Long-term deficit grows as economy slows

By Steven Walters
Milwaukee Journal Sentinel

State government faces a long-term imbalance between spending commitments and tax collections of almost $1.7 billion, even if the budget-repair bill being debated in the Legislature becomes law, lawmakers were told today.

Bob Lang, director of the Legislative Fiscal Bureau, gave Senate Republicans that estimate of the so-called “structural deficit,” which is the projected shortfall Gov. Jim Doyle and legislators face next year when they must debate and pass the 2009–11 budget.

First, however, Doyle and legislators must fix a $652 million shortfall in tax collections in the current budget, which ends in mid-2009. The Senate was scheduled to debate a budget-repair bill today; the Assembly will take up the same bill on Wednesday.

Lang said the $1.7 billion long-term deficit is almost entirely attributable to the slowing economy. Tax collections are only expected to grow by 2 percent, which is less than half of the average annual growth of 5.5 percent. Every 1 percent lag in tax collections means state government collects $130 million less in taxes, Lang said.

“It will be a difficult budget in 2009–11, to say the least, unless the economy really turns around,” Lang told Senate Republicans.

The new $1.7 billion structural deficit is about $800 million higher than the estimate made in October, when the Legislature and Doyle agreed on the current state budget.