Thursday, May 10, 2012

The Walker "surplus" claims- the only accuracy is that taxes are up. (Pt. 1)

I was getting ready to take off from work when I glanced upon todays' Wheeler Report and saw something from Mike Huebsch entitled: "Memo to Gov. Walker regarding general fund tax collections and fund condition." And my bullshit detector started screaming, so I clicked on the page to take a look.

Sure enough, Huebsch is claiming that tax revenues have picked up and now there is supposed to be an $89 million surplus for the state at the end of the 2-year biennium. This would be quite the turnaround from what the Legislative Fiscal Bureau reported 3 months ago, where the LFB predicted a $208 million budget deficit that would have to be made up. So why the sudden turnaround? Well, Huebsch says
This improvement in general fund tax revenue projections relates to several items. General fund revenue collections through April were ahead of forecast and refunds were lower than anticipated. In addition, the federal Bureau of Economic Analysis has issued data revisoon that raised its estimates of personal income for Wisconsin. These revisions indicate that 2011 income growth was stronger than anticipated at the time of the February revenue estimates. Further, the federal Bureau of Labor Statistics has released its Quarterly Census of Employment and Wages. This reported stronger growth in employment for the third quarter of 2011 than previously estimated. The Department of Revenue also incorporated the most recent forecast by IHS Global Insight, which reports a stronger 2011 base and growth for personal income than the February forecast.
For this post, let's deal with the tax revenue question first. We'll handle the other claims in a second part of the post.

General fund revenue collections through April were ahead of forecast and refunds were lower than anticipated. I'm not going to pretend to know about the number of tax refunds given out, but it'd surprise me that in a year when there were major cuts in taxable pay to hundreds of thousands of public workers in the middle of the year and a dropping stock market in the middle of the year that there would be lower tax refunds, because incomes would be smaller than expected, not larger. But since I can't say for sure. I'll give Hibby this one.

And the "higher tax revenue" claim has some legitimacy, because since we last checked in on the relatively low revenues in February, the last 2 months have seen several types of tax revenues go up. This is true both for the Federal Government (April saw U.S. revenues up by 10% vs. 2011 and Uncle Sam run a monthly surplus for the first time since Obama has taken office.) this was also true for Wisconsin. Wisconsin income taxes were 12.62% above March and April 2011, and are now up 4.5% through 10 months of the fiscal year vs. 2.4% 2 months ago. Sales taxes gave also picked up, up 12.3% in March and 9.5% in April. Why, I'm not exactly sure (I know the weather was great in March, April doesn't add up), but it now means FY-to-date, it's gone from 0.75% below budget to +0.88% above budget. Even corporate taxes came in strong for March and April, and are now up 5.44% year-over-year. The only area not keeping up is excise taxes (beer, smokes, etc.), which are down 3.6% year-over-year, and 5.59% vs. the budget.

So when you put that together, and figure the current fiscal year increases to hold for the rest of the year, the numbers look like this:

Income tax $7.002 billion (+$133.945 million vs. budget)
Sales tax $4.306 billion ($36.036 million vs. budget)
Corporate tax $899.259 million (+$18.459 million vs. budget)
Excise tax $694.102 million (-$41.098 million vs. budget).

So you could argue that revenues could come in around $147 million above budgeted amounts, which would lead to the type of surplus Huebsch is claiming. But here's the problem. It assumes that the growth in record-heat March and April will continue in May and June. And of course it could easily reverse back just as quickly as it did to the good side the last 2 months. So if things flatten out, that deficit could well show up again by the end of the fiscal year, especially given that May and June 2011 were strong months in 2011, and one bad Memorial Day weekend could screw over the Sales tax revenues (so heavily dependent on the Summer months).

By the way, the other reason they anticipate this surplus? $78 million in "savings" resulting from "structural refunding authorized by [the state budget] and other debt refinancing, which is creating reduced debt service costs for the 2011-2013 biennium." That's right, WALKER IS KICKING THE CAN DOWN THE ROAD AND USING THE NUMBERS TO TRY TO SAVE HIS ASS TODAY. Wonder if the Tea-Baggers will let him have it like they do when they shed their crocodile tears about the federal debt?

Huebsch and Walker's act is very reminiscent of Walker's press conference last July where he took credit for what appeared to be a strong June jobs report despite being told by DWD officials that the job increase was "very questionable" due to most being seasonal tourism-related jobs. It later turned out that the DWD's concerns were on the money, as revisions later showed no job growth in June at all. And just like today, that report came out a few weeks before a recall election where the GOP and Walker had to put their records on the line. You don't think they might be putting out sketchy data or cooking the books again, do you?

Of course they would. These people have no sense of decency and would make things up to create an alternate reality at the drop of a hat if it gave them a couple of extra dollars or votes. The fact that the April revenue numbers were blasted out on the 3rd when they usually come out in the middle of the month is equally noteworthy for the same reason.

So while the DOR numbers are looking good, no legitimate public servant would run with them to change policy with such a small sample size of better-than-expected numbers. But then again, Mike Huebsch is the same hack who estimated protestors made $7.5 million in damage to the Capitol, when it turned out the total damage was only $200,000, or slightly above normal wear-and-tear. So maybe he;s just using the same math...the one that might work on AM 620 and 1130, but doesn't pass the smell test with anyone with a clue.

And if you think the numbers are fishy enough, wait till you see what I have to say about the Walker boys' assumptions for the overall economy. That comes in Part 2.

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