Gov. Tony Evers delivers his 2025 state budget address in February. The bipartisan budget Evers signed in July spends down much of Wisconsin's budget surplus. (Photo by Baylor Spears/Wisconsin Examiner)

Wisconsin could be facing a more difficult budget than it has seen in recent years with recently approved spending and tax cuts consuming most of the state’s historic surplus, according to the nonpartisan Wisconsin Policy Forum.

The research organization described the state’s most recent budget as an “all of the above” plan in its recent report. Mark Sommerhauser, communications director and policy researcher at the Wisconsin Policy Forum, said the previous budgets showed more restraint from policymakers when it came to spending and tax cuts. 

“There were some tax cuts, there were some spending increases, but certainly not of the magnitude that could have occurred,” Sommerhauser told the Wisconsin Examiner in an interview. “In this budget, we saw a lot more of both.”

Sommerhauser said it was “clearly a budget that was much more focused on the here and now than on where the state’s finances would be in two or four years.”

“There’s an argument that ‘hey, this money should be returned, either back to taxpayers or spent on programs that benefit our state’s residents, rather than just sitting in the general fund,” Sommerhauser added. “That’s what policymakers opted to do with this budget.”

The $111 billion state budget passed by the state Legislature and signed into law by Gov. Tony Evers in early July increased spending by 7.7% — an increase of $3.3 billion — allocating $46 billion to fund a number of priorities.

The budget also included more than $1 billion in tax cuts over the next two years. 

One major cut comes from a change to Wisconsin’s income tax brackets. The new budget expands the state’s second tax bracket, with a 4.4% tax rate, and shrinks the third bracket, which has a 5.3% rate. Wisconsin residents on average will see a $188 cut per filer — affecting more than 1.5 million tax returns. Sommerhauser described the change as a “modest but still notable income tax cut for almost everybody that has some degree of income tax liability, except those folks that have very, very little.” The change will cost the state about $320 million in each year of the budget.

The second major cut created an exemption from income taxes for the first $24,000 for single filers over 67 and $48,000 in retirement income for married filers over 67.

The new state spending in the budget covers an array of priorities including over $500 million for special education, over $80 million in state general purpose revenue for the University of Wisconsin system, over $380 million for wage increases for state employees and additional funding for child care.

Most Republican lawmakers voted for the budget apart from four Senate Republicans and one GOP Assembly member, celebrating the tax cuts as well as some of the investments in the budget and hailing it as a compromise. Most Democrats voted against the final proposal, saying it inadequately invested in education, child care and other priorities, though five Senate and seven Assembly Democrats joined Republicans in support.

With this budget, the state has now used most of the surplus that has formed the backdrop for the last few budgets. The surplus, Sommerhauser said, was mostly the result of federal pandemic aid and was also created in part by an increase in tax revenue, especially through the sales tax, as a result of inflation. At one point the surplus had grown to over $6 billion. 

“[A large surplus is] not business as usual in Wisconsin,” Sommerhauser said. “More often you see the opposite. You see shortfalls that lawmakers are having to scramble to figure out a way to bridge.”

Sommerhauser said that with the smaller reserves, the next budget is likely “going to be kind of coming back to Earth.”

By July 1 2027, Wisconsin’s general fund balance is projected to be $770.5 million — a drop of about $3.6 billion and the lowest balance since 2018. The state will also have $2.1 billion in its rainy day fund.

This leaves Wisconsin with a projected $2.8 billion in its reserves — about 11% of Wisconsin’s net general fund appropriations in fiscal year 2027, Sommerhauser said.

“That’s certainly not disastrous. It’s not cataclysmic at all. It is more than the state has had in reserve for many years prior to the pandemic,” Sommerhauser said. “Of course, it’s a lot less than the last couple of budgets here.”

Wisconsin isn’t the only state to be on this trajectory. At its annual summit in early August, the National Conference of State Legislatures (NCSL) gave an overview of state budgets and asked whether it is time for states to “tighten the belt.”

Erica MacKellar, program principal of NCSL’s Fiscal Affairs Program, said during the presentation that, overall, states ended fiscal year 2025 in a “fairly strong position.” Looking back to the pandemic, she said state revenues didn’t take as big a hit as they were initially expecting. 

