State officials predict $1 billion budget shortfall if all spending plans are approved despite higher tax revenue

Patrick Marley , Molly Beck | Milwaukee Journal Sentinel

MADISON - Wisconsin would come up $1.1 billion short over two years if all agency spending plans are approved, according to a report released Tuesday.

The report from the Department of Administration highlights the challenges that will be faced by incoming Democratic Gov. Tony Evers and Republicans who control the Legislature.

At a stop in Milwaukee on Tuesday, Evers said it was "premature" to say exactly how he would address the projected shortfall in his first state budget, which he will have to introduce early next year.

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The report found the state will take in an additional $2.1 billion in tax collections over the next two and a half years because of increased economic activity. But that's not enough to cover all the funding requested by state agencies.

Most of those agencies are overseen by outgoing GOP Gov. Scott Walker, but the state Department of Public Instruction is overseen by Evers, who as schools superintendent is seeking more than $1.4 billion over two years.

Evers and lawmakers can address the funding challenges by giving agencies less than they requested, raising taxes and fees or finding other sources of revenue. But finding a solution that is palatable to both Democrats and Republicans would be tricky.

Agencies rarely get all the money they seek and Republican lawmakers strongly oppose raising taxes. Evers has said he wants to accept hundreds of millions of dollars in additional federal money under the Affordable Care Act that would help shore up Wisconsin's budget, but Republican lawmakers are against that idea.

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This month, the nonpartisan Public Policy Forum projected the state would need an additional $2.2 billion over two years to have state agencies continue operating at the same level and give schools the same increase they saw in the most recent state budget.

That projection assumed most state agencies would get less than what they sought and schools would get far less than what Evers wants.

The Republican leaders of the Legislature's budget-writing committee hailed the forecast as a dividend of GOP measures over the last eight years.

"Governor Walker is leaving Wisconsin in much better fiscal shape than what he inherited," Sen. Alberta Darling (R-River Hills) and Rep. John Nygren (R-Marinette) said in a statement. "Thanks to our reforms, tax cuts, and common sense budgeting, our state is expected to generate an additional $2.1 billion."

School funding is a likely sticking point in the next budget. Evers wants more than $1.4 billion for schools and has stood by that proposal even as Assembly Speaker Robin Vos (R-Rochester) has said he believes an increase of that size would necessitate large tax increases he opposes. Senate Majority Leader Scott Fitzgerald (R-Juneau) has suggested lawmakers craft their own budget separately from Evers' first budget

Sen. Jon Erpenbach (D-Middleton), who sits on the budget committee, said he hopes Republicans don't dismiss Evers' budget simply because of his political persuasion.

"If Tony's putting more money in public education, that’s something we all value," Erpenbach said. "I would hope that whatever he proposes on K-12 funding would make it through the budget and not be dismissed out of hand just because he's a Democrat." He added that he doesn't expect a tax increase to be necessary to provide the increase for schools because agencies likely won't see approval of every spending proposal.

At his Milwaukee stop, Evers said he was beginning to work on the budget. He spoke before the Department of Administration released its projection.

"It’s premature for me to answer the question directly, but I believe we will be proposing that increase (for schools) that you saw, so we’ll either have to find ways to shrink some areas or find ways to fund those areas," Evers said. "It’s always been about priorities, and it will continue to be.”

Evers spokeswoman Carrie Lynch said in a statement that the governor-elect "is confident his team can put together a balanced budget that puts Wisconsin children and families first."

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Don Behm of the Journal Sentinel staff contributed to this report from Milwaukee.

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