State, local governments face budget concerns as projected revenues drop

MADISON, Wis. — The Evers administration is starting to cut spending to offset the economic impact of the coronavirus.

The Department of Administration told employees it is cutting agency budgets 5% to offset the economic damage the coronavirus has caused the state, but more will likely have to happen for the state to regain balance.

“We fell off a cliff, and in some sense we’re still falling, and we don’t know what it’s going to feel like when we hit the ground,” said Jason Stein, the research director at the Wisconsin Policy Forum, a nonprofit, independent policy research organization.

Stein said there are a lot of questions which still need to be answered that will help determine what the state will have to do.

“How long is this crisis going to go on? How deep has unemployment already fallen? How long will it linger? Will it get worse?” he said.

Republicans have long called for more attention to the economic issues facing the state during the pandemic. Assembly Speaker Robin Vos, R-Rochester, told reporters in March the projected revenue surplus was gone.

Vos and others in the caucus praised the decision to begin cuts, which are expected to save the state $70 million.

“This is a smart, proactive move by the administration,” said Assembly Speaker Robin Vos, R-Rochester. “As we begin work to manage this impending fiscal crisis in Wisconsin, it’s good to see that we’re already on the same page.”

More cuts will likely have to be made, as the governor predicts a potential $2 billion hit to the state’s revenue, which comes primarily from income and sales taxes, both of which are taking losses during the pandemic.

The state has built up its rainy day fund over the past years, but it is now at the level to which most other states keep their similar funds, and Stein cautioned against putting too much reliance on the reserve.

When it comes time for future cuts, Stein pointed out the state spends most of its money not running the government, but running programming.

“You think about things like aid to K-12 schools,” he said. “You think about things like Medicaid, healthcare for the needy, which would be nursing home care as well as acute care for children and families. You think about aid to local governments.”

Local governments are also predicting budget problems.

On Wednesday Madison Mayor Satya Rhodes-Conway projected a potential $20 million loss in revenue, “depending on what revenue streams you want to look at,” she said.

“Next year’s budget is not going to be pretty,” Rhodes-Conway said.

As for the state, the law requires the state maintain a balanced budget, so lawmakers and other government officials will have to tackle this head on eventually, but what those bipartisan discussions will look like in this divided government remains to be seen.