Gov. Tony Evers, Assembly Speaker Robin Vos (R-Rochester) and Senate Majority Leader Devin LeMahieu (R-Oostburg) — Wisconsin’s three leaders all of whom are set to retire this year — announced a $1.8 billion deal Monday to provide additional funding to Wisconsin schools for general aid and special education and tax relief in the form of rebate checks, property tax cuts and the elimination of taxes on tips and overtime. 

The deal is the culmination of months of negotiations on how to use the state’s projected surplus to provide additional funding to schools and tax relief to Wisconsinites.

Negotiations kicked off at the beginning of this year after the general fund surplus was projected to be $2.37 billion at the end of the biennium, June 30, 2027 — about $1.5 billion higher than expected. However, they fell apart as Evers and Senate and Assembly leaders argued over the form that a proposal should take and a deal was not reached before the end of the regular legislative session. 

According to a Department of Administration and Department of Revenue memo released Monday, the state’s general fund tax collections are tracking between $300 million and $350 million above the January estimates. 

Evers said the school funding was the biggest win in the bipartisan agreement. The deal includes $300 million for special education funding and $300 million for school general aids. 

“I think money for schools, that’s obviously the most important thing for me, but again, we’re in a position to actually compromise and have Republicans and Democrats, at least in the leadership level, getting something done,” Evers said. 

Evers spoke to reporters during a visit to Barneveld middle and high schools where he spoke to students and staff about their mental health initiatives on Monday morning. He was there to highlight investments that have been made in schools. He noted that Barneveld is a good school district and said the deal reached by him and lawmakers would “make them an even better” one. 

About $85 million will be used to guarantee schools get 42% of their special education costs reimbursed for the 2025-26 school year and the remaining funds will be used to guarantee a 50% reimbursement rate in 2026-27. 

The 2025-27 state budget promised a 42% special ed reimbursement rate in the first year of the budget and a 45% rate in the second year, but the funds set aside were not adequate to meet those rates. 

The state’s special education reimbursement is currently a “sum certain” appropriation, meaning that there is a fixed pot of money available for the costs. If schools’ costs exceed the amount set aside, then the rate of reimbursement is lower. A change to a sum sufficient appropriation would ensure that the amount available is enough to cover the promised rates. 

Evers said negotiations couldn’t get to a sum sufficient appropriation for special education funding, but that negotiators used figures that should get the state to the promised rates. 

“Next budget people have to ensure that it is sum sufficient, but we did not get across that bridge, unfortunately,” Evers said. “Look, we know what the numbers are, so it’s going to be 50[%].”

The deal will also increase funding for pupils participating in the choice, charter, special needs scholarship  and open enrollment programs by $16 million. 

The investment into general school aids comes after lawmakers declined to provide any new funding in the 2025-27 state budget and property taxpayers across the state saw increases in December. The $300 million is intended to help buy down school property tax levies, although the amount will not completely cover the $325 per pupil in additional school revenue limit authority that school districts have as a result of a previous Evers budget veto.

The agreement also includes $50 million meant to serve as property tax relief aid for the Wisconsin Technical College System beginning in 2026-27. 

The Wisconsin Association of School Boards said in a statement that it was encouraged by the deal’s investments in special education and general aids, but cautioned that it would not completely fix schools’ financial issues.

“While these resources are important for public schools struggling with a declining level of state investment, it will not solve the longer-term problem,” WASB said. “The state has shifted away from providing inflationary increases in spendable resources for schools for 17 years. One state surplus deal cannot reverse that trend by itself.”

The Joint Finance Committee is scheduled to take up the proposal on Tuesday, and it’s expected that the full Assembly and Senate will take up the proposal on Wednesday in a special session. Ever signed an executive order for the session Monday afternoon. 

Vos said in a statement that legislators would be sending the surplus  “back to help families with the pressure of increasing costs, reward hard work, and to continue investing in schools to help stabilize rising property taxes.”

LeMahieu said Repiblicans’  top priority was to send the surplus back to “hardworking taxpayers across the state.” 

“This deal will provide immediate relief with $600 in surplus refund payments and provide permanent property and income tax relief for Wisconsin families,” LeMahieu said. 

The deal will also provide $300 tax refunds for individuals and $600 refunds for married joint filers. Tax relief in this form was originally a Senate Republican proposal, though they had proposed rebates of $1,000 for married joint filers and $500 for individuals.

The deal also includes the elimination of taxes on tips and overtime — two proposals that Evers initially vetoed. The proposal will align state with federal law, though the state proposals differ as they are permanent changes rather than having a sunset date in 2028. 

