Saturday, May 26, 2012

The big WisGOP lie- Wisconsin never had a $3.6 billion deficit, and it's not fixed

My post from Thursday has apparently caught wildfire, as it has over 1,400 pageviews in less than 48 hours, making it the second-most read column in this blog (the most is my article exposing the WisGOP lies about Kaukauna Schools last July- something Walker-types still try to pull over on people). Thanks to all of you for spreading the word.

Let's pick up from that article by discussing another common claim from the Walker Administration- that Wisconsin faced a $3.6 billion budget deficit when Walker came in, which forced the huge cuts to schools, colleges, Badger Care and other services. But where did the $3.6 billion come from, and was it really ever that high? The short answer is: It came from Walker officials who had every incentive to inflate the number, and it was never close to that high.

I'll first direct you to an excellent blog entry from commentator Feeling Blue Seeing Red who claims that Jim Doyle had a balanced budget when Walker took office, and the "structural deficit" he allegedly left Walker was largely bunk. The numbers are a bit off, but the main point of the blog is correct - that the structural deficit is based on all agencies getting everything they wanted.
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.
As someone who's worked on budgets in the public sector, this is absolutely true. Sure, you give a number and explain that this is what you'd need to take care of everything you'd want, but like any other business, there usually isn't enough money to go around to actually get it, so you go through the work of figuring out what you CAN do.

So let's look at what the Doyle report in November 2010 with all agency requests and go to Page 13 to see what was asked for. And you'll see that over $2.07 BILLION is requested in increases. A lot of this is offset by $1.633 billion in projected lapses, but even if you get rid of all lapses, just keeping things under current law with no changes takes $437 million out of the structural deficit.

But the Walker folks don't do that. The "$3.6 billion" figure they cling to comes from DOA Budget Director Brian Hayes, who threw this document out less than a week before Walker dropped the bomb. Hayes basically backs out a lot of these lapses and created an overly-high Medicaid bill to reach this figure.
The adjustments include adding $1.2 billion GPR to the Department of Health Services budget request to reflect questionable caseload and federal aid assumptions in the Medicaid program. The other change removes over $800 million in assumed lapses included in the Department of Administration budget request for prospective cuts. Taken together, these changes add over $2 billion GPR to more accurately portray the budget challenge facing the Governor and Legislature.
Well, overestimating Medicaid costs as an excuse to cut services has been a bad Walker habit, so much of that $1.2 Billion should be immediately questioned. And the feds have consistently continued to fund Medicaid, bailing Wisconsin out of costs that Hayes seems to be projecting onto the state.

And as for the lapses, let's not forget that Walker also built his budget on $899 million in lapses, or $86 million more than the projections given by Hayes in Feburary 2011. So between about $600 million in Medicaid costs (I'll assume only half of it was bullshit) and $86 million in increased lapses, let's reduce that structural deficit by $686 million.

Then let's not forget that Hayes' budget numbers include tax breaks given out by Walker and the WisGOPs when they took over in January 2011. The LFB broke down what those tax cuts were projected to do:
(a) SS SB 2, which federalizes the treatment of health
savings accounts; (b) SS AB 3, which would create an income and franchise tax deduction or
credit for businesses that relocate to Wisconsin; and (c) SS AB 7, which would create an income
and franchise tax deduction for businesses that increase employment in the state. SS SB 2 has
been enacted into law as 2011 Act 1. The other two bills have passed both Houses of the
Legislature, and the Governor has indicated that he will sign them. It is estimated that, together,
these three bills will reduce general fund tax collections by $55.2 million in 2011-12 and $62.0
million in 2012-13.
So there's another $117 million added to the deficit. So take that out of the $3.6 billion.

And last but not least, remember the famous "BROKE MY ASS!" revenue surprise in May 2011, where the Doyle-Dem budget of 2009-2011 was yielding much higher tax revenues, and improved the budget picture not only for 2011, but also the 2011-2013 biennium because it led to a higher starting point.
Based on our review of the collections data and the new economic forecast, we now believe
that general fund tax revenues will be higher than the previous estimates by $233 million in 2010-
11, $204 million in 2011-12, and $199 million in 2012-13. The three-year increase is $636 million,
or 1.6%.
So let's go over these adjustments that happened, shall we?

Walker DOA budget deficit- $3.603 billion
MINUS removing all Dept. increases- $437 million
MINUS overestimated Medicaid- $600 million
MINUS extra budget lapses- $86 million
MINUS tax cuts in January 2011-$117 million
MINUS better revenues May 2011- $636 million

ACTUAL structural deficit 2011-2013 - $1.740 billion

In other words, less than half of the $3.6 billion the Walker folks said it was. It's also below a couple of structural deficits that Doyle had to deal with, and right in line with the Doyle Administration estimates in November 2010. You think Walker could have cut $1.6 billion to schools, hundreds of millions to universities and hundreds of millions more to localities if the public knew there was a lot more money there to handle these services? Not that Walker wouldn't have tried- he's paid big bucks to screw up services and get them sold off to contributors- but it would never have flown with the casual bystander or even the transcribers that pass for Wisconsin media.

But the sad part is that the structural deficit probably IS that high or higher for the future. Mike Ivey of the Cap Times had a story about this week showing a Walker tax break that allows business to write off $360 million in taxes over the next 4 years, with a rate that falls to "below zero" by 2016. The lack of corporate taxes due to this tinkle-down measure is going to have to be made up by someone, or else it'll throw the state into further deficit

There are a number of other "fiscal bombs" that Walker has set to go off over the next few years, with the funneling General Revenues to the Road Builders in the Transportation Fund as a good example. This starts on July 1 for $35 million, could be well over $125 million for the 2013-2015, and near $250 million by 2021. And of course, let's not forget the $558 million in credit-card borrowing revealed this week, which'll cost Wisconsin taxpayers nearly $419 million in extra costs over the next 3 budgets.

And because of Walker's tax credits to business and the wealthy, those taxpayers won't be the rich, they'll be people who actually do work like you and me. So not only did Walker never face a $3.6 billion deficit, he also has left us fiscally worse off than we were before he took office. Don't bet on the media to make this effort themselves, but feel free to spread around this truth in these last 10 days. Because I really don't want to be blown up by more Walker fiscal bombs.


  1. Another great post, brimming with solid numbers *and* knowledgeable explanation of what the numbers mean. Great job!

  2. Great job going into further detail. I wonder if anyone will pay attention?

  3. Jake, I think we differed on our numbers because I looked strictly at the requests vs expected revenues outlined in the Nov 2010 report, which predicted a $1.5BN shortfall. Of course that never was going to be Walker's budget... but does present a good baseline for what the next Gov would face, sans any significant tax give-aways, policy changes, etc. No doubt it was what the unions were looking at, too, when they agreed to concessions in December 2010. They chose that concessions for healthcare and pension contributions in lieu of layoffs and/or forced furloughs.

    I don't have access to what they offered. Do you? If you factor those monies in, I wonder what of that $1.5Bn projected shortfall would be left?

    IOW, Walker's '$3.6Bn structural budget deficit' was a monster entirely of his own making, one could fairly argue, right?

  4. Feeling Blue, Seeing Red- The DOA document from Doyle is a good baseline because that's where the Walker folks based some of their revenue figures on.

    And good point about how that could not have included the unions' agreed-to concessions (that Jeff Plale voted against in exchange for a cushy job with Walker Administration). That would have reduced the structural deficit by another $100 million or so ($50 million in savings that lowers the base costs for both years).

    But yes, Walker's Administration basically wiggled with the numbers to come up with the $3.6 billion figure, and the media lazily ran with it.