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Revenue Numbers Slowing
The Legislative Fiscal Bureau released updated revenue estimates on Thursday. The numbers are a re-estimate of the revenue projections offered in January 2025, and will be used by the Joint Finance Committee as they continue to develop the 2025-27 State Budget.
Key Points:
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Increased Tax Collections for 2024-25: Tax collections are projected to be $22 million higher than earlier estimates for the 2024-25 fiscal year.
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Lower Projections for 2025-26 and 2026-27: A decrease of $321 million is expected for 2025-26 and $36 million for 2026-27, resulting in a total three-year reduction of $335 million, or -0.49%.
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General Fund Balance: The projected gross balance in the general fund for 2024-25 is $4,337.7 million, which is $70.2 million above previous estimates.
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Economic Forecast Changes: The S&P Global forecast indicates weaker economic growth and lower projections for GDP, personal income, and vehicle sales for the years 2025-27 compared to earlier forecasts.
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Impact of Federal Tax Law Changes: The expiration of the $10,000 limit on state and local tax (SALT) deductions is expected to shift tax collections from corporate income/franchise taxes to individual income taxes, significantly impacting revenues in 2025-27.
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Insurance and Miscellaneous Taxes: Insurance premiums tax revenues are expected to increase, while miscellaneous tax revenues are projected to see steady growth due to strong real estate transfer fee collections
January Estimates:
LFB Memo states: Our analysis indicates that for the three-year period, aggregate general fund tax collections will be higher ($894.3 million) than those of the November 20, 2024, report ($239.6 million in 2024-25, $355.2 million in 2025-26, and $299.5 million in 2026-27). Based upon the November 20 report, the administration's general fund condition statement for 2024-25 reflects a gross ending balance of $3,999.5 million and a net balance (after consideration of the $105.0 million required statutory balance) of $3,894.5 million. Our analysis indicates a gross balance of $4,267.5 million and a net balance of $4,162.5 million. This is $268.0 million above that of the November 20 report.
May Estimates:
LFB Memo states: Based upon our review of the collections data and the new economic forecast, we believe that tax collections will be higher than the January 29 report by $22.0 million in 2024-25, and lower by $321.0 million in 2025-26 and $36.0 million in 2026-27. The three-year reduction is $335.0 million, or -0.49%. In addition to the $22.0 million in increased tax collections, it is estimated that departmental revenues will be $8.7 million above the January 29 projection and net appropriations will be $39.5 million below the earlier estimates. The net result of these estimates is that the projected gross balance in the general fund will be $4,337.7 million, which is $70.2 million above the January projection of $4,267.5 million.
Collections:
LFB Memo states: Based on our review of collections data and the economic forecast, general fund taxes will be higher than previous estimates by $22 million in 2024-25, and lower than the previous estimates by $321 million in 2025-26 and $36 million in 2026-27. The three-year decrease is $335 million, or 0.49%, reflecting a lower forecast for individual income taxes ($370 million) and corporate income/franchise taxes ($90 million). These reductions are partly offset by an increased forecast over the three-year period for general sales and use taxes ($65 million), insurance premiums taxes ($46 million), and miscellaneous taxes ($14 million). The estimates for utility taxes and excise taxes have not been changed since January.
Legislative Updates
- The Legislature does not have another floor session scheduled for the remainder of May.
- The Joint Finance Committee is expected to meet to continue work on the budget, but no meetings were scheduled at the time this report was prepared.
- Over the past several weeks both Speaker Robin Vos (R-Rochester) and JFC Co-chair Howard Marklein (R-Spring Green) have stated to the media they were ‘negotiating’ with the Governor on a tax and budget proposal. But after the revenue estimates were released, legislative leadership called on the Governor to come to the table to negotiate. It is uncertain at this time if meetings are being held, who is taking part in the meetings, and when any negotiations would be made public.
Jacque Offers Bill to Clarify Municipal Meetings
Sen. André Jacque (R-New Franken) and Rep. Shae Sortwell (R-Two Rivers) are circulating a bill to allow local governments clarification in addressing consideration of ordinances or resolutions that previously failed. According to the co-sponsorship memo:
“Under current law, the state legislature’s biennial session is clearly defined and outlined compared to a local government body. Understandably so, various Wisconsin municipalities operate their legislative “sessions” differently than the state due to having staggered terms for their elected officials and other legal reasons. However, due to this, the law is unclear on how a municipality takes up a previously failed ordinance or resolution. This can lead to a municipality not revisiting issues for multiple years that its residents or members of the legislative body want to re-examine. This legislation would exempt municipalities from the parliamentary rule of not taking up substantially similar ideas in the same session, so long as two years (or shorter by local ordinance) has passed since action on the issue was last taken.”
In an interview with The Wheeler Report, Sen. Jacque said, “Basically, it’s to make sure that policy areas aren’t caught up in no-man’s land where there’s no ability for local government to revisit the decision that they’ve made previously…I think this sets reasonable limits…Making a decision should not preclude being able to revisit that at the point you have a different governing board.”
When asked if there are laws which currently prevent local governments from taking up previous issues, Jacque said, “I think there’s legal ambiguity, I don’t want to speak for local municipalities, but I know that in at least a few instances…that was brought forward by the attorney as the reason potential ordinance issues could not be taken up.”
LRB-1267 Memo Local Governments (Sortwell, Shae) Local government rules of proceedings and consideration of ordinances or resolutions for which enactment or adoption previously failed.
Municipal Court Fee Proposal
Rep. Dean Kaufert (R-Neenah) is circulating a bill he called “The Municipal Court Fee Modernization Act.” The proposal would increase the maximum fee a municipal court can charge by $10. According to the co-sponsorship memo, “This bill would increase the maximum fee a municipal court can charge by $10, from $38 up to $48. It does not require a municipality to increase this fee but gives them the option. This fee has not been adjusted since 2013. Under current law, a municipal court can collect a fee of between $15 to $38 on each case to fund the cost of operating the municipal court. The fee is imposed if there is a default of appearance, there is a plea of guilty or no contest, on issuance of a warrant or summons, or the action is tried as a contested matter.”
Municipal court fees were designed to help cover the cost of operating the court, but many municipal courts are finding the fees are not keeping pace with the costs to fund courts. Kaufert told The Wheeler Report, “I received this idea from talking with my local Neenah-Menasha municipal court judge. I learned that many municipal courts are finding it increasingly difficult to fund their court operations with the existing fee structure because of the significant inflationary costs over the past few years, and the fee has not been adjusted since 2013. My bill will give local municipalities the option to make a small increase to this fee, which will help make sure that municipal courts are paid for by the offenders, not general taxpayers through property tax levy dollars. Without this change, municipalities would be forced to make up funding shortfalls with property tax levy dollars.”
LRB-2463 Memo Municipal Court (Kaufert, Dean) Increasing the maximum fee for court costs collectible in a municipal court action.
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