Here & Now

State Took In $281 Million Less Than Projected

Zac Schultz:

Moving now to new budget numbers, which show the state took in less money than expected in the last fiscal year. Revenues were about $281 million, or 2% less than what the legislative fiscal bureau had projected in January. For more on the revenue numbers, we turn to Todd Berry, president of the Wisconsin Taxpayers Alliance. Thanks for being here.

Todd Berry:

Good to be back.

Zac Schultz:

Is this a big number to be worrying about? A small number?

Todd Berry:

Well, you know, in the world of economics, if you can forecast something and only be off by 2%, you are not doing too bad actually. If we can project the stock market, we would all be rich. The problem is that– And this is both a Democrat and Republican problem and it’s been this way, as we all know, forever. They always want to budget right to the edge, either cut taxes to the edge or spend to the edge. And when you only have $165 million ending balance, which is not much, then any kind of error could cause trouble. That’s really what’s happened. I think it should be said that we can’t predict revenue, and the legislature and the governor should maybe take that to heart instead of assuming that these numbers are locked in stone. We are always going to be off a little bit.

Zac Schultz:

Now looking at the numbers on the sheet that the Department of Revenue put out, 98% of that shortfall or less than projected revenue came from lower income tax collections and corporate income tax collections.

Todd Berry:

Yeah.

Zac Schultz:

Is that connected to the tax cuts in the last budget, or are those separate?

Todd Berry:

See, that's part of the problem. We don’t know whether the economy is lurking behind there. We had a weak first quarter, we had a relatively strong second quarter, and we have multiple tax cuts coming into play. If we didn’t guess how much those were going to effect the budget, then those could be off. I think the one interesting thing to note, and this is the one place in all of the numbers that I would be concerned, and that is that the corporate income tax numbers are down over 9%. And my experience over the last 20 to 30 years is when the corporate income tax revenues start to soften, you better fasten your seat belt, because sooner or later, there’s going to be, you know, a real slowdown and perhaps a recession. Now, it may be a couple of years off, but we'll have to see.

Zac Schultz:

Of course, this has become political the instant the numbers came out. Speaker Robin Vos, Republican, said, Wisconsin residents should feel even more confident that our state is headed in right direction. But in the last fiscal year the state actually brought in less than the year before. So how can that be the right direction?

Todd Berry:

Well, of course the reason they brought in less than before is because they were cutting income taxes by $160 million, and technical college property taxes by $400 million, on and on and on. I mean, it with was billion or two. So you'd expect the collections to be down. You know, the– I’ve said before on this program that this whole kind of rhetoric is like having one hymn book, and one side has a verse and the other side has a verse. Depending on who is in power or out, they just trade the verses. Either we're going to an awful place, or if, eh. That's the problem.

Zac Schultz:

We'll read the other verse that came out. Democrat Peter Barker reached a statement. This is Further evidence the policies of Governor Walker and Republican legislature are not working. But this could be part of the larger economy, right? This isn't necessarily these policies.

Todd Berry:

It could be the national economy. But again, I think if we come away from this with something new it would be we also have to remember that we can’t forecast revenues, we can’t forecast the economy. Maybe nothing is happening in the economy, maybe it’s just that we don’t do a good job of forecasting. And historically if you look back, when we are coming out of recoveries, we tend to overestimate, and when we're going into slowdowns can tend to over– yeah, overestimate. You know, who knows, we'll have to see.

Zac Schultz:

In just a few seconds, what does this mean for the next budget, no matter who the governor is?

Todd Berry:

That’s the thing, regardless of why it’s happening, and we can’t be sure, when you budget so tightly that all you have is $165 million less by the end of next year, or midyear, then when the revenues drop $100 million, $200 million, $300 million, it can push us back into deficit. And that is something that both parties have been doing for the last ten to 15 years. The lesson is, how about keeping a little cushion, gang?

Zac Schultz:

We'll look at that next time. Todd Berry, thanks for being here. We definitely appreciate it.