Enjoy that surplus...for the next 5 months

You can bet the right-wing media in this state will spend the next few days crowing about the Legislative Fiscal Bureau report which estimates Wisconsin will end Scott Walker's first 2-year budget with a $484 million surplus. And on the surface, this is true- the report estimates that Wisconsin will take in more in revenues than expenses for the two-year period, and by an even higher amount than the $348 million Walker's Department of Administration estimated late last year.

So how'd this $136 million increase in the surplus happen? Let's let the LFB tell you.

First, the estimated tax collections of this memorandum are $37.1 million above the administration's projections.

Second, net departmental revenues are projected to be $35.0 million above the amounts shown in the November 20 report.

Third, it is estimated that net appropriations will be $64.5 million below the amount reflected in the administration's report. Among the reasons for the difference are a reduction in estimated debt service payments ($25.5 million) (done by borrowing on the state's credit card and adding more debt and expense for later years) , a projected lapse in the SeniorCare program ($18.0 million) (cutting Senior Care, nice) , and an estimated reduction in the cost of various refundable tax credits ($19.0 million).

Oh, and the LFB also includes $584 million in lapses, which I haven't seen a lot of in reports as of yet, but that's how they get a "surplus". So not really much there for economic growth, and I'd rather be a lot higher than 42nd in the country for jobs and I'd like $3,600 a year in take-home pay back. But if these guys had a top goal of balancing the budget for 2011-2013, I suppose they succeeded, so give them the golf clap.

However, take a gander to the next budget and you'll see the picture isn't quite so rosy.

Compared to the November 20 [DOA] report, our analysis indicates that for the three-year period, aggregate general fund tax collections will be $259.1 million less than those reflected in the report ($37.1 million higher in 2012-13, $152.7 million lower in 2013 14, and $143.5 million lower in 2014-15).

The primary reason for the $259.1 million reduction is due to the enactment of the American Taxpayer Relief Act of 2012. At the time of the November 20 report, under state and federal law, Wisconsin's estate tax would have been restored for deaths occurring in 2013 and after (I touched on that in this article). It was estimated that this restoration would have increased tax collections for the state by $219.0 million ($94.0 million in 2013-14 and $125.0 million in 2014-15). The $219.0 million was included in the November report. However, Congress modified federal law so that this will not occur.

There are also lower estimates vs. the DOA for sales taxes along with cigarette and other tobacco taxes, and higher estimates for income taxes (because the LFB anticipates the Obama recovery to pick up). So let's add up the revenue estimates and put them together with the expenses estimated by the DOA, and see what kind of baseline we're in for the next budget, for 2013-2015.

Cash surplus, end of FY 2013 $484.7 million
Reduction in FY2014 revenues vs. DOA -$152.7 million
Estimated DOA revenues vs. expenses FY2014 -$91.4 million
Reduction in FY2015 revenues vs. DOA -$159.6 million
Estimated DOA revenues vs. expenses FY2015 -$80.0 million
Required "rainy day fund" balance, end of FY2015 -$65.0 million

New projected budget balance, 2013-2015 budget -64.0 million

That's right, we already need to make cuts or find new revenues for this next budget. And now let's throw in some adjustments that very well could happen.

1. Logisticare rebid- this is estimated at an extra $80 million for the next 2 years, which wasn't included in the budget estimates.

2. Sequestration/ fiscal cliff concerns. Sure, Congress has voted to extend the debt ceiling for the next 3 months, but that still doesn't change the fact that there are huge budget cuts lurking for late March, and Walker's own DOA estimated

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 thes equestration order. Initial reports indicate that Wisconsin has about $94 million at stake in fiscal year 2013-14 with the sequestration agreement. About one-half of this reduction would affect federal education transfers to Wisconsin and, therefore, would not be felt until next fall's school year and after passage of the [2013-2015] Biennial Budget.

So that's another $188 million that could go away over 2 years.

So now we're up to $332 million that has to be dealt with. Oh, and Walker and Assembly Speaker Vos are promising $300 to $350 million in income tax cuts as well when Walker's budget is released next month. Even if we don't have the money, and even if a former UW professor of mine points out

“The result is that the income tax cut will do almost nothing to spur economic growth in Wisconsin,” [Prof. Andy] Reschovsky said in an email to The Badger Herald. “The $300 to $350 million cost of the income tax cut will also mean that there are $300 to $350 million [in] fewer resources available to invest in education, health care, transportation and other state functions.”

Then again, that is the goal of Scott Walker and the Bradley/ Koch money men he fronts for (easier to FUBAR government services and sell them off if you do that).

So you can bet the Fitzwalkwerstanis will try to claim the 2011-2013 surplus somehow allows us enough cushion to cut taxes in 2013-2015. The LFB's report shows that is simply not true, and in fact, we're probably facing a budgetary deficit well into the hundreds of millions of dollars. In fact, what Scott Walker needs in order for his failing schemes to end up producing a balanced budget is for Obama's America to have its economy take off, without hinderance from Tea Bagger budget cuts. How's that for irony!