Evers expressed confidence that there are enough votes to get the deal through both houses and to his desk. 

“I need a majority of each house, and whether that’s all Democrats, all Republicans or a mix, I don’t care,” Evers said. “I think it would be hard for anyone to say I’m not in favor of this…[when] as a result, my local school district gets screwed. I think that’s going to be a hard position for people to take.” 

It’s already clear that not every member is on board as Democratic and Republican Senate lawmakers express concerns and opposition to the deal in statements.

Senate Minority Leader Dianne Hesselbein (D-Middleton) said in a statement that from her perspective there is no deal. She said her caucus needs to see the full details of the “expensive proposal” before they say more. 

“Three men who will not be in elected office next year have come up with this proposal which Senate Dems will be reviewing,” Hesselbein said. “Any proposal must pass both houses of the legislature and no one knows if Republicans have the votes to pass it.”

Assembly Minority Leader Greta Neubauer (D-Racine) has not responded to a request for comment. 

Sen. Steve Nass (R-Whitewater), who is also retiring this year, said in a statement that he “can’t support another bad deal cut by leaders that will never face the voters again.” 

With an open race for governor and control of the state Legislature up in the air, some expressed concerns about leaders deciding to spend down the surplus when they won’t be around to deal with the consequences next year. 

Democratic candidates for governor, Sen. Kelda Roys (D-Madison) and former Department of Administration Secretary Joel Brennan criticized the way lawmakers negotiated the deal and the contents of the deal. 

“Budgets are difficult to negotiate and demand tough decisions, and that’s why I believe they must be done in public with input from Wisconsinites. It’s very disappointing that this one wasn’t, and we should expect all candidates for governor to commit to an open process,” Brennan said. “I’m all for putting money back in people’s pockets, giving our schools a much-needed boost, and providing some property tax relief, but this deal misses the mark in many other ways. It does nothing to address the cost-of-living crisis that is still crushing Wisconsin families on things like child care, health care, and gas and utility prices.” 

Roys said the leaders had come to a “backroom” deal.

“This latest deal is the height of fiscal irresponsibility,” Roys said. “It spends a projected ‘surplus’ before it’s in the bank, even though that projection was estimated before Trump’s attack on Iran that disrupted our economy and caused gas prices to skyrocket. It gives a little one time money to public schools while permanently cementing unfairness in our tax structure. Worst of all, it blows nearly a billion dollars on an election year gimmick to send out rebates, squandering the ability of a new Democratic majority to make the long-overdue investments in our kids that they deserve.”

The critique on the transparency in the negotiation process comes after Lt. Gov. Sara Rodriguez, who is also campaigning for the nomination, was recorded saying she would craft the state’s next budget “behind a curtain.”

Evers told reporters that the negotiations with lawmakers was typical process.

“Well, sometimes you do things behind the curtain,” Evers said. “Leadership both from my staff and others on the other side met on a regular basis, and we kept others informed about that. Now, if… [Roys is] angry because we didn’t involve every legislator prior to, that doesn’t happen with a regular budget, too. So if she’s going to be governor, she needs to get used to it.” 

He continued: “If she’s not going to support it, my question would be, ‘How do you run for governor of the state of Wisconsin and say to your schools, well, you know, this money of 42% and 50% for special education, I’m against that?’ That’s a tough one to run against.”

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Edith Butler is dealing with a real-world math problem: Her housing costs keep rising while a tax credit intended to help keeps shrinking. 

The widow and retired nurse, 68, lives by herself in a two-bedroom Eau Claire home. She paid $9,000 in rent over the course of last year, eating up more than 60% of her Social Security paycheck — her primary source of income. Her utility costs are also expected to hike next year.

She received $708 last year from claiming a homestead tax credit, which is meant to help lower-income homeowners and renters recoup some property tax costs. That was down from the $900 credit she received five years ago after paying just $6,600 in rent. 

In the past, the homestead credit has paid to fill her propane tank for about three months during winter and offset some other costs. But it’s dwindling each year because the state rarely updates eligibility guidelines and credit calculations for inflation. Butler’s credit shrinks whenever the federal government increases her Social Security payment to account for the rising costs of living. 

She’s not alone. Statewide homestead credit claims dropped from an average of $523 per recipient in 2013 to $486 in 2025, with thousands fewer claimants as fewer people remained eligible.

“These things have never adjusted. But we’ve paid into these programs all our lives. I paid taxes for 50 years, (and) my Social Security is my benefit that I paid in,” Butler said. “You work hard and you pay into programs, and then when you need them in your older years like this, they’re not there for you.”

