Analysis: Crisis is no excuse for abandoning fiscal restraint

Wisconsin would be worse off had responsible budgeting not produced healthy surplus, rainy day fund

By DAVID FLADEBOE | April 6, 2020

As Wisconsin remains on lockdown, our state budget is headed towards a cliff. Just about every tax the state collects will be affected by the crisis, so now is not the time for massive new spending. Fewer cars on the road mean the state will collect less in gas taxes, layoffs and pay reductions mean lower income tax collections, shuttered stores and restaurants mean less in sales tax revenues. Our best-case estimates show at least a $100 million deficit in gas tax collections alone.

Gov. Tony Evers is pushing the Legislature to “convene without any further delay,” but the legislative leadership is rightfully taking time to assess our states finances, understand the full ramifications of the massive federal relief bill and hold off on any new state spending. While some expenditures may be necessary to get us through this difficult period, they need to be targeted and temporary.

Wisconsinites are fortunate that responsible state budgeting over the last nine years meant we entered this crisis with a healthy rainy day fund and sizeable budget surplus. The state is going to have to dip into the reserves but should not abandon the fiscally prudent policies that produced the surplus in the first place. Doing so would be a recipe for bankruptcy.

The Badger Institute and our coalition partners at the Wisconsin Institute for Law & Liberty, AFP-Wisconsin and the MacIver Institute have made several non-fiscal policy recommendations. Lavish government spending is not going to fix our economy or replenish state coffers – it will only make the recovery harder. The state needs to focus on reducing red tape, lowering the tax burden and maintaining fiscal responsibility, not writing checks we can’t cash.

The Tax Foundation also has recommendations for states to end 2020 with a balanced budget: https://taxfoundation.org/fy-2020-state-budgets-fy-2021-state-budgets/.

David Fladeboe is a Badger Institute public affairs associate. Permission to reprint is granted as long as the authors and Badger Institute are properly cited.

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