“As states recovered, they unexpectedly saw these big revenue surpluses, and that was due to a number of factors, including the large amount of aid that the federal government sent to states,” MacKeller said. “Revenue growth jumped to around 15%, but states always knew that that level of growth was really unsustainable, and have been really planning for a return to normal of state revenue growth and a revenue slowdown that I think we’re seeing now.” 

MacKeller said that prior to the pandemic, state year-end balances as a percentage of state spending were about 10% on average — an increase from the low of about 4% during the Great Recession.

“In fiscal year 2023, after we saw those record surpluses, that percentage soared to over 30%, and now that number has started to come back down,” MacKeller said. “The preliminary average from our survey shows about 16[%] for fiscal year 2025, so that’s putting most states on pretty firm footing at this point.” 

Sommerhauser said the bigger issue now is that Wisconsin is spending more than it brings in through taxes — creating a projected structural deficit. He said it’s something policymakers will have to grapple with in the coming years.

Under the new budget, the state’s general fund will spend about $24.4 billion and bring in $23.1 billion in tax revenues in 2027. The projected gap “would be one of the largest of the past generation,” according to the Wisconsin Policy Forum.

The state could use the reserves for the additional spending, but it wouldn’t be a long-term solution, Sommerhauser said. 

“The state can do that on a one-time basis if it’s got a bunch of money in the bank, which it does right now,” Sommerhauser said. “The issue with that is that you can only spend that money in the bank one time.”

If spending and revenue remain the same, Wisconsin would have an imbalance of -$727 million and an imbalance of -$1.4 billion by the end of 2028-29, according to the Legislative Fiscal Bureau. 

Sommerhauser noted that unlike the federal government, Wisconsin can’t run a huge deficit year after year. The state constitution requires lawmakers pass and the governor sign a balanced budget.

“The state can do these things, whether it’s drawing money out of reserves or sometimes there are other little tricks that the state can kind of pull out of its hat on a one-time basis,” Sommerhauser said. But, he added, “if your ongoing revenues are significantly out of alignment with your ongoing tax revenues, you’re gonna have a headache to deal with every two years, and you’re setting yourself up to have some really challenging budgets that could eventually make you have to do something really, really painful — whether it’s a big tax increase or some sort of big spending cut.”

Sommerhauser said the Great Recession was the point in recent memory when the state dealt with the greatest budget shortfalls.

“There were some significant tax increases that were put into place in 2009, when we had Democratic controlled state government,” Sommerhauser said. During the 2009-2010 budget (the last time there was a Democratic trifecta), former Gov. Jim Doyle and the Legislature created a new tax bracket of 7.75% on married couples filing jointly with taxable income above $300,000 to help close the budget gap the state was facing. The state’s highest bracket is currently 7.65%.

“You had the big election in 2010 where everything flipped, and then you have Gov. [Scott] Walker and Act 10, and everything happening in 2011 which brought about some really large spending cuts in the state,” Sommerhauser said. At the time, Walker’s administration was projecting the state would have a $3.6 billion deficit and the Republican trifecta took the route of drastically cutting public employee benefits to address it.

“We obviously are hopeful that we’re not going to see a recession again anytime soon… but this is our best sort of attempt to give a sense of what the Legislature might be needing to grapple with in two years,” Sommerhauser said.

The partisan composition of Wisconsin’s state government could also look quite different by the next budget. 

Evers announced that he won’t be running for reelection just a few weeks after wrapping up the 2025-27 state budget, making the 2026 election the first open race since 2010.

The Republican and Democratic fields of candidates are still shaping up. Some of the announced candidates have made comments signaling what they would like to see from a budget. 

Lt. Gov. Sara Rodriguez, the first Democratic candidate in the race, has said she would invest additional state funding in Wisconsin’s schools. Republican Washington Co. Executive Josh Schoemann has said the recent budget spends too much and is taxing people too much. Republican U.S. Rep. Tom Tiffany, who is still considering a run, noted the potential deficit on social media when he said that Wisconsin “must change course before we end up like MN and IL.” 

The state Senate and Assembly will also be up for grabs in 2026.

