State Projects $4 Billion Budget Surplus but Faces Challenges Ahead

On November 20, the Department of Administration (DOA) released updated state revenue estimates heading into the 2025-27 biennium. According to DOA, Wisconsin is on track to conclude the 2023-25 biennium (which ends in June 2025) with a $4 billion surplus, an increase of $500 million from earlier projections. The Evers administration expects an additional $1.7 billion in new tax collections over the next two years. However, if every request from state agencies is granted, the state could face a $742.8 million deficit by the end of the 2025-27 biennium – teeing up some difficult decisions in the 2025-27 state budget process.

In addition to uncertainties surrounding potential changes to federal spending and the impact on the state’s budget, sharp partisan differences exist regarding how to allocate the $4 billion surplus. Senate Majority Leader Devin LeMahieu has stated that his caucus’ focus is on income tax cuts, particularly targeting the second-highest tax bracket. Assembly Speaker Robin Vos has also emphasized tax relief as a top priority. Meanwhile, Governor Tony Evers and legislative Democrats have identified funding for K-12 funding, higher education, childcare and PFAS as key budget priorities. These differing priorities will need to be reconciled during the budget process alongside requests from state agencies.

The Governor’s 2025-27 state budget proposal is expected to be released in mid-to-late February 2025.