Three weeks after the start of the new fiscal year, the legislature may be one step closer to a budget deal. On Thursday, July 20, Assembly leadership and Assembly Joint Committee on Finance (JFC) members released a letter stating they would accept a compromise on transportation funding offered by Gov. Scott Walker. Walker’s offer would redirect the $203.5 million he had originally recommended for income tax cuts to the transportation budget. According to the letter, Walker also offered the possibility of no new transportation bonds. Earlier this month, the governor issued a proposal to the legislature lowering transportation bonding by $200 million to $300 million. The potential deal comes just two days after the Senate released its own separate budget proposal that includes $712 million in new transportation bonding and eliminates the personal property tax in 2018.
Initially the deal looked like it could break the budget stalemate, but Senate Majority Leader Scott Fitzgerald (R-Juneau) was cautious to accept. Instead of shifting the income tax cut funds to transportation, Senate Republicans prefer to use the funds to eliminate the personal property tax – a key element to the Senate’s budget proposal.
The Senate’s 660-page budget proposal mostly includes actions already voted on by JFC, however, it does include some changes to what JFC approved and incorporates their plans for budget areas yet to be taken up by JFC – including K-12, transportation and taxes.
On transportation, the proposal increases transportation bonding to $712 million and includes funds to keep highway megaprojects on track. The Senate proposal also restores Walker’s recommendation to repeal prevailing wage, an item JFC had removed as a non-fiscal policy item.
In addition to the elimination of the personal property tax in 2018, a hefty cost of $239 million, the Senate’s proposal also makes several tax changes from Walker’s original budget bill. The proposal eliminates the governor’s income tax reduction, earned income tax credit, and sales tax holiday. However, the proposal adopts the governor’s proposal to sunset the forestry mill tax. The Senate plan also adds several sales tax exemptions for building materials, beekeepers, fish farms and broadcasting equipment.
One notable change in the Senate proposal from the JFC committee’s approved changes, was the elimination of $50 million GPR from excess Medicaid funds that JFC placed in its supplemental appropriation for 2018-19. Instead, the Senate allocates the funds to address the $51 million decrease to Wisconsin’s budget due to Illinois’ recently enacted tax increases.
The Senate proposal also deletes the action by JFC to maintain the ambulatory surgical assessment. Instead, the Senate plan repeals the assessment beginning in 2017-18 and provides $5 million GPR annually to support Medicaid access payments to ambulatory surgical centers.
Soon after announcing the Assembly would accept the governor’s offer, Assembly JFC chair Rep. Nygren (R-Marinette) sent another letter to his fellow JFC co-chair, Sen. Darling (R-River Hills) stating that JFC should resume its work as early as next week. However, with the Senate reluctant to give up the personal property tax repeal, Majority Leader Fitzgerald and Sen. Darling told the press that a meeting next week was unlikely, but left open the possibility for a meeting the first week of August.