LFB Publishes Fiscal Impact Memo After Yesterday's Surplus Deal Hearing

LFB's Fiscal Impact Memo

Yesterday the Joint Committee on Finance held a hearing regarding the Republican leadership's and Governor Evers's proposed Surplus Deal.

The Legislative Fiscal Bureau, led by director Bob Lang, gave testimony on the Deal's fiscal impact for FY26, FY27 and FY28. This morning, the LFB's memo to the JCF was made public on the Legislature's website. The memo itself can be read here, and the proposed legislation creating the Deal can be read here.

The Deal amounts to $1,553.8 million in appropriations and $260.2 million in reduced revenue between FY26 and FY27. The sum total effect of the Deal on the state's General Fund balance between these two years is a reduction of $1,814 million.

In the current fiscal year (FY26) the LFB estimates that the Deal would have little impact on the state's General Fund––decreasing the fund by ~$89.5 million.

In the next fiscal year (FY27) the LFB estimates the Deal's fiscal impact on the state's General Fund to result in a decrease of ~$1,724.5 million.

Little reported on has been the fiscal impact of the Deal on the state's General Fund for FY28 and beyond if the state were to implement a cost-to-continue budget. According to Bob Lang's testimony and the memo released by the LFB this morning, the ongoing amount for FY28 amounts to ~$819 million.

In total, 6 items could result in ongoing reductions in the General Fund: 4 of them programs, and 2 of them income tax deductions...

Special Education Aid–– $230 million

General School Aid–– $302.5 million

Tech Colleges–– $50 million

Choice, Charter, Special Needs–– $12 million

Overtime Income Tax Deduction–– ~$148.1 million

Qualified Tips Income Tax Deduction–– ~$48.9 million

Interest Earnings Reduction–– ~$27 million

Total = ~818.5 million

The last significant estimate made by the LFB was the effect of this Deal on the state's surplus. By the end of FY26, the surplus (Net Balances) would be $2.75 billion, down from January's estimate of $2.893 billion.

By the end of FY27, the surplus would be $438.44 million, down from January's estimate of $2.373 billion.

Assuming the state's revenues and expenses stay the same in FY28, this would mean that the income deductions and the interest earnings reductions alone would reduce the surplus to $178.4 million by the end of FY28. If the ongoing general school aid is included, the surplus becomes a deficit in the amount of -$124.05 million. But if all ongoing amounts are considered, the deficit at the end of FY28 becomes -$380,554,500.

If the Surplus Deal doesn't pass, "the net balance at the end of the biennium would increase to $2,252.4 million" said Director Lang in response to an open records request.