Saturday, May 12, 2012

Did Walker really solve a $3 billion budget deficit?

He lied.

According to the Wisconsin State Constitution, the state budget must be balanced on a biennial basis. In November of even years, the Dept of Administration must present certain budget information to the Governor. Their report serves as a warning to the sitting governor and legislature of the potential need for a “budget repair bill” as the end of the current two-year bienniel budget nears. It also serves as a draft for a new two-year budget.

This comes from the report filed November 19, 2010, “Despite the worst economic crisis since the Great Depression, under the leadership of Gov. Doyle, Wisconsin was able to keep its budget balanced.” The report further projected that through June 30, 2011, the budget would result in a $10M surplus.

Then, on January 31st, 2011, the non-partisan Legislative Fiscal Bureau (LFB; the state version of the CBO) projected a $56 million surplus for the state's general fund.

In other words, both the DoA and Legislative Fiscal Bureau projected no need for an emergency budget repair bill. In fact, under oath, Walker admitted to a Congressional panel that his Act 10 “Emergency Budget Repair Bill” introduced in February 2011 had no financial impact on the current state budget.

But that’s a different lie than Walker’s claim to have cleaned up the State’s ‘$3.6 billion budget deficit without raising taxes.’  Specifically, Walker says, “Wisconsin's budget is broken due to an overreliance on one-time fixes, illegal transfers, unsustainable federal funding and economic weakness due to high taxes and job-killing regulations. The Governor is balancing the budget in two critical ways – improving the state's business climate in support of job creation and bringing state spending permanently in line with our ability to pay.”

In fact, the DoA’s report published in November 2010 stated, “The economic forecast for the next two fiscal years will result in tax revenue of 4.2 percent growth in fiscal year 2011-12 and 3.4 percent in fiscal year 2012-13. (In contrast, fiscal year 2008-09 saw a 7.1 percent decrease.) When these projections are compared with agency budget requests, the projected gap is $1.5 billion on June 30, 2013.”

Looking at the Agency Budget Requests on page 6 of the November report, they add up to  an increase of $1.560 billion in FY12 and a further $825.6 million on top of that in FY13, for a total increase of $3,945.6 million over two years. Had the state simply required that the agencies keep their budgets at FY11 levels, projected revenues would have produced a $347.6 million surplus by June 2013, even after covering all the items Walker pointed to as contributing to the deficit (i.e. making up the shortfall of Medicaid dollars from the expiring federal stimulus, making good the raided IPFCF fund, halting furloughs – all of which were addressed in the Nov 2010 report).

Of course not all agency budgets could be held to FY11 numbers.  They had to be reviewed and adjusted, and priorities identified . It's a process every agency – and budget – goes through. But, it is patently absurd to claim that the budget requests equaled a ‘structural deficit’.

Doyle’s Federal stimulus-enhanced 2009-11 budget appropriations added up to $62,192,112,300. Walker signed into law $64,323,927,000 of spending, $2.1 billion more than Doyle’s 2009-2011 Budget. 

The truth is that there was no ‘structural budget deficit ‘(other than automatically granting budget requests without review.) Nor did Walker reduce the overall size of the state’s budget.

So the real issues for Wisconsin’s citizens are the priorities realized in his budget, and what he had to do to balance a budget bigger than any previous governor has ever had.

1)      Firstly, we know that he cut $1.23 billion in support to local governments for public schools and funding for state universities, technical colleges and other local programs.

a.       Local districts could make that money up for their K-12  schools by requiring public workers to pay more for health insurance plans and pension contributions  – the tools given to them by Act 10. Except that this year, most school districts have had to lay off teachers, cut into everything except core curriculum (like art,  band, sports programs) and increase class sizes of elementary and core curriculum offerings. 

b.      The UW System had to pare its budgets and raise tuition fees, as did the state’s technical schools.

c.       Public funds weren't lost entirely; in targeted communities (Milwaukee and Kenosha) funds were allocated to support charter and voucher schools.

2)      That money, and more, $1.6B billion to be exact, was allocated for tax giveaways, supposedly to create business.

a.       So far, Wisconsin has received little for its ROI. In fact, Walker and the GOP-controlled legislature’s focus on ideological issues in lieu of aggressively stimulating Wisconsin’s economy have had an immediate and chilling effect.  Wisconsin has lost jobs, and the LRB is now projecting revenues to be less than budgeted – giving rise to a $1-200 million projected budget shortfall. Walker and AG Vanhollen have announced that they will raid the mortgage settlement funds to make up part of the deficit.  IOW, Walker owns the current projected budget deficit.

3)      Changes to the Earned Income and Homestead Credit resulted in a $69.8 million increase in revenues to the state due to an increase in taxes on those least able to pay.

4)      More than $400 million was raided from 12 separate funds to pay for projects prioritized by Walker.  The bulk of the money raided comes out of General Program Fund accounts used to fund schools and local government – and used to pay for transportation (highway) projects. 

In fact, highway projects were committed without concern for future budget deficits; the next budget will face a Transportation Fund deficit in cash and needed bonding of more than $900 million.

5)      Finally, citizens must distinguish between operating expenses incurred by agencies providing consumable services – aid to families, Medicaid programs, public safety operations, etc. - and long-term debt, for which the Legislature must approve the issuance of bonds.  State debt management historically has maintained GPR debt service at approximately 4 percent, or below, of GPR. In other words, debt payment (principle repayment + interest) on long-term bonds should not be more than 4% of the General operating budget. As the governor’s budget proposal stated, “This standard is consistent with sound debt management to ensure that debt service does not consume an increasing share of the state's budget. This policy provides a yardstick against which requests for new bonding authority are considered. Of necessity this standard will be exceeded during the next biennium; however, a more stringent use of debt provided in this budget will result in that ratio declining in the future.”

Again, Walker talks a good game, but his reality is different.

His budget restructured hundreds of millions of dollars of debt to avoid current principal payments due and stretch payment periods into the future.  His budget includes significant new debt. Per the LRB, it will cost future taxpayers more and take longer to pay off long-term bond debt. “The ratio of GPR debt service to GPR revenues is estimated to increase from a range of 4.63% to 5.14%, under the illustrated levels of growth in revenues, which is well above the state's 3.0% to 4.0% target.”

In conclusion, Governor Walker boasts that he has solved the state's financial problems. But the truth is that he is spending more; postponing debt payments; making potentially illegal fund transfers;  creating more debt and increasing the debt service burden for future budgets to deal with.

The people of Wisconsin deserve an honest discussion about what the state’s funding priorities are - or should be. Debate about allocating funds for public assistance vs road construction, or investment in schools vs credits for businesses to stimulate job growth should reflect how tough those choices are.

But what the people of Wisconsin shouldn’t accept is a leader who lies to them about needing a budget repair bill when he really aims to cripple workers’ rights; a governor who lies about solving imaginary budget deficits and lowering taxes, when he does neither; and an ideologue who cripples our public schools to give money to private, unregulated charter schools and businesses that fatten their bottom lines instead of creating good-paying jobs.

1 comment:

  1. And now we learn a little about how he is spending the "Transportation Fund" money in the budget.