Focus Newsletter 2011-13 budget recap (I): Budget basics

July 19, 2011  •  Vol. 2011 No. 11
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  • Summary
  • Press Release
  • The 2011-13 state budget is now law. General fund spending totals $29.03 billion (b), or 7.6% more than the esti- mated total ($26.99b) for 2009-11. Adding federal aid and various user charges yields an “all-funds” budget of $64.32b, an increase of 3.5% over the prior two years. The story of this budget is the replacement of one-time federal stimulus dollars with ongoing general fund taxes, and the $1.4b growth in Medicaid at the expense of most other programs.

  • Dale Knapp or Todd A. Berry
    608-241-9789
    wistax@wistax.org

    After Dust Settles, State Budget Becomes Clear

    Spending is Up, Tax Cuts are Relatively Small

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    MADISON— With the 2011-13 state budget now law for a month, general — and somewhat surprising conclusions — can be drawn. First, despite program cuts, planned 2011-13 spending is up. Second, although talk of tax cuts was frequent, actual changes are modest. These are a few of the findings from a new analysis of the 2011-13 budget by the Wisconsin Taxpayers Alliance (WISTAX). Now in its 79th year, WISTAX is a nonprofit, nonpartisan private research organization dedicated to citizen education.

    The two-year budget approved in late June spends $64.32 billion from all sources, or 3.5% more than 2009-11. One part of the budget, called the general fund budget, attracts most public attention because it relies mostly on state income, sales, business, and other taxes. While budget debate centered on program cuts, general fund spending is actually growing to $29.03 billion, a 7.6% increase from the 2009-11 estimated total.

    How can total biennial expenditures be up 3.5%, yet its general fund component increase at more than twice that rate? The short answer is: federal one-time stimulus money used two years ago to fund some of the state’s largest programs, e.g., school aids and Medicaid, is disappearing and state general fund taxes must now replace them.

    Of major state programs, only Medicaid — health care for the poor and disabled — has state support growing substantially, with a $1.4 billion or 50.7% increase. K-12 education, the program receiving more state taxes than any other, is 5.7% lower than in 2009-11. It falls about $400 million in 2011-12, and then grows slightly off that base to $4.91 billion in 2012-13.

    Other major programs and their two-year expenditure changes are: University of Wisconsin support (-3.8%), state shared revenues for counties and municipalities (0.0%), and corrections (1.1%).

    While spending is rising, tax and fee cuts are surprisingly small. And most of them were enacted in January, before the state budget was introduced. The combined changes produced net general fund tax and fee cuts of $140.8 million. Relative to total general fund spending, the cut was less than 0.5%.

    The largest tax reduction creates an income tax deduction for new hires, reducing collections by $33.5 million annually. The other major cut ($21.8m in 2011-12 and $28.0m in 2012-13) aligned state and federal income tax treatment of health savings accounts. This primarily helps individuals without traditional employer-sponsored health insurance. Wisconsin was one of the few states that did not have such a provision.

    A third change offers businesses relocating to Wisconsin a tax credit, which will reduce tax collections by $500,000 annually.

    Copies of the Focus reports titled "2011-13 budget recap (I): Budget basics," and "2011-13 budget recap (II) Tax and fee changes," are available at www.wistax.org or by e-mailing wistax@wistax.org; calling 608.241.9789, or writing WISTAX at 401 North Lawn Ave., Madison, WI 53704-5033.

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