Weaknesses

State spending. Spending grows from $98.8 billion to over $111.1 billion, a 12.4% increase. Here’s the full breakdown of agency spending. For those of us who want long-term consequential tax and spending reform, this budget exasperates Wisconsin’s spending problem. According to the Kaiser Family Foundation, Wisconsin already spends more per capita than every other midwestern state. If Wisconsin is ever going to actually flatten and eliminate the income tax, lawmakers have to get serious about spending reform. Our polling shows voters support limiting spending growth to inflation + population growth, which would have been about 4% for this budget.

Borrowing. Lawmakers have been working to reduce borrowing in recent budgets. The last budget got bonding down to under $700 million, less than 1% of that budget. This budget pushes bonding back up over $3 billion, and accounts for almost 3% of the overall budget.

Surplus/Deficit. The $4 billion+ state surplus largely disappears under this spending plan, leaving a balance on paper of $829 million in June 2027. Looking at it from an ongoing basis, it creates a $1.2 billion structural deficit.

DOGE-style cuts of wasteful spending. None included.

Tax and fee increases. It more than triples the hospital tax, includes $200 million in transportation fee increases, and includes other fee increases like camping reservation fees.

Film subsidy. It includes a $5 million per year tax credit for filmmaking. Gov. Walker ended a previous film tax credit over a decade ago.

Strengths

Tax cuts. Despite spending going up, the budget does deliver middle class tax cuts. It includes $1.3 billion tax cuts on some middle-class taxpayers and certain retirees. That’s good news. It also includes a new elimination of sales tax on residential utility bills ($178 million).

Worker’s Compensation changes. It begins implementing a fee schedule on worker’s compensation claims for hospital charges, a long-time priority for employers to reduce the cost of workplace injury treatments. It also increases workplace injury disability payments (a labor union priority), and extends worker’s compensation PTSD coverage to first responders.

State employee FTE count. The state has 74,733 FTE workers. Gov. Evers wanted to increase it by another 881 workers. The final budget from lawmakers reduces the FTE count by 303.

Bad policy removed. Gov. Evers originally included a wish-list of liberal policy proposals and tax hikes in his budget, all of which have been pulled out of the document. The legislature also did not include too much new policy on their side, which also means some good ideas, like child welfare reforms and fixing teacher apprenticeships, will have to be worked on as separate legislation later this year.

TBD

Hospital tax and Medicaid. It increases the hospital tax from 1.8% to 6% of patient revenue. From that, hundreds of millions will go into Medicaid and over a billion will go back to hospitals. Republicans in DC are working to prohibit increases to the hospital tax as part of the OBBB.

Child care. It spends $330 million on child care subsidies and new child care related programs. It also adjusts regulations to allow large family care centers for up to 12 kids, allows 16-year-olds to work as child care teachers, and on a pilot-basis allows a ratio of 1 provider to 7 kids aged 18 months to 2.5 years, while also helping child care providers who are losing young kids to school districts. Long term solutions are still needed for this kitchen-table issue.

K12 education. The final compromise increases spending in K12 by an additional $1.4 billion. This includes increasing district/charter school special education funding to 45% of student costs (+$2,250 per student in 2027), an additional $9.7 million for choice and charter students (+$1,062 per student in 2027), and $39 million for Act 20 literacy grants to reimburse curriculum, training, and assessment. Missing, however, is funding to improve the teacher apprenticeship program to solve the teacher shortage for public and private schools.

Universities of Wisconsin. $256 million more for the UW System (includes approximately $50 million in new funding, the rest for employee raises), and $840 million in authorization for UW system building projects. It is missing reforms to right-size the system.

State employee wages. 3% and 2% wage increases for state employees over the 2-year budget.

Transportation. Over $250 million in new transportation spending for roads and various earmarks, with $200 million in various fee increases.

WEDC. $5 million for workforce talent attraction.

Earmarks. While earmarks can be good or bad, depending on purpose and your view, thanks to a 2011 reform signed by Gov. Walker they are now always known before a state budget bill advances. Here’s the list of earmarks in the current state budget proposal.