With another legislative session comes another biennial state budget bill, and Wisconsin is expected to have a surplus of $7.1 billion when the current fiscal biennium ends June 30. The 2023-25 state budget will occupy much of the Legislature’s attention for the next few months.
In last night’s State of the State address, Gov. Tony Evers (D) announced that his executive budget proposal will include funding for mental health, child care, PFAS, and workforce and economic development. During the 2022 election, Gov. Evers said that his upcoming budget proposal will include additional funding for K-12 education and an increase in shared revenue for municipalities. Gov. Evers will present his executive budget proposal to a joint session of the Legislature on February 15.
It appears likely that the Republican-led Joint Committee on Finance will once again remove the governor’s non-fiscal policy proposals and decline to add any non-fiscal items, limiting Gov. Evers’ ability to reshape the document via exercise of his line-item veto authority. If Gov. Evers and Republican legislative leaders can find areas of compromise in the budget, items on the table could include state tax policy, transportation, public education, workforce development, and corrections.
Tax Reform
As we covered here, Assembly Speaker Robin Vos has said that a top priority for him will be for the 2023-25 budget to cut taxes by at least $3.4 billion and possibly “significantly” more. The 2021-23 budget cut income and property taxes by a similar amount. Recently, Senate Majority Leader Devin LeMahieu proposed changing the state income tax to a flat rate of 3.25 percent for all taxpayers by 2026; Speaker Vos has also indicated support for a flat tax.
Gov. Evers has called a flat tax a “non-starter,” saying “we prefer a progressive tax system that we have now.” During the 2022 election, the governor proposed an income tax cut of 10 percent for single filers at $100,000 or less and joint filers at $150,000 or less.
Republicans are also reattempting a repeal of the remnants of the personal property tax, an issue long called-for by many business trade associations and industry groups. This was nearly accomplished last session. The Legislature budgeted for repealing the tax, but Gov. Evers vetoed the bill that contained language effecting that repeal. Gov. Evers said he supported repealing the tax but cited concerns with how the bill could affect taxes for companies based outside of Wisconsin and the fees that railroad companies pay in lieu of property taxes.
Medicaid
The state’s Medicaid budget continues to have a sizable surplus. As of July 2022, Medicaid was projected to end the current fiscal biennium with a $414.5 million surplus in state funding. This was largely driven by the additional 6.2 percentage points the federal government has provided for every calendar quarter in which the COVID-19 public health emergency (PHE) is in place.
Recent federal legislation ended the connection between the emergency and certain temporary changes to Medicaid. Even though the PHE remains in place, Wisconsin will now begin to “unwind” its temporary Medicaid rules related to the emergency, and DHS will restart Medicaid and CHIP eligibility reviews. The easing of these rules was intended to prevent people with Medicaid and CHIP nationwide from losing health coverage during the pandemic. States are eligible for a phase-down of the enhanced payments through the end of 2023 if they comply with certain rules.
PFAS
PFAS has been in the news regularly as the Department of Natural Resources (DNR) announces the results of drinking water sampling and issues fish consumption advisories. Recently, DNR began providing bottled water to residents of the Town of Stella in Oneida County after a random sampling of private wells across the state showed elevated levels of PFAS in area groundwater.
During a Stella town meeting, the area’s legislators suggested that the 2023-25 budget could provide more funds for a DNR grant program that assists homeowners with private wells. Sen. Mary Felzkowski (R-Irma), a member of the budget-writing Joint Committee on Finance, noted that “there is a little bit of a budget surplus” but she “couldn’t begin to speculate” how much funding would be required to address PFAs. Rep. Rob Swearingen (R-Rhinelander) agreed, saying, “If we need to do some sort of special legislation regarding PFAS or add to the [well compensation] fund, I think that’s a definite possibility.”
Gov. Evers’ 2023-25 budget will propose spending $106 million to “support municipalities in responding to local PFAS contamination, bolster staff and resources at [DNR], and increase PFAS testing, sampling, and monitoring.” His budget will also include new regulatory standards for PFAS. The governor included some similar proposals in his 2021-23 proposal.