Monday, January 23, 2017


The first fast-tracked measure in the 2017-19 Wisconsin Legislature heats up tomorrow. No, it doesn’t deal with the special session Governor Walker has called on dealing opiod addiction- there are no days scheduled on the Assembly or Senate floor for that yet.

Something else has higher priority, which means we will have hearings in the Assembly Labor Committee on Tuesday and Senate Labor and “Regulatory Reform” Committee on Wednesday on a bill that would prevent local and state government from certain pro-union requirements on construction projects, commonly known as Project Labor Agreements (PLAs).
Under this bill, the state and local units of government are prohibited from engaging in certain practices in letting bids for state procurement or public works contracts. Under the bill, the state and local governments may not do any of the following in specifications for bids for the contracts: 1) require that a bidder enter into an agreement with a labor organization; 2) consider, when awarding a contract, whether a bidder has or has not entered into an agreement with a labor organization; or 3) require that a bidder enter into an agreement that requires that the bidder or bidder's employees become or remain members of a labor organization or pay any dues or fees to a labor organization.
GOPs and other (cheap) labor businesses are claiming that such a bill would open up competition for projects and result in both cheaper costs and more employment (raise your hand if you’ve heard that line before).

Dave Branson, the executive director of the Building and Construction Trades Council of South Central Wisconsin, disagreed with that mentality, and explained earlier this month in the Daily Reporter how Project Labor Agreements work. Branson notes that these PLAs often end up being a win-win for government as well as workers.
When Wisconsin public agencies look to invest taxpayer dollars in construction projects, they — just like corporations in the private sector — essentially have two distinct business models from which to choose.

The first relies on project-labor agreements, commonly called PLAs. It’s a business model that offers increase jobsite efficiencies through the use of a 21st century labor-management approach that fosters cooperation, harmony and partnership. It ensures that construction owners will have a steady, local supply of the world’s safest, most highly skilled and productive craft workers. And it ensures these workers will receive a pay and benefits package that is reflective of their skill and productivity.

PLAs further promote employment opportunities for local residents — particularly military veterans, women and minorities. PLAs can help people in these groups gain access to career training in the skilled trades through the use of apprenticeship-readiness programs and formal apprenticeship education and training.

PLA arrangements present a stark contrast to the “race to the bottom” business model that permeates the U.S. construction industry today. Advocates of this system appear to staunchly believe that contracts in the construction industry should be awarded primarily to contractors who are able to assemble the lowest-cost workforce possible. Workers in this group tend to be among the most vulnerable and exploitable.

In the public realm, where there is oftentimes an ironclad “low bid wins” requirement, disreputable employers are increasingly misclassifying employees as “independent contractors” or using undocumented workers, in order to reduce their labor costs and win contracts.
Call me crazy, but maybe quality should play a factor in a construction project, given that cutting corners and performing shoddy work often result in the need to spend more in further repairs and improvements in later years.

But of course, there’s a bigger ethos at work with Hutton and the rest of the ALEC/GOPs that are supporting this, and it involves trying to reduce the power of Wisconsin workers to obtain and maintain decent wages, and keep them more "in line" with politicians and bosses. This has been the theme of most WisGOP labor “reforms” over this 6 year Reign of Error, starting with Act 10 on public employees, then moving onto right-to-work (for less) for private workers. It also includes a number of behind-the-scenes moves, such as erecting barriers to receiving unemployment and welfare benefits (and making people more desperate, causing them to accept lousy jobs and wages), changing who is on the Wisconsin Employment Relations Council (WERC), and eradicating professor tenure at the UW System.

All of these moves are designed to make the average Wisconsin worker to be more at the mercy of their current and future employers, and have to settle for smaller wages and benefits as a result. It’s a straight-up transfer of money from the working classes to the owning ones (or worse, the owning classes put those extra profits into their pockets or use the extra money for less productive measures like kickbacks to politicians and asset gambling).

