Despite COVID-19 & Safer At Home, fiscal year ends in the black
General Fund ends with $1.2 billion balance, the largest in two decades
Rainy Day Fund ends with $761.8 million balance, the largest ever
Corporate & sales taxes up, income taxes down first quarter of FY21
Governor Evers announced $256.4 million in additional permanent tax relief thanks to online sales
Governor Evers, DOA find $301 million in agency budget cuts
October 23, 2020
By Lexi Dittrich
Wisconsin has been through a lot in the first half of 2020, from the throes of the coronavirus pandemic, to an unemployment crisis, to a statewide shutdown that closed many businesses to in-person traffic. Despite that, recent analyses of the 2020 fiscal year (FY20) show that the State of Wisconsin is in a good financial position.
A memo by the nonpartisan Legislative Fiscal Bureau and the 2020 Annual Fiscal Report by the Department of Administration were recently released showing the status of Wisconsin’s revenues and expenses during FY20. The fiscal year recently closed on June 30th.
Wisconsin tax collections in FY20 were $17.532 billion, almost $200 million, or 1.1 percent, higher than tax collections in fiscal year 2019 (FY19). In FY19, the state collected $17.341 billion. Collections in FY20 were, however, $112.7 million less than what the state originally estimated.
The state General Fund balance sits at $1.172 billion, nearly $400 million higher than estimated at the beginning of the 2019-2020 budget. This is the largest year-end balance Wisconsin has seen in the past two decades.
Whenever the state has a fiscal surplus, state law requires that a portion of that surplus be set aside into the Budget Stabilization Fund or “Rainy Day Fund.” With this recent positive fiscal news, the state transferred $105.8 million to the Rainy Day Fund. The fund balance has now reached $761.8 million, the “largest balance in state history,” according to the DOA.
There was another piece of positive news for Wisconsin taxpayers last week when Governor Evers announced that additional permanent tax relief was on the way. Gov. Evers announced on October 20 that $256.4 million in tax relief will be coming directly to lower and middle-income Wisconsin taxpayers.
This relief comes as a result of a provision in 2019 Wisconsin Act 10 that requires out-of-state retailers, like Amazon, to pay Wisconsin sales taxes. The online sales tax revenue is then used to lower Wisconsin’s income tax rates. State Senator Dale Kooyenga (R – Brookfield) and State Representative Jessie Rodriguez (R – Oak Creek) authored the proposal.
This will be a welcomed relief as Wisconsinites continue to recover from the effects of the state COVID-19 mitigation measures.
The state collected $8.742 billion in individual income taxes in FY20, which is $146.2 million less than estimated. Income tax collections fell by $251.8 million compared to collections in FY19. Withholdings from wages and salaries increased by $212.3 million, or 2.6 percent, over last fiscal year.
Sales tax collections totaled $5.836 billion in FY20, an increase of $140.7 million over collections in FY19. The state originally estimated that sales tax collections would be $5.930 billion at the end of the fiscal year.
Collections from corporate taxes in FY20 were $1.608 billion, 20.2 percent higher than collections in FY19. The state originally estimated collecting $1.502 billion in corporate tax in FY20.
According to DOA, “A significant amount of corporate income/franchise tax collections accrued to the state in the form of one- time audit payments and increased collections from partnerships under the 2017 Act 368 entity-level tax.” Corporate audit payments were $191 million higher in FY20 than in FY19.
The Annual Fiscal Report from DOA also detailed state expenses for FY20. The state spent $17.327 billion in general purpose revenue (GPR) expenditures, $502 million less than what was budgeted. Compared to FY19, state spending increased by $175.6 million. Between fiscal years 2018 and 2019, state spending increased by $720.5 million.
For the past 11 years, including FY20, Medicaid and state K-12 education have been the state’s biggest expenditures.
Medicaid cost the state $10.839 billion in FY20, with $2.845 coming from GPR. GPR spending on Medicaid decreased by $160.8 million compared to spending in FY19. The decrease was mostly caused by the Medicaid matching dollars provided by the federal government through the Families First Coronavirus Response Act (FFCRA). Medicaid enrollment did increase in FY20 by 1.9 percent overall, primarily due to the COVID-19 shutdowns. Enrollment increased by 5.8 percent among childless adults, the biggest enrollment increase out of all Medicaid eligibility groups.
General school aid made up 35.8% of state expenditures in FY20. General school aid is almost entirely funded by state GPR funds, whereas the majority of Medicaid expenditures are federally funded. This makes general school aid the highest GPR expenditure in Wisconsin.
$6.211 billion was invested in schools, an increase of 3 percent over the $6.026 spent in FY19.
Of the $6.211 billion, $193.3 million went to funding Milwaukee’s choice schools program. Another $10.8 million funded private choice programs in Racine and the rest of Wisconsin.
Overall, school districts’ per-pupil revenues increased by $204 in FY20 over FY19.
Funding for the University of Wisconsin System made up $1.076 billion, or 6.2 percent, of state expenditures in FY20. In FY19, the UW System accounted for $1.120 billion in state expenditures.
Looking ahead, the Department of Revenue (DOR) released a preliminary list of tax collections for the first quarter of FY21. DOR reports individual income taxes were $1.786 billion in the first quarter, down by $65 million compared to the first quarter of FY20. Excise taxes on producers for items like alcohol and gambling were also down in the first quarter, collecting $129.2 million in FY21 compared to $134.3 million in FY20.
Sales taxes brought in $1.024 billion in the first quarter, up $9 million from FY20. Corporate taxes in the first quarter were up 52.7 percent compared to FY20, collecting $550.7 million in FY21. Combined, taxes on estates, real estate transfers, and utilities were up 57 percent compared to FY20. The state collected $23.7 million in these taxes in the first quarter of FY21.
Finally, in response to the COVID-19 pandemic, Governor Evers in May announced that several state agencies’ budgets would be cut, or lapsed, in order to reduce the state budget. The Governor originally planned to find $250 million to cut in July, but by the end of September, the Governor and the DOA had identified over $301 million that could be cut from agency budgets.
Despite these cuts, funding for state operations saw 3.6 percent increase in FY20, for a total expenditure of $4.075 billion.
A full list of agency budget requests for the next fiscal year will come out some time in early November, including budget requests from the Department of Public Instruction. The state will also publish a Comprehensive Annual Financial Report (CAFR) for FY20 sometime in December.