Tuesday, November 20, 2012

The Walker budget lies just don't stop

Today was when the Walker Administration released the budget requests for agencies, and gave their revenue estimates for the next budget. This document from Walker's DOA was quick to pat itself on the back for what it claims will be a structurally balanced budget for the upcoming biennium.
This letter finds our budget in a much stronger position than two years ago. We finished fiscal year 2011-12 with a positive fund balance of $342.1 million. As a result, we entered fiscal year 2012-13 with the largest opening balance since fiscal year 2000-01.

As reported in the annual fiscal report last month, under Governor Walker's leadership, Wisconsin made the largest contribution to the State's rainy day fund. The $108.7 million was the first time the state contributed to the rainy day fund in consecutive years. In fiscal year 2010-11, Wisconsin transferred $14.8 million into the fund.

Wisconsin has virtually reached a position of structural balance. At the introduction of the current biennium in February, 2011 Wisconsin faced a $3.6 billion structural deficit. For the coming biennium, agency budget requests exceed expected revenues by $91.4 million in fiscal year 2013-14 and by $80.0 million in fiscal year 2014-15, for a total of $171.4 million over the biennium.
Of course, we know the alleged budget surplus is a crock, and the "$3.6 billion Doyle budget deficit" claim was a lie based on a wish list from state agencies. And if you go inside the outgoing Doyle Administration's estimates in 2010, you'll find that they didn't use the Walker Administration's rosy scenarios when it came to revenue growth.

Remember, in late 2010 Wisconsin's economy was just starting to come out of the hole from the Great Recession, and had begun creating a few thousand jobs a month in that Summer, with that number picking up in early 2011. But the effect of this wasn't known on revenue growth at the time, and therefore, the Doyle DOA played it safe.

estimated revenue growth, Doyle budget request
FY 2010-2011 +4.25%
FY 2011-2012 +4.20%
FY 2012-2013 +3.40%

And it turned out they sold this short, because when the Legislative Fiscal Bureau re-estimated the revenue figures in May 2011, they showed that the 2010-2011 revenues were actually projected to be up 6.5% instead of 4.25%, and the following 2 years also had higher revneues as a result.

In fact, those LFB numbers help to illustrate the failure of the Walker era. Even as the Fitzwalkerstanis claim "stronger than expected revenues" helped cause the 2011-2012 alleged surplus, they still project total GPR revenues for FY 2013 to be $116 million LOWER than the LFB estimates from May 2011. And this is despite the U.S. economy being better than anticipated since that LFB paper dropped.

But the past failures of the Walker Administration doesn't deter his DOA from claiming things will take off from 2013-2015. Check out the revenue growth predicted by the Walker Administration for the next 2 years.

estimated revenue growth, Walker budget request
FY 2012-2013 +1.83%
FY 2013-2014 +3.77%
FY 2014-2015 +3.52%

The revenue growth assumes that estate taxes will resume in the U.S., adding $219 million to the state's coffers. This would be going over the fiscal cliff for this tax- and I'm cool with this actually happening, but I'm betting the oligarchs that pull Walker's strings aren't. In addition, the Walker folks assume that corporate income taxes will go up by a combined $54 million the next 2 years. Seems hard to believe as we've hard records profits in the U.S. the last couple of years, so it'd be difficult to keep that part up, and also because the Walker folks phased in many of their corporate tax cuts, such as the domestic production tax credit that could lower taxes to zero for many businesses by 2016.

That's not the only major bit of trickery in the Walker budget request. The DOA demanded that agencies keep their requested increases low, so the total amount asked for would only go up by a small amount. Compare that to the more honest Doyle budget, which asked all agencies to submit what they needed to fill all of their needs.

Difference in total GPR spending requests
Doyle year 1- +$658.5 million (+4.6%)
Walker year 1- +$528.9 million (+3.6%)

Doyle year 2- +$728.8 million (+4.9%)
Walker year 2- +$540.4 million (+3.5%)

Well no kidding that Walker's budget is likely to balance if the agencies ask for nearly $320 million less over the 2 years than they did under Doyle, even if those lower requests ignore the reality that more money has to be spent to meet the needs of Wisconsinites. And the budget requests don't even account for the extra expenses the state would have to come up with if major spending cuts go into effect for 2013.
According to the Congressional Budget Office, "[s]ubstantial changes to tax and spending policies are scheduled to take effect in January 2013, significantly reducing the federal budget deficit. According to the Congressional Budget Office's (CBO's) projections, if all of that fiscal tightening occurs, real (inflation-adjusted) gross domestic product (GDP) will drop by 0.5 percent in 2013.... [This] will cause…the [national] unemployment rate to rise to 9.1 percent in the fourth quarter of 2013…[and then] economic growth will pick up..."

The fiscal tightening – also known as the fiscal cliff – compels a sequestration of funding streams that Wisconsin receives from the federal government, absent some other agreement. Medicaid and many other programs were exempted from the sequestration order. Initial reports indicate that Wisconsin has about $94 million at stake in fiscal year 2013-14 with the sequestration agreement.
This doesn't count the extra unemployment costs and other aid costs like Badgercare and related stabilizers if the country did fall back into recession due to the fiscal cliff taking full effect and nothing being done in 2013 about it. But the Walker folks decide to take the positive budgetary effects of going over the cliff through higher estate taxes, while ignoring the much higher expenses that would hit at the state level at the same time.

So not surprisingly, the Walker Administration's claims of a balanced 2013-2015 budget are based on sketchiness, combining a rosy revenue scenario while ignoring large spending needs that exist, particularly in light of the Walker Administration's cutbacks in this last budget. For example, the 2014-15 budget request for shared revenue to municipalities is lower than the actual shared revenue given four years before, and the 2013-2015 request only gets back $560 million of the $800+ million cut from K-12 aids. If that budget request was actually to become law, local governments would need to massively raise property taxes just to stay at their current levels, or find their services FUBAR'ed, with major disruptions to people's lives.

But the Walker folks don't care, as long as the numbers look good and they can strike a pose claiming that they "balanced" the budget. (Heck, they wouldn't mind if the services got FUBAR'ed- all the easier to sell them off if that happens) And because our media doesn't know enough to actually look at the real numbers, they might be fooled into falling for the "balanced budget" lie. However, I don't trust the LFB to be so gullible when they release their budget estimates in a couple of months, and now that you've been guided through the numbers, you know better as well.

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