So are all of you blue-collar Trump voters who were looking for better jobs and wages, and the ones cheering now-President Trump for signing an order today removing the US from the Trans-Pacific Partnership, are you cool with this Wisconsin GOP plan to limit your wages even more? If you want real change that might improve your life, and more freedom to earn a decent living (goals that I completely agree with and think you deserve), how about rising up against this anti-PLA bill, and recognize that guys like me who work with our heads in big cities aren’t the ones keeping you down?

Now do you see which people are really screwing you over? It’s the anti-worker WisGOP legislators and the anti-worker Governor that are the real villains in stagnating your life. So are you going to speak up and boot them out, or continue to blame "those “elitists and takers" in big cities, and continue to lose? Your call, blue-collars.

Sunday, January 22, 2017

A Wisconsin budget geek's Bible- and a Big Lie on DOT funding

As we go through the state budget, it's important to know exactly what all of these programs are, and how much funding they get (and have gotten).

With that in mind, let me forward you to the Legislative Fiscal Bureau's Informational Papers, which you should consistently refer back to over the coming months.

And given that Transportation Funding is going to be a big deal in this budget, with many choices and directions that can be taken (as evidenced by a good, in-depth article from Mark Sommerhauser in the Wisconsin State Journal today), let me throw this bit out there from the Informational Paper on Transportation Finance. Because you know WisGOP and GOP-perganda media will try to perpetuate a Big Lie on how "the Transportation Fund is only in trouble due to Jim Doyle's raids."

One look at Page 13 of the PDF of this informational paper shows that WisGOP talking point is 100% FALSE.

Transfers between Transportation Fund and General Fund 2003-2017
$1.42 billion Trans. Fund cash to Gen Fund (all between 2003-2011)
$43.9 million Trans Fund debt service paid by Gen Fund ('03-'05)

$1.56 billion borrowing from Gen Fund to pay for Trans. Fund projects (all budgets from 2003-2017)
$446.1 million General Fund cash to Trans. Fund (all since 2011)

NET TRANSFER 2003-2017

That's right, nearly $561 million more has been sent over from the General Fund to the DOT than was ever "raided" by Jim Doyle. And even worse, that $1.56 billion in borrowing for DOT projects continues to be paid back with interest, so the total tab is likely to be much higher than that. And since the General Fund includes the vast majority of other state spending, including schools, aid to local communities, and Corrections, all of those sources are getting squeezed by this need to use the General Fund to pay off debt for these DOT projects.

And now the Assembly GOP's floated budget plan indicates that they are planning to shift another $600 million from the General Fund to the Transportation Fund for 2017-19. If true, that would mean the state would have shifted a net total of $1.16 billion dollars to the DOT over 16 years. Think our schools, or the UW, or local services could have used some of that money?

Keep these stats in your back pocket, as I have little doubt that WisGOPs will try to float the "alternative fact" that the "Doyle raids" caused the DOT fund to be in a deficit. It is a bald-faced LIE, and in fact, more money has been stolen from the General Fund to pay for the DOT.

Saturday, January 21, 2017

Tens of thousands speak in Madison. WILL DPW LISTEN?

I was one of the 75,000-100,000 people in downtown Madison this afternoon, showing our displeasure with the illegitimate (and already-flailing) president and GOP agenda.

That's me on upper right at the edge of the Capitol lawn.

There's definitely something happening here, and I think people have fucking had it with being told that Trump was elected legitimately or that the GOP agenda is something a majority of people approve of. The numbers of people don't lie, especially in contrast to the pathetic crowds that witnessed Trump being sworn in, and you can already tell that fact is driving Drumpf crazy. Which tells me we need to keep up the pressure and make that boy crack.

I was also fired up by the comments a Teabagging dimwit made on a friend's Facebook page, and I may have hurt his soul a bit by reminding him of his mediocre, dead-end life and BS takes. I feel no shame in being that rough, by the way. I read his comments around the same time that I was finally able to find a parking space downtown (in the 3rd ramp I tried), and as I did, WJJO was blasting this song on their "Nothing but '90s" Saturday. And no song seems to fit better when it comes to describing the typical non-rich, weak-minded Trump voter than this one.

