Gov. Evers and Legislative Leaders Announce

Budget Deal

At 5:00 AM this morning, Gov. Tony Evers, Republican legislative leaders and Senate Democratic leader Dianne Hesselbein announced a budget compromise that significantly boosts funding for K-12 education, childcare, and the Universities of Wisconsin while enacting $1.5 billion in tax savings.

Gov. Evers stated in announcing the deal, “I’m excited to announce our state budget will not only invest over $330 million for our child care industry and provide direct support for child care providers to help lower the cost of child care for working families but it will also provide nearly $1.4 billion in spendable revenue for K-12 schools with the largest increase in special education aid for K-12 schools ever in state history and will make the largest investment in our UW System in

over two decades.”

Assembly Speaker Robin Vos (R- Rochester) touted that the budget deal delivers on Assembly Republicans’ two biggest priorities, tax relief for Wisconsin and reforms to make government more accountable. The tax relief in the compromise would over the next two years cut taxes by $643 million, retirement taxes by $695 million by exempting the first $48,000 of retirement income for a married couple and eliminates the sales tax on electricity “saving consumers $178 million.”

In a joint statement, Senate Majority Leader Devin LeMahieu (R-Oostburg) and Finance Co-Chair Howard Marklein (R-Spring Green) said “This compromise will provide meaningful tax relief for retirees and the middle class, stabilize the child care system without making pandemic-era subsidies permanent, and strengthen our schools by reimbursing special education services at a higher rate.”

Senate Democratic leader Dianne Hesselbein (D- Middleton) highlighted the role Senate Democrats played in helping “hammer out a bi-partisan budget agreement.” She noted a week ago Republicans were “proposing $87 million in cuts to the UW, a mere 5% increase in reimbursement for special education, and no direct payments to childcare providers” and because of their involvement were able to secure meaningful increases in investment in those areas.

According to Wispolitics.com, Governor Evers have given his assurance that he will not veto anything that is part of the announced agreement but has reserved his right to veto areas of the budget that are not covered by the agreement.

Highlights of the Agreement

From the Governor’s press release

Taxes

The deal proposes $1.5 billion in tax savings

1.6 million Wisconsin income taxpayers will see income tax cuts under the provision, with an average tax cut of $180
82 percent of the tax cut will go to Wisconsin taxpayers with adjusted gross income below $200,000.
Eliminating retirement income taxes for many Wisconsin retirees. Allowing those age 67 or older to exclude up to $24,000 (up to $48,000 for married-joint filers) of retirement income payments will reduce taxes on approximately 280,000 Wisconsin filers by an average of about $1,000 per filer.
Eliminate the sales tax on household utility bills to help reduce energy costs for families. This will help lower out-of-pocket costs on energy and utility bills for Wisconsinites across the state, saving Wisconsin households nearly $156 million over the biennium.

Health Care

The proposal would fund the current Medicaid program at its cost-to-continue, ie no cuts to the Medicaid program. The cost-to-continue provides ongoing funding for the Medicaid program for the next two years based on the increased costs of providing services and changing enrollment projections.
It would require DHS to establish the hospital assessment at six percent, with 30 percent of the funds generated retained by the state in the Medical Assistance Trust Fund, which helps to fund the state Medicaid program. The remainder of the funds will be used for investments in hospital provider payments, resulting in over $1.1 billion in additional investments in Wisconsin hospitals.
It would implement a fee schedule for the state’s workers compensation program like what was proposed in 2023 Assembly Bill 1074 which was supported by WMC and opposed by the WI Hospital Association and WI Medical Society. This provision would impose maximum fees that a health care provider may charge when treating an injured employee through the worker’s compensation system.

