Madison, Money & You.

Madison, Money & You. $ CESA 10 ▪ 04.04.2014

Overview  Long view ’14: Jobs and taxes  Looking back: Old history and 2011-13 budget  Recent developments: —2013-15 budget —Tax cuts: Multiple rounds  Speculating about ‘tomorrow’ —Tax reform and school finance uAbout WISTAX (SchoolFacts, text, consulting)

The long view: Job trends in Wisconsin Monthly job growth: Wis. vs. US > ~= <=

The long view: Taxes in Wisconsin State-local taxes as pct. pers’l income – and % Wis. > US (FY 2011) #10

Taxes . . . second look, tax reform? (Census, FY11)

Old! history: Decade of dysfunction Boom-bust budgeting 1995-2010: Dig a hole, file a hole, dig . . . Tricks, transfers, gimmicks, borrowing 2011-13: Inherited deficit, big Medicaid hole; Cut everything, add $1b+ to Medicaid Tax changes? Composting & increasing

Latest: 2013-15 state budget  July ’13 surplus ~$760 million  Total 13-15 spending: $68.3b, $33+b/yr ▪ vs. $64.3b budgeted in 11-13, +6.2%  Gen’l fund net spdg: $30.24b (13-15) ▪ $14.84b (13-14) vs. est. $14.30b (12-13), +~3.8%  $2.05b bonding vs. $1.73b (11-13)  Income tax cut  Bottom line: Mid-2015 surplus/deficit? Expenditures > revenues

Budget detail: Squeeeeze continues Gen. fund two-year spending increase ($m)

Romeo and . . . tax cut in four acts  Economy & tax projections (Let’s party!)  May 2011: Corporate tax cut, approach?  March/May 2013: Income tax cuts ▪ Proposals: Gov. vs. legislature ▪ Size? Approach? Who gets? Downside?

Tax cuts in four acts, pt. 2  The real meaning of revenue estimates  May 2011: Corporate tax cut, approach?  March/May 2013: Income tax cuts ▪ Proposals: Gov. vs. legislature ▪ Size? Approach? Who gets? Downside?  October 2013: School tax “buydown”  2014: ▪ Revenue reestimates (good/bad) ▪ Gov’s proposal: Elements/details Inc. tax, withholding, prop. taxes ▪ Long-term finances (Sen. anxiety)  Issue? ▪ Political grease? Opp’ty missed?

. . . is K-12 as a priority?  Shifting priorities, 1990 –  State fiscal problems, 2001 – 12  The new priorities, 2011 - State tax cuts vs. “aided” local tax cuts  Local property tax ‘relief’ by state control  Transportation finance (gum and rubber bands)  M-E-D-I-C-A-I-D

K-12 aid trends, gen’l and categorical

The real issue: Revenue limits

K-12: Cuts and after Aid programs specifically (after -8.1% & +1.4%) — +1.5% ($75m), +2.8% ($140m); 2-yr = +$290m — Total. growth: +$276m (K12); +$87m (choice/charter, $14m from aid appropriation) Rev. limits –tighten ‘09/5.5% cut+freeze ’11-’13 New revenue limits, 2013-15 +$75/year under caps + $75/year in categorical Careful: Net +$100/student in ‘14 and $150 in ‘15.

Policy directions in 2015-17?  The 2016 lb. elephant in the room — goal?  Real tax reform? Have we had it? What is it? Principle of “grease”  Income tax elimination? $7-8 billion Sales tax implications, 13+%? or . . .  Major property tax reform? Tech. college “buy-down”– first step, second step?  Alternative: Tot. “rebalance” (Recall ranks)  Did you forget school finance? Ah, no.

Thank you! Questions? Critique? Wisconsin Taxpayers Alliance (WISTAX) Facts about government, taxes and spending Serving taxpayers, business, community leaders, and the press for over 82 years www.wistax.org

Modicum of real reform? Gov. $343m - marginal rates Missed opportunity? ▪ Cash as “political grease” ▪ Tax law as regulation Broader base/cut rates Incr. May rev. est’s: Opp’ty? JCF response/final ($650m) ▪ All rates, brackets reduced ▪ Streamline: credits, checkoffs, Fed-state differences.

The budget’s tax cut: Who got what?

Gov’s spending focused (two-year totals)  All increases Programs w/ Largest Increases, One/Both Years Over ’13 Base ($m) for Tot. Biennium (14+15 vs. 13) Net incr.  Big 2 = $717.6m ! Total = $731.7 m JCF?DHS +$179.3m DPI +$127.4m

Final question: GAAP deficit (TBD) Gov. Proposed 13 14 15 -2.06 -2.36 G.A.A.P? -2.64 ? • Political incapacity to save, and the value of saving in today’s economy & the GAAP world

Madison, Money & You.