No more the crap rolls out your mouth again
Haven't changed, your brain is still gelatin
Little whispers circle around your head
Why don't you worry about yourself instead

Who are you? Where ya been? Where ya from?
Gossip burning on the tip of your tongue
You lie so much, you believe yourself
Judge not lest ye be judged yourself

Holier than thou
You are
Holier than thou
You are
You know not

Before you judge me take a look at you
Didn't you find something better to do?
Point the finger, slow to understand
Arrogance and ignorance, go hand in hand

It's not who you are, it's who you know
Others lives are the basis of your own
Burn your bridges and build them back with wealth
Judge not lest ye be judged yourself

Holier than thou
You are
Holier than thou
You are
You know not

Ya, who the hell are you?
Ya, ha you

Holier than thou
You are
Holier than thou
You are
You know not, not
And right before that, JJO was blasting this great one from my college days.

Which led to me think- maybe what the WisDems need more of in the Age of Trump and the Age of Fitzwalkerstan is a whole lot less of "they go low, we go high." Those people think that 2010s politics is still some kind of friendly debating society, and that appealing to reason is all you need, with the party decision-makers being political lifers in suits.

Maybe the Dems need a lot more White Zombie/Metallica listeners that have worked real (and often crappy) jobs in real places, and are willing to tell the Walkers and Ryans and Trumps of the world "FUCK YOU, STOP LYING AND STOP BEING A FASCIST PIECE OF CRAP!" and willing to (figuratively) break the baseball bat over the heads of liars and scumbags, and outwardly taking on the GOP-perganda lie machine on Wisconsin's AM radio station. Who cares if the bluntness and confrontation hurts the feelings of a few soccer moms? Things are unacceptable today, and playing patty-cake with these GOP piles of shit will not succeed.

You can't deny the energy and feeling of "You will NOT pull this bullshit anymore!" that permeated the Capitol Square this afternoon. And it's well past time that the DPW stop "trusting the data" and start listening to what the people are doing and saying. It feels like the door is opening to a large-scale awakening and uprising against the regressive GOP, and people are done with laying back and "trusting in the system/trusting in the leaders", especially after doing so failed in the 2016 election.

The Dems and the DPW better recognize, join in and ride along, instead of trying to blunt this energy by trying to put it through the "proper channels", because the rules have changed.

Friday, January 20, 2017

Assembly GOP claims there's a bunch of money to cut taxes. There isn't

Just as I predicted, Assembly Republicans came out yesterday claiming all of the benefits of higher predicted revenues in future years, while not dealing with the higher costs. They based this BS out of a rigged request that they gave to the Legislative Fiscal Bureau, which was released yesterday.

Basically the Assembly GOP asked the LFB to make these assumptions.

Use the revenue predictions for FY 2016-17 of $15,503.6 million in tax revenues, and have that be a two-year “base” for this budget.

Then use the difference of the FY 2018 and FY 2019 revenue figures, and add in the projected year-end balance of FY 2016-17 to find out how much extra we have to “play with” in this budget.

Ass. GOP math- “extra” money
FY 2017-18 $16,033.4 million ($529.8 “extra”)
FY 2018-19 $16,616.0 million ($1,112.7 “extra”)
Proj. end balance FY 2016-17 $427.2 million

And sure enough, the AssGOPs sent out a press release yesterday saying “See, there aren’t any budget problems, we’re in great shape!”, and used the memo as an excuse to propose a tax cut/road funding package that they will work on as part of the next state budget.

Um, a few problems with the AssGOPs’ thinking.

1.In the real world, you don’t get to take all the benefits of higher revenues and then ignore higher costs. Just because I might (key word: MIGHT)be getting a raise it doesn’t mean I have all of this “extra money” that I can magically blow and/or not need over the next 2 ½ years. My house payment/rent, taxes, gas, food, entertainment, loans, and lots of other things are also likely to go up….or I need to spend more to pay them off.

Well the same thing works in budgeting. The LFB memo that counted on a “Trump Boom” to raise revenues also is counting on higher inflation now, and in the future.
The consumer price index (CPI) increased by 1.3% in 2016. IHS Marki! expects the CPI to increase by 2.5% in [State Fiscal Year] 2017, 2.1% in 2018, and 2.5% in 2019.

