Madison — The state Senate voted Tuesday to spend down a state surplus by $100 million to deliver $33 in property tax cuts for the typical homeowner over the next two years, hustling to act just hours after the Legislature's budget committee voted unanimously to advance the bill.
The Senate approved the tax cut 28-5, with all Republicans and 10 Democrats voting in favor of the bill after criticizing it in most of their comments for being fiscally irresponsible. The five Democratic senators voting against the tax cut were Tim Cullen of Janesville, Bob Jauch of Poplar, Mark Miller of Monona, Fred Risser of Madison and John Lehman of Racine.
The measure now zips to the Assembly, which is expected to pass it Thursday and send it to Gov. Scott Walker.
Earlier Tuesday in a hectic day of action at the Capitol, the Legislature's Joint Finance Committee unanimously passed the tax cut along with several bills to provide funding for training workers and a state tax credit for developers rehabilitating historic buildings.
Under current expectations, the property tax cut and the other bills would lower the state's balance by $120 million in the current two-year budget and add $180 million to the projected shortfall in the next budget, according to figures released by the Legislature's nonpartisan budget office Tuesday.
On the floor, Senate Majority Leader Scott Fitzgerald (R-Juneau) said Republicans had put the state on better financial footing and could pass the "welcome" tax relief. Walker echoed those comments.
"I'm pleased to see the Republicans and Democrats in the Senate come together to provide $100 million in property tax relief for Wisconsin families, farmers, seniors, and small businesses. Our tough, but prudent, decisions mean we can invest in Wisconsin's priorities, and one of those is holding the line on property taxes in this state," Walker said in a statement.
Cullen said the tax cut was more political smoke than financial substance, amounting to barely a dollar per month in the first year for the owner of the typical home. He offered an amendment to put the money into the state's rainy day fund instead, saying the tax cut was being done to ensure Walker's re-election next year.
"That at the end of the day is what this is all about — $100 million of property tax relief. Nice headline," Cullen said.
Sen. Glenn Grothman (R-West Bend) scoffed at that.
"I assure you this is not a gimmick. We're Republicans, that's what we do," Grothman said of the tax cut.
But Sen. Fred Risser (D-Madison) said it would be better to save the money or use it to avoid some of the $2 billion in new state borrowing in the current budget or pay down some of the state's $14.2 billion in debt.
Only hours before lawmakers hurried to vote on the tax cut, an analysis by the Legislative Fiscal Bureau showed that along with the state budget the proposals passed Tuesday would swing the state's main account from its current surplus to a $725 million projected shortfall for the 2015-'17 budget. That would be an increase of 33% from the previously estimated shortfall of $545 million.
The shortfall would be less than half of those the state has carried into most of its recent budgets going back to 1997, but the growth in the gap between the state's spending and taxing levels as laid out in state law would also be one of the fastest increases seen over that period.
The report from the Legislative Fiscal Bureau followed a report Monday from Walker's administration that the state surplus heading into the current 2013-'15 budget was $89 million more than expected. The annual report from the Department of Administration showed the surplus for the budget that ended in June was $759.2 million in the state's main account, up from the last estimate of a $670 million balance used to plan the current 2013-'15 budget.
That surplus is due in large part to tax collections coming in $71.5 million higher than expected, with the remainder due to lower than projected state spending, according to the fiscal bureau.
As a result of the surplus, the state added $153.2 million to its rainy day fund, bringing the total to $278.5 million. Wisconsin has traditionally had very little in its rainy day fund, and Republicans Tuesday touted that the fund was at its highest level ever.
The fund is about 1.9% of the state's current yearly spending, or enough to sustain the state government for about a week. Fiscal bureau director Bob Lang told members of the budget committee that the rainy day fund is moving "in the right direction."
But, "we frankly are below a number of other states that have targeted 3% to 5% (of spending)," Lang said.
A big portion of the property tax cut will be covered by plans announced last week by Amazon.com Inc. to begin collecting $30 million in taxes a year on sales to Wisconsin residents.
The Walker property tax proposal would push down the December tax bill on the median-valued home by 0.4%, or $13, over current estimates, to $2,925. Next year, taxes under Walker's plan would rise modestly so that over two years they would be about $11 more than they are now on the typical home, but still lower than they otherwise would have been.
Walker's proposal would increase state aid to local schools by $100 million over the next two years but not allow them to increase their total spending as limited by state-imposed caps. That would force school officials to lower property taxes.
The property tax relief would flow through the state's school aid formula, and taxpayers in some districts would fare better than others.
Milwaukee Public Schools would receive an estimated $2.9 million in additional aid for property tax relief, a 0.6% increase over its current general school aid, according to the fiscal bureau.
The Menomonee Falls School District would see a much larger percentage increase, receiving an estimated $150,736, or 2.1% more than currently expected. Funding for the Mequon-Thiensville School District, meanwhile, would remain essentially flat, with just $292 more for that district.
No one from the public spoke on the property tax bill. But several business groups registered in favor, including the Wisconsin Builders Association, the Wisconsin Realtors Association, and Wisconsin Independent Businesses.
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