(The Center Square) – Wisconsin’s new budget will spend down most of the state’s reserves, resulting in a balance of $770.5 million on June 30, 2027.
That will be the lowest balance since 2018, according to new analysis from Wisconsin Policy Forum.
The spending is an increase of 12.4% over two years, an increase of $12.3 billion. The budget includes $111 billion in spending with $3 billion in bonds.
The budget calls for 300 fewer state employees but will result in a budget increase for staffing due to the rising costs of benefits and 3% wage increases in July 2025 and 2% in July 2026 for all state workers.
That will cost the state an additional $385.7 million over the two years from general tax revenue and $242 million from other funds, according to the analysis.
The budget calls for more funds going into the rainy-day fund, with the reserve level moving to $2.8 billion by the end of the two years, which is approximately 11.4% of the net general fund appropriations in 2027.
“That relatively strong balance could be needed, since moving forward the state could face a return to budget challenges,” the analysis said. “The state’s reserves are projected to drop for the next two years because state spending will outpace revenues in both years of the 2025-27 budget.”
The spending levels in the approved budget will lead to issues heading into the 2027-29 budget with a significant shortfall in funding that likely cannot be made up through increases in tax revenue.
“To fully close the gap, state officials will likely have to turn to measures such as spending cuts, tax increases, or further drawdowns of reserves including potentially part of the rainy-day fund,” the report says.
The budget’s income tax cut, meanwhile, will lead to up to a $190 cut from single and head of household filers and $253 for married couples if the filers have a taxable income of at least $50,480 for single filers and $67,300 for married couples filing jointly.
“In other words, this change delivers a savings of a similar dollar amount to both middle and high-income taxpayers but would not provide any savings to low-income state residents who owe little to no income taxes,” the report said. “The provision will lower state tax collections by about $320 million in each year of the two-year state budget.”