Although a strong dollar is expected to depress the price of imports, the CPI is nevertheless expected to slightly increase due to higher oil prices and wage inflation from a tighter labor market. Overall, the rate of core (excluding food and energy) inflation, which was 2.2% in 2016, is forecast to remain steady at 2.2% in 2017, 2.1% in 2018, and 2.2% in 2019. Food prices, which grew only by 0.3% in 2016, are expected to increase by 1.2% in 2017, 2.4% in 2018, and 3.0% in 2019. Energy prices, which fell by 6.3% in 2016, are expected to grow by 8.1 % in 2017, 1.3% in 2018, and 4.0% in 2019.
If anything, this number has been understated in Fiscal Year 2017, as this week’s CPI figures from the Bureau of Labor Statistics showed that US prices rose by 1.4% in the last 6 months of 2016, an annual rate closer to 3.0% than 2.5%.

So let’s play the same game the AssGOPs played and assume that total costs projected by LFB for FY 2016-17 increase at the rate of inflation, and I’ll even be kind enough to figure that FY’s 2016-17 higher inflation won’t drive up this year’s projected costs.

Wis General Fund costs with inflation 2016-19
2016-17 total costs $15,950.8 million
2017-18 total costs $16,285.7 million (+334.9 mil)
2018-19 total costs $16,692.9 million (+742.1 mil)

Well, there goes more than half of your “$2 Billion to play with”, AssGOP.

And of course, if they’re going to throw $300 million a year away on a tax cut to “offset” $300 million in higher taxes that would partly fill the $880 million deficit in the Transportation Fund (enabling themselves to stay in the good graces of DC lobbyist Grover Norquist), there goes another $600 million for this General Fund budget. Equally freaky is that the AssGOPs gave no detail what that tax cut would be, nor do we know the form that the Transportation Fund tax hike would be (Gas tax? Registration fee? “Hybrid tax”?).

So let’s see where we stand after accounting for inflation and this unnamed tax cut.

“extra revenue” $2,070 million
MINUS Inflation $1,077 million
MINUS tax cut/shift $600 million
MINUS Gen Fund Reserve Requirement $145 million

That $348 million is barely more than what LFB says we’re projected to carry over into the 2017-19. And over two years $348 million accounts for somewhere around 1.5% of the total budget, leaving very little breathing space in case the Trump Boom never happens and revenues fall short.

Now gander over to the budget requests for all state agencies, and you’ll notice a few standouts on the list with requested increases well beyond the 5% of inflation that we are slated to have over these two years.

Biggest % increase in Gen Fund budget requests over 2016-17 base
Elections Commission +56.4%
Historical Society +27.2%
District Attorneys +24.9%
Supreme Court +10.2%
Public Defenders +9.5%
Educat. Commun. Board +9.2%
Dept. of Justice +6.4%
Health Services +6.0%
Corrections +5.6%

And while the DOJ, Health Services and Corrections are on the low end of this “request above inflation” list, they are also two of the largest agencies in Wisconsin, which means they need more money to fill in that small percentage.

Extra Funding requested above inflation
Health Services $77.6 million
District Attorneys $17.8 million
Corrections $12.2 million
Public Defender $7.6 million
Historical Society $6.7 million
Others $5.1 million

Note that the UW System and the K-12-based Department of Public Instruction are NOT on this list, meaning that merely giving these people an increase of 5% to cover inflation could be spun as a “generous giveaway,” while still not coming close to reversing the damage of a decade-plus of cuts that those institutions have taken on. So now we’re down to around $220 million.

I’m not even bringing up the current gaps that exist, such as the Veterans Trust Fund (do we really want to keep taking $12 million a year from Veterans Homes then covering up the bad consequences of not keeping those homes up?), or the need to cut the cord on the money-leaking Local Government Property Insurance Fund. Maybe we don’t need to be carrying over all of that $427 million to the next budget, and pay our bills now…...unless you’re not all that confident in seeing 2017's revenue shortfall being limited to $150 million or in actually seeing the $312.5 million of Medicaid savings actually happen.

