a plant in Mount Pleasant.

"The next budget is going to be challenging when it shouldn't have been" because of the strength of the economy, Hintz said.

He said the budget could cause gridlock but maintained hope that Democrats and Republicans would be able to work together.

"The legislative process is geared toward compromise," Hintz said. "Deals need to be made and not everyone gets what they want."

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Molly Beck of the Milwaukee Journal Sentinel contributed to this report.