1st Quarter 2023 President’s Message

By Rob Henken

If you’re wonky enough to be talking about the state budget around the office water cooler or among friends and relatives (yes, I admit you would have to be pretty wonky to do that!), then I would bet one of your main points of discussion is about how much and whose taxes to cut. Or, if you have school-age children or grandchildren, you might also be touching upon Gov. Tony Evers’ proposal to dramatically increase spending on K-12 schools.

But those would not be the most likely conversation topics if you were refilling your water bottle at the Forum’s offices in Milwaukee or Madison. Instead, the state budget issue you would likely find us discussing is how much our leaders can responsibly spend down a historic state surplus.

One reason for our focus on this issue is that it’s such uncharted territory. Many of our staff members have spent much of our working lives analyzing state and local budgets from the perspective of what will need to be cut, rather than where to spend. We have also repeatedly warned state leaders about the perilous nature of the state’s reserves, which for years were among the lowest of the 50 states. Consequently, we see both the opportunity and potential pitfalls that this budget holds.

Our state faces so many pressing needs that we have been writing about for years – ranging from special and early childhood education to conservation to local roads, transit, and all forms of aid to local governments – that we understand the temptation to invest as much of the surplus as we can.

Meanwhile, as we have documented year after year, the state has made important progress in reducing its tax burden to the middle of the pack among the 50 states, and we similarly recognize the promise of using our newfound fiscal health to lower our tax ranking even further and improve our competitiveness.

But our experience analyzing difficult to near-impossible budgets year after year also tells us that we need to be prudent. As we pointed out in our recent state budget brief, the Evers proposal would leave the state with enough reserves to cover about 12% of annual spending – a relatively healthy amount but still a few percentage points below what the Government Finance Officers Association would recommend.

Even more concerning is the structural deficit the budget would create by committing the state to more ongoing spending in the next budget than its projected revenue streams could support.  And the governor is not alone – tax cuts proposed by Republican lawmakers even after reducing proposed new spending could leave the state with a similar or even larger structural imbalance.

Former Milwaukee Mayor Tom Barrett once jokingly referred to me as “Milwaukee’s buzzkill” and I hate to play that role once again. But with a possible national recession looming and the federal pandemic relief funds that have propped up essential services at all levels of government soon to be exhausted, it’s critical that state leaders balance their spending and tax cutting impulses with steps to avoid big holes in future budgets and to prepare us for the all-but-certain rainy day.

Feel free to let me know what you think by emailing or calling, and stay tuned for lots more Forum commentary on the state budget as deliberations heat up in the weeks ahead!