Now, the state does catch a break with a large decline compared to 2017's base funding that needs to be set aside for the Wisconsin Department of Administration, due to a debt swap last year which pushed off a $363 million balloon payment that was to be made in May 2018, and spread it out over the next 20 years (plus interest). But that doesn’t change what will actually be spent to pay off that debt in FY 2016-17 (it was offset by hundreds of millions in lapses, so net was $0), so there’s no benefit to the state’s bottom line in this analysis. And it goes to another problem that the AssGOPs refused to mention- rising debt payments in this budget and future years as the result of can-kicking and related Walker/WisGOP budget tricks. Wisconsin’s debt is at an all-time record $8.07 billion, and more funds will be needed to be set aside and shelled out in the coming budgets as those debts come due.

So maybe it’s not such a great idea to try to use the hope of a Trump Boom to cut taxes on revenues that haven’t been realized yet, and instead keep some funding around if/when that Boom doesn’t happen, so another budget hole doesn’t open up in the next 24 months. And especially given that we don’t know what Commander Cuckoo Bananas and the rest of the GOP Clown Show might do to domestic spending and money coming down from DC in the coming months, I’d think having some money lying around would be a wise insurance policy, in case the state is left to pick up some of the burdens of Trump/Ryan Fantasyland economics.

Of course, that would require forethought and a mentality where governing properly trumps cheap political headlines and trying to pull another over on the rubes. And that isn’t anything that today’s WisGOP will ever be interested in, so expect more gimmicks and prayers in the coming months, and expect our job growth and quality of life to continue to decline as a result.

Thursday, January 19, 2017

Meh December means 2016 has worst job growth yet under Walker

In between all of the points and counterpoints about yesterday's release of the Wisconsin revenue figures, we had another monthly Wisconsin jobs report come out this afternoon. And not really much to discuss here, beyond the typically pathetic Walker Administration spin job on the figures.

Total jobs-
DOWN 3,700, November revised UP 3,000. NET -700.

This is a bit misleading because 5,100 of the decline in December and 1,500 of the revised increase in November is due to "local government." This is likely due to one-time hiring for the November election, and the subsequent reduction of those workers in the December report. But still stagnant, even if you adjust for the election workforce items.

Private sector jobs-
UP 900, November revised UP 1,500. NET +2,200.

Again "Meh," especially as the nation added 144,000 private sector jobs in December and also had upward revisions. What is noteworthy are the increases in Manufacturing by a seasonally-adjusted 3,000 and Construction by 2,700 (actually, Construction was the result of lower-than-normal seasonal layoffs, but it works). On the downside the Trade/Retail sector had a bad drop of 4,900 jobs on a seasonally-adjusted basis. Not a good sign when you should be hiring up for the Holiday shopping season, and indicative of what has been a soft Fiscal Year 2017 for sales taxes in Wisconsin.

The bigger story is that this December report continued a 2016 trend of bad job numbers in Wisconsin. While the nation has been still consistently adding around 150,000 jobs a month for the last 9 months, Wisconsin actually has fewer people working now than they did in March.

Job change, Wisconsin March 2016 - Dec 2016
Total jobs -3,400
Private sector -2,100

In fact, 2016 had the least amount of total jobs gained in Wisconsin since 2011, and the lowest RATE of private sector job growth since Walker was elected in 2010! Bet you won't see that fact mentioned in many places. 2016 also added more than 16,000 jobs to the total Walker jobs gap, and now Wisconsin is more than 110,000 jobs behind the rest of the country's pace since the Age of Fitzwalkerstan began in 2011.

Oh, but now that Trump will be president, this will all change. And our budget will balance and somehow we'll finally reach 250,000 jobs in the next year. Riiiiiight.

Well, in fairness, US job growth will likely flatten out under Drumpf, but I bet the gap is still well over 6 figures when 2017 ends as well.

Further digging shows LFB "surplus" estimate shaky as hell

When you dig further into yesterday’s revenue estimates from the Legislative Fiscal Bureau, the evidence they use to support their higher revenue projections for the next Wisconsin state budget becomes even more questionable.

