2021-23 State Budget

According to a January 25, 2022 memo to legislators from the nonpartisan Legislative Fiscal Bureau, the state is expected to end the fiscal biennium on June 30, 2023 with a $3.8 billion surplus, nearly $2.9 billion more than the most recent projection. LFB attributes most of the increase to a $2.5 billion increase in expected sales, income, and corporate tax collections and a nearly $340 million drop in appropriations. Because the state’s budget stabilization or “rainy day” fund has a balance over $1.7 billion, none of the surplus funds will be automatically transferred to that account.

A month earlier, Gov. Evers noted in a press release that Wisconsin’s General Fund recorded its largest positive balance ever, as calculated under Generally Accepted Accounting Principles (GAAP), at the end of the 2020-21 fiscal year. The state ended the most recent fiscal year with a balance of $1.18 billion. The 2019-20 and 2020-21 fiscal years mark the first time that the state has run a GAAP positive balance since the state began publishing its Annual Comprehensive Financial Report in 1990.

The Wisconsin Department of Administration announced October 18 that the state ended its 2021 fiscal year with a balance of $2.58 billion, a record surplus and more than double the $1.17 billion balance Wisconsin had at the end of the previous fiscal year. The numbers came as part of the department’s Annual Fiscal Report on state finances.

Under state law, when the general fund ends the fiscal year with a surplus, a portion of that must be transferred to the state’s Budget Stabilization (“rainy-day”) Fund. Given this year’s surplus, the state transferred $967 million to the rainy-day fund for a total balance of about $1.73 billion, more than five times the fund’s balance three years ago.

A memo from the nonpartisan Legislative Fiscal Bureau (LFB) on October 18 projects that the balance of the state’s general fund at the end of fiscal year 2023 will be $930.6 million. In June of this year, LFB estimated that state tax collections by the end of fiscal year 2023 will be $4.4 billion more than previously estimated, “based upon the strength of collections and the vastly improved economic forecasts for the remainder of this year and the next two years.”

State Will Update Income Tax Withholding Tables for 2022

On October 7, LFB released a memo explaining that the Department of Revenue will update the individual income tax withholding tables, effective this coming January 1 for tax year 2022 onward. The 2021-2023 state budget cut income taxes by $2 billion, necessitating changes to the tax rates, brackets, and sliding scale standard deduction. LFB estimates that the update will reduce income tax collections by $709.8 million on a one-time basis in fiscal year 2022.

The memo notes that “a provision requiring DOR to similarly update withholding tables beginning January 1, 2022, was included” in the budget passed by the Legislature “but was vetoed by the Governor.” A press release from DOR advises employers to implement the revised tables no later than January 1, 2022.

On Thursday, July 8, Governor Tony Evers (D) signed 2021 Act 58, the state budget for the 2021-2023 fiscal biennium, which began July 1. The Wisconsin Assembly approved the budget bill (Assembly Bill 68) on June 29, with the Senate concurring in the bill the following day. The two-year budget spends $87.5 billion and cuts income and property taxes by $3.4 billion.

While approving the budget, Gov. Evers used his line-item veto authority 50 times, mostly making minor adjustments to program- and project-specific appropriations and language. The governor’s most notable veto was to nix a transfer of $550 million from the state’s general fund to the Budget Stabilization Fund. That money will sit unspent in state coffers unless the Legislature and Gov. Evers agree on how to spend it.

In his veto message to the Legislature, Gov. Evers wrote that he “object[s] to making these funds unavailable for supporting the needs of Wisconsinites that the Legislature failed to address. … I request the Legislature work with me to instead invest these funds to address the immediate needs of Wisconsinites.” Many of the governor’s other veto explanations objected to the Legislature placing limits on the authority or flexibility of state agencies. All told, Gov. Evers used his line-item veto authority the fewest times since the 2011-2013 budget, when Governor Scott Walker (R) also issued 50 partial vetoes.

On Tuesday, June 29, the state Assembly voted 64-34 to approve the budget, with four Democratic representatives joining all Republicans to vote in favor of the bill. That included Representatives Steve Doyle (D-Onalaska), Deb Andraca (D-Whitefish Bay), Beth Meyers (D-Bayfield), and Don Vruwink (D-Milton). On Wednesday, June 30, the Wisconsin Senate voted 23-9 to concur in the state budget. Democratic Senators Janet Bewley (Mason), Brad Pfaff (Onalaska), and Jeff Smith (Brunswick) joined all present Republicans in backing the bill. Senator Roger Roth (R-Appleton), currently serving a military assignment, was the only legislator absent from either house for the final budget vote.

Although the Legislature had already set aside several days during that week for a normal floor period, Republican leaders convened an extraordinary session to consider the budget and several other bills. That had the effect of limiting procedural maneuvers that could have extended or delayed the process. The 2021 budget marks the first time since 2007 that a state budget has cleared either house of the Legislature with the support of legislators from both parties.

In May and June of 2021, the Wisconsin Legislature’s Joint Finance Committee (JFC) held a series of executive sessions to consider various budget motions related to state agencies and programs. In the series of articles linked below, we review the motions considered by the committee during each session, including notable items that the committee adopted:

• May 6: Finance Committee Overhauls State Budget, Removing Hundreds of Policies and Resetting Spending Levels
• May 13: Revenue, Veterans Affairs, Financial Institutions
• May 20: Administration, Tourism, Ethics, Elections
• May 27: K-12 and Higher Education
• June 2: Natural Resources, Workforce Development, DSPS, DATCP
• June 8: Transportation, Building Commission, Military Affairs
• June 10: Justice, Courts, Corrections, DATCP, DNR
• June 15: Health Services, Insurance, Children and Families, Public Service Commission
• June 17: Final Motions, Taxes, Shared Revenue, WEDC, ETF

In his original executive budget proposal, Governor Evers included a two-year operating budget of more than $90 billion and a long list of changes to various state laws and programs. Immediately following the governor’s budget address in February, Republican legislative leaders indicated they would make significant changes to the proposal.

At its May 6 executive session, the Republican-led JFC took steps to more or less start over from the governor’s proposal. Then, the committee held a series of meetings to consider and approve budget motions for all state agencies and programs. With its adoption of Motion 999 on June 17, JFC completed its work assembling a state budget. In that motion, the committee adopted substitute amendments incorporating its changes to the governor’s proposal and recommended passage of the budget bill as amended.

Wisconsin operates under a biennial budget, meaning the legislature passes a budget every other year. The budget process begins in the fall of each even year, when state agencies submit their budget requests to the governor and the Department of Administration.

The Department of Administration’s State Budget Office develops a budget based on the governor’s agenda and agencies’ requests. The governor then presents his budget to the state legislature for its consideration.

Once the governor’s budget bill is introduced, typically in January or February of each odd year, the Legislative Fiscal Bureau will take 3-4 weeks to prepare a comprehensive analysis of the bill for the Joint Finance Committee (JFC). Starting in mid-March, JFC will schedule committee hearings and invite selected agency heads to appear and testify before the committee on their respective agency budgets. Public hearings on the bill are then held in three to five locations throughout the state, starting in March and completed by mid-April.

After the agency and public hearings, JFC begins meeting several days each week through the end of May to take votes on various aspects of the bill. At the end of the JFC budget process, all JFC modifications to the governor’s bill are incorporated in a substitute amendment and sent to the full legislature for floor votes in each house.

The legislature generally takes the bill up in June and sends their final product to the governor by the end of the month. The governor completes veto review within 30 days of receiving the bill, and then signs it into law.