May 2, 2017 – Milwaukee, WI – The Wisconsin Institute for Law & Liberty has released a new policy brief, “5 Things Everyone Should know About the State Budget.” Like every budget cycle, tensions are high in Madison as the push and pull between the governor, legislators, and lobbyists take shape.
Before the Joint Committee on Finance in the legislature begins crafting and voting on key components of the budget this week, it would be useful to highlight some key points about the budgeting process in the state. Here are 5 things every taxpayer should know:
Income taxes make up a significant portion of the state’s general fund appropriations. Individual income taxes make up 51% of the total general fund spending.
The state uses the general fund to spend money on things like education, prisons, and healthcare. The largest categories of general fund spending include medical assistance, K-12 spending, and corrections. These three programs make up approximately 55% of general fund spending.
Medical Assistance spending has grown significantly. In 1995, medical assistance was approximately 11% of general fund spending, but is 17% today. This is largely attributable to increases in Medicaid spending. But the long term trend is that Medical Assistance programs become increasingly costly, taking up more of taxpayers’ dollars. Several economic factors and federal policy go a long way in explaining this dramatic increase.
Heated rhetoric aside, state government spending on school voucher programs represent a tiny fraction of overall spending. Spending on Wisconsin’s school choice programs represent only 1.5% of general fund spending.
State budgets always require difficult decisions and trade-offs. It is important to remember that state budgets are finite pots of money. Spending must “balance” – at least on a cash basis – each year. The state Constitution prohibits deficit spending. Unlike the federal government, Wisconsin (and most other states), can’t accumulate a $20 trillion dollar debt. A consequence of this reality is that increased spending on Medical Assistance has decreased the pot of money available to fund other programs, and increased the tug-of-war for resources among interest groups.