Let’s start with the largest part of General Fund taxes, the individual income tax. The LFB admits that a few accounting tricks and (ab)uses of Walker/WisGOP tax cuts will reduce total income taxes that come in, but that the economy will do so well under Trump that it won’t matter!
Although individual income tax collections are currently 4.6% above 2015-16 collections on a year-to-date basis, collections are estimated to increase 3.5% in the rest of 2016-17 and end the year 4.0% higher than 2015-16. A lower growth rate in the second half of 2016-17 reflects some taxpayers accelerating estimated payments in December, 2016, as opposed to January, 2017, and an increase in refunds in the Spring months due to law changes.

The law changes include increasing the standard deduction for married filers, federalizing exemption amounts under the alternative minimum tax, the final year phase-in of the manufacturing and agriculture credit, and the capital gains exclusion for Wisconsin assets. The capital gains provision was enacted as part of 2011 Wisconsin Act 32 (Walker’s first budget), but its initial impact will occur in tax year 2016 due to a five-year holding period requirement. Law changes will also affect future collections as their impact, relative to 2015-16, is expected to grow from -$77.7 million in 2016-17 to -$123.6 million in 2017-18 and -$150.7 million in 2018-19. Otherwise, individual income tax collections are expected to increase over the coming biennium, reflecting the continuation of the national recovery from the 2008-2009 economic downturn.
WHOA! So not only is the bump in December income tax revenues a one-time fluke due to (mostly rich) people paying now to increase their refunds next year, but there are a number of new tax cuts that kick in that’ll reduce revenues by another $350 million between now and June 2019. Even scarier is that the LFB admits this is guesswork because we haven’t seen a tax year with provisions like the capital gains one on the books- that revenue loss could well be more than $350 million (much like what happened with the M&A cut).

And yet the LFB anticipates a “Trump Boom” will more than make up for this, and raise individual income taxes by 3.9% in Fiscal Year 2018 and 4.2% in Fiscal Year 2019? Give me a break. Another questionable prediction from LFB comes from their thoughts on corporate taxes, whose collections have crashed in the first 6 months of Fiscal Year 2017- down over 20% according to the LFB, and over 19% according to the Wisconsin Department of Revenue. The LFB’s claims the drop in corporate taxes is due to a handful of companies getting huge refunds, and says the coming Trump Boom will turn this year’s projected loss will turn into corporate tax growth of 4.4% in FY 2018, and 1.1% in FY 2019.
However, collections this year have been affected by certain large one-time refund payments (for what? Sure ain’t job growth!). According to IRS Marki!, growth in both economic profits and adjusted before-tax book profits are expected to be higher over the remainder of the state fiscal year as compared to the six-month year-to-date collection period. Similarly, IRS Markit's national measure for state and local income taxes is expected to reverse from a small year-to-date contraction to moderate growth over the next two quarters. Projected corporate income/ franchise tax revenues for 2017-18 and 2018-19 reflect the forecast for adjusted before-tax book profits through the remainder of the forecast period, as well certain state tax law changes that are anticipated to have an impact on future corporate income/franchise tax revenues.
Again, color me skeptical. Let’s assume the Trump Boom doesn’t happen, and we merely continue with the decent-but-not-great US GDP growth and lagging state job growth that we’ve seen in the last year, and we continue to grow revenues at the same 2.69% rate that LFB is now projecting for this Fiscal Year. Here’s how much difference that makes to the estimates.

Revenue “miss” from LFB at 2.69% growth
FY 2017-18 -$112.8 million
FY 2018-19 -$267.1 million