Sommerhauser said it’s likely the next governor and state Legislature could be dealing with a challenging state budget, though it’s still unclear how challenging.  

“If economic growth is really strong for the next two years, we could be in a position where we have a projected shortfall, but it’s quite manageable… That’s kind of the best case scenario,” Sommerhauser said. “Worst case scenario is if we would see a recession in the next couple of years, that could be setting us up for a very challenging budget.”

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People attend the WorldPride International Rally and March on Washington for Freedom at the Lincoln Memorial in Washington, D.C., in June. Conservative judges might allow lawmakers to reinstate the practice of conversion therapy, which aims to change the sexual orientation or gender identity of LGBTQ+ people. (Photo by Kayla Bartkowski/Getty Images)

Week after week, a teenage Brandon Long sat through counseling sessions that he said framed his identity as a failure.

Now an ordained minister in northern Kentucky, Long told Kentucky state lawmakers about the years he spent undergoing therapy designed to rid him of his “same-sex attraction.”

“Just imagine yourself being told, session after session, that if you remained as you were, you would be rejected,” he said.

Long testified in February before a Kentucky House committee against a Republican-sponsored bill that would cancel Democratic Gov. Andy Beshear’s 2024 executive order that banned a controversial practice known as “conversion therapy” for minors.

Conversion therapy is a catchall term for controversial efforts to change the sexual orientation or gender identity of LGBTQ+ people. Sometimes called “reparative therapy,” it can range from talk therapy and religious counseling to electrical shocks, pain-inducing aversion therapy and physical isolation.

The bill, Long told lawmakers, “creates a legal shield for conversion therapy, allowing parents to force their children into a practice condemned by every major medical and mental health organization worldwide.”

Kentucky’s Republican-controlled legislature passed the bill, then overrode the governor’s veto in March.

Conversion therapy has been denounced by major medical organizations including the American Medical Association, American Psychological Association, American Psychiatric Association and the American Academy of Child and Adolescent Psychiatry. They say it’s ineffective and harmful and puts LGBTQ+ people at risk for depression, substance use, suicide and other mental health issues.

More than half of states have banned or restricted the practice for underage patients since California became the first to do so in 2012, according to the Movement Advancement Project, a nonprofit research organization that tracks LGBTQ+-related laws and policies.

But political currents are shifting. Conservative majorities in the courts, in state legislatures and at the federal level have reshaped the legal landscape, opening the door for Republican lawmakers and conservative Christian groups to reinstate a practice that has been roundly discredited by the medical community.

In March, the U.S. Supreme Court agreed to hear a case challenging Colorado’s 2019 conversion therapy ban on freedom of speech grounds. The decision marks a change from 2017, when the court refused to hear a challenge to California’s ban, and 2023, when it declined to hear a challenge to Washington’s ban.

The high court’s decision, which isn’t expected until next year, could reverse — or solidify — conversion therapy bans across the country.

Last month, a Virginia court partially struck down the state’s 2020 law banning conversion therapy for minors, a win for conservative Christian organizations. GOP lawmakers in Michigan have introduced a bill to repeal the state’s ban. And Missouri‘s Republican attorney general has filed suit to overturn local conversion therapy bans.

On the flip side, in Wisconsin, the state Supreme Court cleared the way earlier this year for the state to permanently ban the practice.

‘The world has changed’

While organized attempts to “cure” homosexuality have been around for centuries, “ex-gay” groups that promised to change a person’s sexual orientation began gaining ground in the 1990s as policy debates arose over same-sex marriage and gay people serving in the military, said Dr. Jack Drescher, a psychiatrist and psychoanalyst in private practice in New York City. He is also a clinical professor of psychiatry at Columbia University whose research has focused on gender and sexuality.

But after Massachusetts legalized same-sex marriage in 2004 and more states followed, the influence of conversion therapy proponents waned.

As of this year, 23 states and Washington, D.C., prevent licensed health care providers from subjecting minors to conversion therapy, according to an analysis of state laws by the Movement Advancement Project. Four more states restrict the practice, such as by not allowing public funding to go toward conversion therapy services.

State laws typically levy fines or discipline the professional licenses of practitioners who try to engage minors in conversion therapy. They don’t necessarily prevent clergy or unlicensed counselors from attempting such counseling.

