Report: $2B Needed To Maintain Current State Spending

A new report says it will take more than $2 billion just to maintain current state spending levels with some modest increases.

The analysis from the Wisconsin Policy Forum released Friday illustrates the dilemma facing incoming Democratic Gov. Tony Evers and the Republican-controlled Legislature. Evers will have to introduce a balanced budget early next year for the Legislature to consider.

The report says it will take an additional $2.2 billion to continue existing programs, outpacing the state’s average revenue growth.

The report assumes a 1 percent increase for state agencies and more than $1.1 billion for Medicaid and K-12 school aid combined.

Evers ran on the promise of increasing money to schools alone by $1.4 billion. But the Wisconsin Policy Forum report only factors in the same dollar increase that was given in the current state budget, bringing the cost to an additional $621 million over two years.

The report also includes $496 million in additional funding that the state Department of Health Services estimates will be needed to maintain Medicaid programs in the next budget.

“We’re attempting to just give readers a sense of what the challenges are in the upcoming state budget, as lawmakers and the governor-elect try to fund the current services that the state is providing and take up promises they made during the campaign,” said Jason Stein, research director for the Wisconsin Policy Forum.

Stein said much of the next budget will depend on compromises made by Evers and the Legislature.

John Kovari, associate professor of political science and public administration at the University of Wisconsin-La Crosse, said the new report is a standard method of forecasting the state’s future financial situation, ahead of the state Department of Revenue’s formal estimates and other departments’ budget requests.

“It sets up a really interesting pre-conversation to have before those formal estimates come in from those state agencies,” Kovari said.

He said it’s not uncommon for states to find their projected revenue below the estimated cost of keeping existing programs running. But it also means Evers is facing some tough decisions.

“There are some adjustments in commitments that we’ll have to look at, where we might not spend as much as we want to,” Kovari said.

Stein agrees that the challenges in the next state budget aren’t the worse that Wisconsin has seen.

“There will be a certain amount of revenue growth as long as the economy keeps expanding and it can cover a lot of these increases in the state’s costs. But not necessarily all of them and that’s where politics comes in and that’s where setting priorities by elected officials comes in,” Stein said.

One potential cost savings not included in the report’s estimate is federal funding received for expanding Medicaid under the Affordable Care Act. Throughout his campaign, Evers said he would take the expansion funding, while Republican legislators continue to be opposed to the move.

Kovari said the issue is likely to be a major part of budget debates this year.

“The fact that the states that have expanded their Medicaid programs under the Affordable Care Act, even conservative-leaning states, and they have not gone under, in fact they have actually boosted their economies with additional health care spending, I think that will be a big lesson for the state,” Kovari said.

Kovari said he’ll also be watching to see if Evers sticks to his campaign promise to lower taxes for middle-class residents and if it comes at the cost of higher tax rates for wealthier residents.

“Given this situation, tax cuts seems less likely given the expenditure demands on our state just to keep doing what we’re doing,” Kovari said.

Editor’s note: This story was last updated at 4:30 p.m. Friday, Nov. 9, 2018, with additional reporting by WPR.