So much for the revenue “gain” that was touted yesterday. And there’s a flip side to the rosy scenario that LFB went along with that few have mentioned- rising inflation. Take a look at this part of the revenue estimate analysis (note, in this section, the “year” is actually the State Fiscal Year, so “2016” really means July 2015 - June 2016).
The consumer price index (CPI) increased by 1.3% in 2016. IHS Marki! expects the CPI to increaseby 2.5% in 2017, 2.1% in2018, and 2.5% in 2019. Although a strong dollar is expected to depress the price of imports, the CPI is nevertheless expected to slightly increase due to higher oil prices and wage inflation from a tighter labor market. Overall, the rate of core (excluding food and energy) inflation, which was 2.2% in 2016, is forecast to remain steady at 2.2% in 2017, 2.1%in2018, and 2.2% in 2019. Food prices, which grew only by 0.3% in 2016, are expected to increase by 1.2% in 2017, 2.4% in 2018, and 3.0% in 2019. Energy prices, which fell by 6.3% in 2016, are expected to grow by 8.1 % in 2017, 1.3% in 2018, and 4.0% in 2019.
Now here’s the budget trick that Scott Walker, the Wisconsin GOP, and most of the media aren’t telling you- most budget requests that Walker asked for had 0% inflation for Fiscal Year 2018 and 2019! This is even accounting for energy costs for fleet vehicles and state buildings, and pretty much everything else that didn’t have to deal with program growth. But the CPI prediction in these revenue estimates says that prices by June 2019 will be up a good 5-6% compared to today.

In other words, don’t allow Walker folks to pull a trick where they 1. claim a revenue boost related to the hopes of a Trump Boom without 2. adding expenses from inflation that is part of such a Boom. I have a strong suspicion they will try to pull this kind of double-standard when the Governor’s budget is released in the coming weeks, and we need to be ready to call BULLSHIT on it when it does happen, and remind people that projecting costs to stay the same for 2 years will likely be a sizable cut in the real world.

Let's see how things develop over the next month, and then the 4 months of deliberations after that, and assess whether my prediction of a budget hole and/or sizable unmentioned cuts still crops up once you make an adjustment for real life. Bet it does.

Wednesday, January 18, 2017

SURPLUS? In GOP's Bubble, sure. In real Wisconsin? Don't bet on it

You start to head home from work, flip open the Twitter feed, and sometimes the topic is chosen for you.

WHAT? I'd been expecting revenues to go down, based on the disappointing figures to date in Fiscal Year 2017, and even Governor Walker's own Department of Administration reduced their revenue estimates two months ago vs what LFB predicted in 2016.

So what's going on here? Well, let's click on the actual LFB document and take a gander.
Our analysis indicates that for the three-year period, aggregate general fund tax collections will be $454.6 million higher than those of the November 21 report ($63.4 million in 2016-17, $145.3 million in 2017-18, and $245.9 million in 2018-19)....

Table 3 shows general fund tax revenue estimates for 2016-17 and each year of the 2017-19 biennium. Over the three-year period, these estimates are $454.6 million (0.95%) higher than the projections released by the Department of Revenue (DOR) last November. By year, the new estimates are higher than DOR's projections by $63.4 million in 2016-17, $145.3 million in 2017-18, and $245.9 million in 2018-19. The estimates for all three of the state's major tax sources (the individual income tax, general sales and use tax, and corporate income and franchise tax) are greater than DOR's estimates in each year. The new estimates are based on the most recent national economic forecast and tax collections data, both of which are generally stronger than in November. The estimates also incorporate all law changes enacted to date.
I will agree that the revenue picture brightened earlier today when the Walker Administration released a nice bounce-back in December's numbers, bumping year-over-year revenue growth for Fiscal Year 2017 from 1.2% to 2.6% (and they released those numbers ahead of schedule, what a concidence!).

Of course, even with that improved picture, the LFB says the state will still come in more than $150 million BELOW what we needed to raise to match the LFB's own projections from last year. So how are we not in need of a budget repair bill? Lower spending in Medicaid, due to lower enrollments and different types of usage (I'll leave it up to you as to why that might be). The LFB says that Medicaid spending will come in $312.5 million below what was budgeted 2 years ago, and that lapse in spending along with others will allow for the state to carry over $427 million into the next budget (but, you know, Obamacare is in a "death spiral" and destroying the country fiscally).

But what about the future years in the 2017-19 budget? The LFB says that's because the economic analysts they follow are indicating that Donald Trump truly will make America Great Again!
Under the January, 2017, forecast, IHS Marki! predicts real GDP growth of 2.3% in 2017, 2.6% in 2018, and 2.3% in 2019. The main drivers of growth are expected to be consumer spending, business fixed investment, and residential investment. However, the trade deficit is forecast to increase due to an appreciating U.S. dollar and growing domestic demand for imports, thereby dampening real GDP growth.