The Legislature has not substantially updated the homestead credit for 25 years, causing its value to erode. Recent Democratic proposals to update program guidelines have failed to gain Republican support.  

A tax credit’s history

By the 1960s, many in Wisconsin acknowledged the regressive nature of property taxes — that lower-income residents pay higher shares of their income than richer households do,  John Stark, then-Assistant Chief Counsel in the Legislative Reference Bureau, wrote in a 1991 history of property tax relief in Wisconsin. But the state Constitution’s “uniformity clause” restricted what type of tax relief lawmakers can enact. 

Against that backdrop, a State Commission on Aging in 1962 held hearings around the state in which older adults expressed concerns about health care and property taxes. The Legislature responded in 1963 with the homestead credit. Residents 65 and older could claim up to $225 (the equivalent of $2,380 today), with the precise calculation based on income, property taxes paid through ownership or rent.

The Legislature expanded eligibility over the years, notably in 1973, when it lowered the age minimum to 18. That dramatically boosted total claimants and payouts. By 1988, more than 250,000 people received a collective $100 million (roughly $270 million today) in credits.

The trend has since reversed. 

Fewer than 67,000 residents claimed a collective $32.6 million in credits last year — a precipitous plunge, Department of Revenue data show.

The program’s income cap today — $24,680 — has barely budged since 2000. The nearly identical cap of $24,500 in 2000 is the equivalent of $45,812 today when adjusted for inflation.

Meanwhile, the program’s “phaseout income” of $8,060, under which homeowners or renters can recoup the maximum 80% of property taxes paid, has increased by only $60 since the 1989 tax year.

Today’s maximum credit a household can claim ($1,168) is just $8 higher than the 1990 level.

Diane Hanson, Butler’s tax agent, said her clients are receiving smaller credits each year or becoming ineligible as inflation pushes wages or Social Security payments above the static income limit. 

Still, Hanson suspects many who remain eligible don’t realize it.

The homestead credit helped Hanson through her most challenging times. After learning about it at her local library, she claimed the credit for several years while raising her two children during a divorce, one of them with disabilities. 

After becoming a tax agent in 2019, she began to educate clients facing similar circumstances. They include Renata Braatz, who raises her 12-year-old son and spends about 30% of her monthly income on rent through the Section 8 voucher program. She claimed about $600 through the homestead program last year. She spent it on groceries and other expenses for her son.

“I never knew about it. I lived here for six years, and I just started doing it two years ago,” Braatz said. 

But asking questions paid off. 

“Renata was proactive, reaching out, phoning us, and asking if there could be any credits for her. I think that is more than some folks know to do,” Hanson said. “Before I was a tax professional, I myself didn’t know how much the federal earned income credit can help out parents.”

Democrats call for credit’s expansion 

Senate and Assembly Democrats earlier this year introduced identical bills to expand the homestead credit — allowing households earning up to $35,000 to claim it and indexing the maximum annual income, phaseout income and maximum credit to inflation. The proposal would have reduced state revenue by an estimated $36.7 million, $43 million and $48.8 million over the next three fiscal years.

Democratic Gov. Tony Evers also proposed a homestead credit expansion in his last two-year budget. 

Neither  proposal advanced in the Republican-controlled Legislature. 

Sen. Mark Spreitzer, D-Beloit, authored the Senate version of the bill with colleagues. His district borders Illinois, which offers a range of more generous homestead tax incentives. Several constituents who previously lived in Illinois asked him why Wisconsin doesn’t offer what Illinois does, inspiring the legislation.

The Wisconsin Constitution’s uniformity clause prohibits lawmakers from enacting Illinois-like tax exemptions for older adults or other low-income residents, Spreitzer said, but the credit offers a legal work-around.

“There’s not really another credit that takes the place of this,” he said. “That’s why the homestead credit is so important.”

Spreitzer said he plans to reintroduce an expansion bill, and he encourages residents to share their perspectives with their representatives.

“If we want to do something about affordability, this is a very direct thing we can do,” Spreitzer said. “We’re not creating a new credit here. This already exists. We’re just talking about increasing who qualifies and how much money they would get back, and that’s money that they would directly be able to get back on their taxes and then spend to put food on the plate for their families.”

Hanson sees a path for bipartisan support for an update. 

“The alternative is to see it dwindle,” Hanson said. “It hurts the segment of people that actually need it, the people who just don’t get much help anywhere. They’re still working hard to be independent.”

As living costs soar, tax relief shrinks for low-income Wisconsin residents is a post from Wisconsin Watch, a non-profit investigative news site covering Wisconsin since 2009. Please consider making a contribution to support our journalism.