Public Policy Forum Blog

Are state budgets going to pull out of the recession in 2011?

The state's budget analysts seem confident of the economy's recovery. According to the National Conference of State Legislatures, Wisconsin is one of 40 states predicting FY 2010 to be the low point of the recession by forecasting higher total tax collections in FY 2011. Wisconsin's forecast is for 5.4% growth in total taxes collected, a rate of growth only 16 other states expect to exceed.

With regard to specific tax streams, corporate income tax collections are expected to grow the most in the next fiscal year, at 14%. These taxes make up only a small portion of the total tax revenue pie, however. The largest sources of state tax revenue, personal income tax and sales tax, are each expected to produce 5.5% more in tax receipts in FY 2011. These projections put Wisconsin among the most optimistic states--only 14 states predict greater personal income tax receipt growth and just nine states predict greater sales tax receipt growth.

The state expects FY 2012 to be even better; in fact, the forecast for that year is a return to the peak collection levels last seen in FY 2008.

Of course, if these forecasts turn out to be overly optimistic, the result will be an even larger state budget hole--perhaps foretelling such an occurrence, most state agencies have been directed to plan for FY 2011 and FY 2012 expenditures to remain at FY 2010 levels.

Anneliese Dickman