The 2017 forecast is based on the following key assumptions. First, the forecast assumes that the new Trump administration and Congress will lower the average effective personal income tax rate from 21.0% to 19.5% and lower the statutory corporate tax rate from 35% to 20% (partially offset by reducing tax deductions and credits). Second, the forecast also assumes a $250 billion increase in federal infrastructure spending over the next ten years. Third, the 2017 forecast assumes that the Federal Reserve will increase the federal funds rate by 75 basis points in each of the next three years to 1.50% by the end of 2017, 2.25% by the end of 2018, and 3.00% by the end of 2019. Fourth, the Brent spot crude oil price is projected to average $54 per barrel in 2017 and $57 per barrel in 2018. Fifth, the inflation-adjusted, trade-weighted value of the dollar for the broad index of U.S. trading partners is expected to increase 3.3% between fourth-quarter 2016 and fourth-quarter 2017, where it will reach its peak value at 5.5% above the 2016 average, followed by a steady decline. Finally, real GDP growth of major and other important U.S. trading partners is assumed to average 1.7% annually and 3.5% annually, respectively.
Yeah, surrrrre!!!!! We'll have growth jump from the 1.6% rate we're at today to the fastest 3 years of sustained growth in over a decade, now that Trump and the Republicans are in charge! And I might be elected governor of Wisconsin in 22 months! (what? It could happen)

And in an analysis filled with rosy scenarios, this part may be my favorite.
IHS Marki! forecasts that real GDP growth will lead to steady improvement in the unemployment rate to 4.6% in 2017, 4.3% in 2018, and 4.1% in 2019. IHS Marki! anticipates that stimulative fiscal policy will boost job gains in 2018, which would otherwise have been forecast to decelerate. Total nonfarm payrolls are expected to continue to increase, albeit at a slower pace, by 1.9 million in 2017, 1.8 million in 2018, and 1.7 million in 2019. IHS Markit also forecasts that the labor force participation rate will continue to increase to 61.7% by the end of 2019. The largest job gains are forecast for health care and professional business services. Manufacturing employment is expecting to grow by 0.2% in 2017, 0.9% in 2018, and 1.6% in 2019.
5.4 million more jobs? 4.1% unemployment? And manufacturing growing in a time when the dollar gets even stronger than it is now? Is that an analysis, or Donald Trump throwing shit against the wall in one of his speeches?

Oh, and by the way - the US labor force participation rate is currently at 62.7%, so how would it go "up" to 61.7%? Do these IHS Marki! folks (whoever they are) mean the Employment-Population Ratio instead? And if so, do they really believe it would magically rise by 2% in a time when Boomers are retiring by the day and we are already near full employment?

Equally amazing is that this same analysis assumes rising inflation, with prices going up between 2.1% and 2.5% over each of the next 3 years. But somehow their analysis says that consumer spending, personal incomes and nominal GDP will rise even faster, with each figure rising between 4.4% and 5.3% each year!

Look, if somehow all that happens, then yes, we will likely have a nice revenue bump that could cover the requests in Wisconsin's 2017-19 budget. A quick check indicates that the state would still be spending slightly more than it takes in under that scenario, but the projected carryover would let them squeak by (this does not take into account the $880 million deficit in the Transportation Fund, which is a whole 'nother can of worms to deal with).

That reality is why I wouldn't recommend blowing any of these projected extra funds on tax cuts - it's not likely that the cushion will ever materialize, and a far wiser move (if one is to be made) would be to fill in prior holes made due to cuts in education and state shared revenues. This is not only a worthwhile investment to make, it's also one that can shield Wisconsinites from sizable property tax hikes and/or severe service cuts in 2018 and 2019 if these rosy scenarios fail to pan out.

But watch for the GOPs to try to claim there's a "surplus" and that things are somehow booming in Wisconsin because of Scott Walker and Wisconsin GOP policies along with the prospect of Republicans running everything in DC. And watch for too many media members to be suckered in by those words, and parrot them without explanation, making them seem as foolish as the average shriveldicked white guy who fell for this.