Wisconsin's budget picture brightened Thursday, with new estimates that show a surplus will grow to $484 million, giving Republicans and Gov. Scott Walker even more room to pursue their tax cutting agenda.
The estimate from the nonpartisan Legislative Fiscal Bureau was nearly $137 million better than one Walker's administration released in November. The numbers will be used by Walker as he puts the final touches on his two-year spending plan, which he's set to unveil on Feb. 20.
While the bottom line for the current fiscal year that ends June 30 showed improvement, the report projected that tax collections through June 30, 2015, will actually be $259 million less than what Walker's administration predicted. The bulk of that, $219 million, is due primarily to the fact that Walker assumed in November that Congress would restore the estate tax, the Fiscal Bureau said in its report. That did not happen as part of the deal to avert the so-called fiscal cliff.
Still, Walker and Republican legislative leaders touted the positive news in the report about the larger surplus for this fiscal year.
In 2011, Walker took office facing a roughly $3 billion budget shortfall and attacked the problem with deep cuts to education, local governments and other programs. He also forced public workers to pay more for health insurance and pension benefits, and effectively ended workers' collective bargaining rights, leading to an unsuccessful attempt to recall him last year.
The surplus this time makes it easier for Walker and Republicans to follow through on their promises to cut income taxes while also increasing spending on K-12 schools.
Walker said Tuesday that he thought state income taxes could be cut by about $340 million, and that it would amount to a roughly $200 savings per household over the next two fiscal years. Details were still being worked out, he said.
Walker said in a statement Thursday that the larger surplus "will allow hardworking Wisconsin taxpayers to keep more of the money they earn because I plan to move forward with an income tax cut targeting the middle class."
Democrats have been generally supportive of an income tax cut, as long as it's targeted at the middle class. Democratic state Rep. Jon Richards, a member of the Legislature's budget committee, said the higher surplus provides an opportunity not only for the tax cut but also to bolster funding in a number of areas slashed in Walker's previous budget, including job training and education.
There are many other areas vying for the extra money. A task force created by Walker and the Republican Legislature in 2011 on Wednesday recommended $480 million in annual tax increases to pay for transportation needs across the state, including road construction and repair.
Walker and Republican leaders have rejected outright the proposed gas tax and registration fee increases. Walker instead has said he would favor tapping the state's general fund, which would be easier to do given Thursday's sunnier revenue projections.
Walker has also pledged to create a venture capital fund to spur job growth and help startup companies, and to put more money into education that is tied to how well school districts perform. The $484 million projected surplus is on top of another $125 million the state has set aside in its rainy day fund, which could also be tapped for one-time spending.
The $136 million difference between the November report and Thursday is due to a $37 million increase in tax collections for the current fiscal year, a $35 million increase in departmental revenues and a $64 million drop in state expenses.
The Fiscal Bureau projects a 2.1 percent increase in tax collections this year, followed by a 2.4 percent increase the first year of the new budget and 3.6 percent the year after that.
Republican co-chairs of the Legislature's budget committee issued a joint statement saying the numbers show the state's economy is improving.
"As we advance our work on the budget we will continue our aggressive pro-jobs agenda and focus on tax relief for our middle-class families," said Sen. Alberta Darling, R-River Hills, and Rep. John Nygren, R-Marinette.