K-12/ Universities of Wisconsin

The proposal would include a nearly $1.4 billion increase in spendable revenue for K-12 schools across the state in the 2025-27 Biennial Budget. The net categorical aid increase is five times larger than the increase provided in the most recent state biennial budget and a nearly 60 percent increase above the amount previously approved for K-12 schools.
The proposal also includes the largest percent increase in special education reimbursement rate in state history, which will increase to 42 percent in the first year of the biennium and 45 percent in the second year of the biennium. This is the highest reimbursement rate in 30 years and a larger increase for special education than the last three state budgets combined.
$30 million to continue providing comprehensive school-based mental health services statewide, modeled on the governor’s successful “Get Kids Ahead” initiative.
The deal includes an increase of over $256 million for the UW System over the next two years, including:
Over $100 million to support UW System campuses statewide to help stabilize the system after recent campus closures, layoffs, and program cuts and consolidations and ensure UW institutions remain economic and workforce hubs in communities across our state;
$7 million to provide 24/7 virtual telehealth mental health services to nearly all students across UW System campuses;
$54 million to help retain and recruit faculty and staff in high-demand fields of study to ensure UW System institutions remain competitive, world-class institutions;
Over $94 million to increase wages for UW System workers, including faculty and staff; and efforts designed to promote more flexibility and affordability for students at campuses across Wisconsin, ensuring that any general credit hours students earn are able to be transferred and accepted across all UW System campuses by the fall 2026 semester.
Over $840 million to support capital building projects on UW campuses across the state.

Transportation

The deal would invest $150 million in the Agricultural Roads Improvement Program (ARIP) to continue repairing and improving Wisconsin’s rural roads, most especially to help farmers and producers and the state’s agricultural and forestry industries move products to market safely and efficiently. Additionally, $30 million of the $150 million secured for ARIP will be specifically targeted to bridge and culvert repair to help improve and repair deteriorating bridges across the state.
It would also invest $50 million to continue the successful Local Projects Program from the last budget, which is designed to support local organizations that have construction projects that serve statewide public purpose.

Child Care

The deal would invest over $330 million in Wisconsin’s child care industry, including:
$110 million in direct payments to child care providers to help providers keep their doors open and lights on, cut child care wait lists, and lower out-of-pocket child care costs for working families.
The new program will make monthly payments and monthly per-child investments in child care providers to ensure continued, direct support for providers as the Child Care Counts program winds down.
$66 million to fund a new “Get Kids Ready” initiative, the first-ever child care program funded solely by general purpose revenue, or GPR, in Wisconsin state history, which will support child care providers serving four-year-olds to help prepare Wisconsin’s kids for the classroom and get an earlier jump start on learning at a critical time in development.
It also includes an over $123 million increase to rates under the Wisconsin Shares Child Care Subsidy Program to help lower out-of-pocket child care costs for working families across the state. The investment will raise rates for the Wisconsin Shares program to ensure Wisconsin meets its statutory obligation, designed to ensure families can access 75 percent of child care slots within a given geographical area and lower the cost of child care for parents.
And $28.6 million for a pilot program to help support expanding capacity across Wisconsin’s child care industry to ensure more families with infants and toddlers can access quality, affordable child care.

What's Next?

Today- Tuesday, July 1st

8:30 AM: News Conference with JFC Co-Chairs Born and Marklein

State Representative Mark Born (R-Beaver Dam) and Senator Howard Marklein (R-Spring Green), Co-Chairs of the Joint Committee on Finance, will hold news conference prior to the executive session of the JFC. (link to WisEye)

9:00 AM: Joint Committee on Finance Executive Session

Tomorrow- Wednesday, July 2nd

Potential Senate and Assembly Floor Action on the budget.

Your Michael Best team lead will keep you updated on the Joint Committee on Finance action on the budget today, as well as any other developments of note. And we will send you an alert updating you on the completion of the Committee’s activity and next steps later today.

If you would like to find time to discuss the above matter in more detail, please do not hesitate to reach out to your Michael Best Strategies contact.

Have a great day,

Wisconsin GR Team

Government Relations Team

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