The bans are more of a public statement of acceptance of LGBTQ+ people, rather than a commonly used preventive measure, said Drescher.

“The bans are reinforcements of the belief that if homosexuality is not a mental disorder or disease, there’s no reason to pretend you can treat it, and anybody who tries is acting outside the mainstream of science,” Drescher told Stateline.

The American Medical Association has written model legislation for state lawmakers who want to ban conversion therapy, a reflection of the broad consensus in the medical community that homosexuality and gender nonconformity are not mental illnesses, said R.J. Mills, a representative from the American Medical Association, in a statement to Stateline.

In the past, some leading psychiatric and psychological associations were hesitant to support state restrictions because they saw the laws as intrusions into the doctor-patient or therapist-patient relationship, Drescher said.

Now, spurred by Trump administration policies that place new restrictions on LGBTQ+ people and the most conservative U.S. Supreme Court in generations, medical organizations are growing more vocal in their opposition to conversion therapy.

“The world has changed,” Drescher said. “Everybody understands what’s at stake now.”

Free speech argument

Conservative legal firms have filed lawsuits in states such as Colorado, Michigan and Virginia on behalf of Christian counselors who say the laws prevent them from practicing according to their faith-based values. They say the bans should be repealed so practitioners won’t face losing their careers over providing services informed by their faith.

A Virginia court last month oversaw a consent decree in which Virginia agreed to not fully enforce its 2020 conversion therapy ban and to allow counselors to engage in talk conversion therapy with minors. The plaintiffs in the case were John and Janet Raymond, state-licensed professional counselors in Virginia who were represented by the Founding Freedoms Law Center, an organization that takes on conservative legal causes.

The kind of talk therapy now allowed can involve conversation, prayer and sharing of written materials such as religious scriptures, said Josh Hetzler, the Raymonds’ attorney, during a public news conference following the court decision.

“With this court order, every counselor in Virginia will now be able to speak freely, truthfully and candidly with clients who are seeking to have those critical conversations about their identity, and to hear faith-based insights from trusted professionals,” he said.

Conservative legislators also are citing their Christian faith in their attempts to roll back state bans.

Michigan state Rep. Josh Schriver, a Republican, filed a package of bills last month aimed at repealing a handful of what he calls “anti-Christ laws,” including Michigan’s 2023 ban on conversion therapy for youth.

A legislative aide said Schriver wasn’t available for an interview, and instead referred Stateline to the recent Substack post he emailed to his constituents.

“As legislators, we’re duty-bound to remove statutes that overstep the authority given by our state and federal Constitutions,” Schriver said in the post.

Long, the Kentucky minister, said the bans are needed because “no one enters conversion therapy willingly.”

“The only reason a child would go through it is because a trusted authority in their life — a parent, a pastor or a therapist — has told them that they are broken and need to be fixed.”

At least five states have a law or policy prohibiting or deterring local-level ordinances that aim to protect youth from conversion therapy.

Some states without such laws are going after municipalities that have banned conversion therapy.

Missouri Republican Attorney General Andrew Bailey in February sued Jackson County, Missouri, home to Kansas City, challenging the county’s 2023 ordinance and Kansas City’s 2019 ordinance, both of which ban licensed counselors from engaging in conversion therapy with minors.

“Our children have a right to therapy that allows for honest, unrestricted conversations, free from transgender indoctrination,” Bailey said in a statement in February. He called the ordinances “a dangerous overreach” that violate free speech and religious liberty rights.

A Republican loss

In at least one state, conservatives have hit a legal roadblock.

In Wisconsin, Democratic Gov. Tony Evers’ administration has been trying since 2020 to enact a statewide conversion therapy ban proposed by the state agency that oversees provider licensing.

But the ban has been blocked twice by a Republican-controlled legislative committee.

Evers’ administration sued.

The Wisconsin Supreme Court sided with Evers last month, ruling that the state legislative committee was overreaching and couldn’t block the rule.

Stateline reporter Anna Claire Vollers can be reached at avollers@stateline.org.

Stateline is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Stateline maintains editorial independence. Contact Editor Scott S. Greenberger for questions: info@stateline.org.