The Legislative Fiscal Bureau issued a memo last week that has generated some confusion about the state’s fiscal situation, because some people incorrectly interpreted it to mean that the state would have a sizeable balance at the end of the 2011-13 biennium. Instead, the LFB analysis shows that the recently approved 2011-13 budget bill puts Wisconsin in a position to have a surplus of $306 million in the 2013-15 biennium. A new Budget Project blog post analyzes the Fiscal Bureau’s figures and assumptions and explains why the welcome news about the state’s fiscal condition isn’t as positive as some might infer from the June 13 LFB memo.

In addition to the fact that the slowing economy could quickly put the short- and long-term budget projections back into the red, a couple of other factors should be caution flags for people who think the state will be safely in the black in the 2013-15 biennium. First, the projected $306 million surplus would only be about $50 million if the budget bill didn’t delay by two years the scheduled increase in the reserve requirement (to 2% of appropriations). Second, the projected surplus will almost certainly be reduced by $219 million when Congress makes a change that precludes resumption of the state estate tax law.

With those considerations in mind, legislators shouldn’t be salivating at the prospect of passing bills this session that phase in additional tax breaks or spending in the 2013-15 biennium. Read more in today’s Budget Project Blog post.

Jon Peacock