Governor Evers warns of ‘very, very, very tough’ budget choices without more federal aid
Is Wisconsin’s fiscal situation as difficult as Governor Evers warns?
With $10 billion from the Paycheck Protection Program, $2 billion in general federal COVID-19 relief, a general fund balance of $1.2 billion, $762 million in the Rainy Day Fund and $300 million in reduced public spending, is Wisconsin in crisis?
November 17, 2020
By Lexi Dittrich
Governor Tony Evers believes Wisconsin’s fiscal outlook for 2021 is bleak without more congressional intervention. If Wisconsin doesn’t receive additional federal dollars to help pay for our COVID-19 response, Evers believes the economy will collapse and the state budget will take a hit.
“We would have to make some very, very, very difficult decisions in our next budget and over the next biennium” without those federal dollars, Evers told reporters Oct. 20.
So, is Wisconsin on the brink of a budget crisis, and is the state really ready to take a terrible hit without more federal help?
Federal funding to date
In March of this year, President Donald Trump and the federal government passed the CARES Act (Coronavirus Aid, Relief, and Economic Stability Act), a stimulus bill that distributed money to every state in the Union for Statewide COVID-19 Responses.
Wisconsin received $2.3 billion in aid. Municipalities with populations of 150,000 or more received a direct share of the aid, so Milwaukee, Milwaukee County and Dane County collectively received $360.6 million of the $2.3 billion in the Wisconsin. The remaining $1.9 billion was turned over to the governor to spend as he sees fit, with little or no oversight from the Legislative Assembly.
This assistance is in addition to more than $9.9 billion in Paycheck Protection Program (PPP) forgivable loans that have been received by more than 89,000 Wisconsin businesses. If a business is using the majority of PPP loans to cover specific costs, like payroll, then it can request that the loan be forgiven entirely by the federal government.
Even though the federal CARES Act passed in March and the governor earmarked most of that $1.9 billion, much of the federal aid has been sitting in state coffers for a long time. Congressman Bryan Steil (R-Janesville) asked Governor Evers for more information in July when a U.S. Treasury Department report found Governor Evers had committed $1.72 billion in federal funds, but that only $75 million had actually been disbursed.
“It’s important that we have clear, up-to-date information about where the CARES Act dollars have been spent and how the state intends to spend the remaining funds,” Steil said. in a press release.
Evers responded to the congressman by saying, “The Department of Administration (DOA) is reviewing expenditures to ensure compliance with federal law and Treasury guidelines, and I would be happy to provide an update. updated once the DOA completes its review.”
Evers has yet to release an explanation detailing how much money was actually spent and how much money was affected, but is still in state coffers. Recently, Governor Evers publicly stated that all of the $1.9 billion in federal CARES Act funding has been earmarked, except for $120 million that he has set aside “to meet the needs emerging”. A DOA web page shows vague descriptions of where the money was committed, but does not specify what was disbursed.
What the governor provided still doesn’t explain how much of the $1.9 billion was actually distributed to pay for immediate COVID-19 needs and why so much federal aid has been sitting on the table for so long. state government account. The Pandemic Response Accountability Committee (PRAC) has an answer to the first question.
The PRAC was created by the CARES Act to provide transparent reporting on federal coronavirus spending by states and municipalities to detect waste and fraud. According to PRAC data on Wisconsin, as of November 17, $1.2 billion of our state’s $2.3 billion share of CARES Act assistance has been spent. This means that 48.1%, or $1.1 billion, was not achieved.
Even though nearly half of Wisconsin’s CARES Act assistance has not been spent, Governor Evers stressed that the $2.3 billion just won’t be enough. On Oct. 20, Evers told reporters that “one package passed months ago just isn’t enough” to support Wisconsin residents through the rest of the pandemic response.
The governor recently lobbied for additional federal aid, saying the state will have no choice but to cut funding for regular government programs in order to pay for our own COVID response after the law’s funds expire. CARES on December 31.
Governor Evers did not provide an exact figure on the amount of additional federal funding in Wisconsin’s total needs or give a detailed account of the programs that would be funded by increased federal assistance.
“Essentially, all money for schools is at risk, funding for our health care outside of COVID-19 is at risk, there are many things at risk within our state budgets and the efforts of our State. COVID-19, we will have to pay for it, but it will be an important and significant issue for our budget,” Evers told reporters on October 20.
Additional federal coronavirus assistance is currently on hold. Congress and President Trump have been deadlocked over a new COVID-19 package for several months. Negotiations over a new round of stimulus aid and funds for the Paycheck Protection Program stalled in October, but talks appear to be picking up momentum around the proposed $2.2 trillion stimulus package. dollars HEROES Act.
Analysis: Current Wisconsin Fiscal Situation
While we don’t know if new aid will arrive before Dec. 31, we do know that despite the governor’s dire predictions, Wisconsin’s fiscal situation is currently in pretty good shape.
According to a Department of Administration (DOA) annual financial report, Wisconsin’s general fund ended with a positive balance of $1.2 billion on June 30. This is the largest general fund balance in two decades, and is $400 million higher than forecast.
By the end of the fiscal year, revenues were so high that Wisconsin was able to make a $105.8 million deposit to the state’s Rainy Day Fund. That brings the fund balance to $761.8 million, the “largest balance in state history,” according to the DOA.
The state Department of Revenue (DOR) also released a report on revenues for the first quarter of fiscal 2021. Their preliminary figures show that sales taxes increased by $9 million and corporate taxes and others increased by more than 50% compared to the first quarter of the previous fiscal year.
This stronger than expected economic activity, despite the pandemic, has resulted in permanent tax relief. Wisconsin Law 10 of 2019 states that “excess” sales tax revenue must be used for permanent tax relief. The two lowest tax brackets in the state were reduced from a rate of 4% to 3.54% and from 5.21% to 4.65%, providing state taxpayers with 257 million dollars in permanent tax relief.
Finally, the governor announced $301 million in budget savings to state agencies this year in response to the pandemic. This is great news for fiscal prudence in Wisconsin, especially in these cash-strapped COVID times. Even though the state government hasn’t laid off or furloughed any of its 29,000 employees, the administration has saved taxpayers hundreds of millions of dollars through efficiencies and reduced spending. . The UW system, which employs an additional 39,000 people with taxpayer money, is also expected to save $30 million through furloughs and pay cuts between UW-Madison and the rest of the system.
While the Governor reiterates his dire warning that Wisconsin will be in trouble after December 31, the fact is that Wisconsin is currently in a positive position financially. Wisconsin taxpayers, who are federal taxpayers by the way, deserve more information from the governor and a full accounting of how every COVID aid dollar was spent before he asks for more. taxpayers’ money to the federal government.
The MacIver Institute will continue to update taxpayers on Wisconsin’s COVID-19 spending and budget situation as we learn more.