The Legislative Fiscal Bureau (LFB) issued new estimates on May 11 of tax collections this year and in the next biennium. According to the LFB, the state deficit over the next 2 years will be $1.6 billion greater than previously estimated.

This grim news could get even worse in the coming weeks. The new LFB figures look only at the revenue trends, not at increased spending needs. The Fiscal Bureau has yet to project how much BadgerCare spending is likely to exceed the budgeted funding level, as the recession swells the ranks of unemployed families who are losing employer-sponsored health care. BadgerCare Plus enrollment has already jumped by 7% over the first 4 months of 2009, compared to December 2008.

WCCF is extremely concerned about many of the initial cuts in the budget bill, and even more worried about the much greater cuts that will be proposed to close the $1.6 billion increase in the deficit. With those concerns in mind, we prepared a brief paper about four options for additional revenue or savings that we think legislators should consider. The four options are:

Treating capital gains as ordinary income;
Restoring the state’s estate tax;
Eliminating the personal property tax exemption for business computers (and the state reimbursement of local governments for the lost revenue); and
Increasing tax collection efforts at the Dept. Of Revenue (DOR).

The Joint Finance Committee voted on May 12 for a version of the fourth option that would fund 30 DOR positions. The LFB estimates those postions will generate $70 million in 2009-11 – a net gain (after paying for the positions) of more than $58 million GPR. That’s a very welcome step in reducing the $1.6 billion deficit, but the Governor and legislators will have to include other revenue uppers in the budget if they are going to avoid relying almost exclusively on cuts to close the increased budget deficit.