On Tuesday, Wisconsin Assembly Speaker Robin Vos (R-Rochester), rightfully, demanded that Governor Tony Evers give the legislature a say on how the $3.4 billion in new federal stimulus funds will be spent by the state of Wisconsin. A bill passed the Senate (SB 183) requiring the spending plan to go through Joint Finance Committee.
Anyone who believes in separation of powers, even at a small amount, should be alarmed that the governor gets to unilaterally spend billions of taxpayer money from Washington DC without any input from the legislative branch.
But regardless of who makes the decision – how should the state even spend the federal money? On Wednesday, the Institute for Reforming Government released a policy proposal that asks lawmakers to consider refunding the federal dollars back to Wisconsin taxpayers. Hard-working Wisconsin families, many of which are still struggling from COVID and the economic shutdowns, know better than the government where to spend the money to offset the harm from COVID.
As explained in the Milwaukee Journal Sentinel, recently enacted federal law, the American Rescue Plan, will send over $5.7 billion to Wisconsin to be spent by state, county, and local governments to help mitigate the negative impact of COVID. Specifically, such funds can be used to:
“Respond to public health emergency or its negative economic impacts, including assistance to households, small businesses, non-profits, and aid to tourism, travel and hospitality.”
Restrictions exist such as the infamous provision which prohibits the state (not local governments!) from using the funds to cut taxes. But, overall, state and local policymakers have some flexibility, subject to forthcoming guidance from the Treasury Department.
Rather than move the money around government or pick winners and losers, the most effective way for state and local officials to give people relief is to simply refund the federal stimulus dollars back to Wisconsin taxpayers. It’s an idea that would likely receive bipartisan support.
First off, from the state level, Wisconsin government does not need any more money. State finances have been remarkably stable throughout the pandemic.
This is due to responsible budgeting practices by Republican leadership in the legislature and former Governor Scott Walker. The state will begin 2021-2023 budget with a balance of $1.8 billion and a rainy day fund balance over $800 million.
Furthermore, Wisconsin has already been allocated $6 billion from previous federal COVID relief in the last year. This money has trickled throughout nearly every facet of government, households, and the economy. Some of it hasn’t even been spent yet. Wisconsin is already awash with federal dollars, the impact of which won’t be felt for months to come.
The timing of the unprecedented $1.9 trillion American Rescue Plan is perplexing. One out of four people in Wisconsin have been vaccinated and the unemployment rate has been hovering at or below 5-6%. The state is on its way to rebounding back from pre-COVID times.
Yet, there’s no denying that some Wisconsinites are still struggling. Many families, especially those in Milwaukee and Madison where public schools have been closed for 12 months, could use some help to provide their children with tutoring and other educational services and help offsetting costs for distance and virtual learning. Additional money can be used to pay bills, mortgage or rent, food, and even relocation costs for a new job.
It’s clear that COVID and the economic shutdowns have impacted families and businesses in so many different ways. This is why state and local governments should explore how to empower families – or small businesses – to determine how best to spend the federal relief money. For example, if the state refunded the money to households in Wisconsin earning less than $75,000, each household would receive a refund of nearly $2,600. Targeted relief could also go to small businesses, although some are thriving while others are struggling. University of Wisconsin economics professor Noah Williams highlights for CROWE that consumer spending on groceries, home goods, and online shopping is up and events and travel is way down.
Whichever way lawmakers do it, they should follow the principle that people – not government – should have the greatest say on where the stimulus dollars are spent.
CJ Szafir is the president of the Institute for Reforming Government, a think tank based in Madison, WI.