May 13, 2009 – Wisconsin’s state budget crisis worsened significantly this week with Monday’s release of new Legislative Fiscal Bureau revenue estimates predicting an increase of $1.6 billion in the projected state deficit for the next biennium beginning July 1.
The bad budget news could set the stage for a legislative move to expand the sales tax to include professional services, including legal services – a potential tax on justice opposed by the State Bar of Wisconsin and a broad coalition of professional organizations. It is also a move apparently opposed by Wisconsin Governor Jim Doyle, but supported by some key legislators.
The Fiscal Bureau’s new estimate of income tax collections -- based on year-to-date collections -- are 8.3% below the collections for the same period last year. The total year-to-date sales tax collections through April 2009 are 3.3% lower than in April 2008. Similarly, year-to-date corporate income and franchise tax revenues are 29.1% lower than last year, and corporate estimated tax payments have decreased 28% compared to last year.
What it all means is that Governor Doyle and legislators must find an additional $1.6 billion in spending cuts or revenue increases -- or a combination of both -- to fill a budget hole previously estimated to be about $5 billion.
On Thursday, May 7 Governor Doyle stated he “will not propose new taxes” to fix the deepening deficit but would instead promote a wide array of budget cuts, including state employee furloughs, rescinding pay increases and cutting state agency budgets an additional 5% on top of an already existing cut of the same amount.
Governor Doyle reinforced that message to legislators later the same day. Asked whether he would sign a budget containing a sales tax increase, Governor Doyle responded by saying he hoped such a proposal did not come to his desk and noted he still has a “strong veto pen.”
Despite the Governor’s clarity on the issue, some legislative leaders have said potential revenue increases – but not necessarily an expansion of the sales tax – could be considered. Other legislators and interest groups are openly backing an expansion of the sales tax to include professional services, including legal services.
Fortunately, no proposal to expand the sales tax to legal or other professional services has yet gained enough support in the legislature to be formally introduced. The State Bar’s government relations staff will continue to work with legislators to head off any efforts to insert such a tax into the budget. Continue to visit the State Bar’s website dedicated to this issue (www.taxingjustice.com) for more information.
Unfortunately, the rapidly deepening state budget deficit may also spell further trouble for other State Bar priorities. Last week, the Assembly co-chair of the Legislature’s Joint Finance Committee said that some budget decisions the committee has already made may have to be revisited – which may include the budget for state courts and related agencies. The State Public Defender and the Wisconsin’s district attorneys may face the prospect of even deeper cuts than those already proposed by Governor Doyle.
On a brighter note, on Tuesday, May 12 the Joint Finance Committee voted 14-2 to restore six administrative law judge positions in the Department of Workforce Development’s Equal Rights Division. At its meeting on May 5, the State Bar Board of Governors had voted to oppose elimination of the positions as originally proposed in the Governor’s budget. (In February, the governors had also voted to oppose the proposed elimination of no probable cause hearings for many types of complaints made to the Equal Rights Division, including allegations of discrimination in employment, housing, and public accommodations. The Joint Finance Committee subsequently removed that provision from the budget, preserving the no probable cause hearings, but at the time did not restore the ALJ positions. Both the hearings and the ALJ positions will now be preserved.)
The Joint Finance Committee will continue to meet through May to complete its work on the proposed state budget before sending the bill to the Assembly and then the Senate for floor action. Legislative leaders have said they hope to complete the budget by June 30.
The Legislative Fiscal Bureau’s summary of AB 75, the proposed state budget, can be found online. A more detailed summary of the Joint Finance Committee’s procedures in reviewing the Governor’s proposed budget is available in the Legislative Fiscal Bureau's informational paper entitled, "State Budget Process."
Visit the Bar’s Government Relations page throughout the budget process for the latest updates and links.
Related articles:
Joint Finance Committee Approves Budget for Courts, Related Agencies - April 22, 2009
State Bar update on 2009-11 state budget, April 8, 2009
State agency briefings address Governor’s budget proposal, March 25, 2009
Joint Finance Co-Chairs announce public hearing schedule for budget bill, March 10, 2009
State Bar of Wisconsin responds to Governor Doyle’s budget, February 25, 2009
State Bar President praises initiatives in Governor’s budget proposal, February 17, 2009
Rotunda Report is a new newsletter, issued once every two weeks, from the State Bar of Wisconsin that highlights legislative, judicial and administrative developments that impact the legal profession and the justice system. It is produced by the Bar’s Government Relations Team and is distributed free to attorneys, public officials and others who help shape public policy in Wisconsin. We invite your suggestions to make the Rotunda Report more informative and useful and we encourage you to visit our website for the most current information about justice-related issues.
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