Sunday, June 16, 2013

WisGOP budget quite W-like

With the Assembly scheduled to start taking up the state budget on Tuesday, let's take a look through the LFB's listing of where the $70 billion budget is at, and discuss a few items.

First of all, the budget is built on a projected surplus of nearly $670 million that is supposed to exist at the end of this month. As mentioned before, is mainly the product of two items that have little to do with real economic growth. The first is the large cuts to shared revenues, K-12 schools and take-home pay for state employees that are the hallmark of Scott Walker's agenda, which has led to Wisconsin having by far the worst economy in the Midwest for the last 2 years, and the nation's economy has grown at a rate more than twice Wisconsin has in the last 2 1/2 years. The second reason for the surplus is a one-time fluke revenue increase in 2012 due to the fiscal cliff at the end of the year, and a booming, bubbly stock market that I wouldn't count on continuing.

Then you look at the overall General Fund numbers, project them forward, and look at how the General Fund balance deteriorates.

Year-end General Fund Balances 2013-2017
2013 +$670 million
2014 +$470 million
2015 +$174 million
2016 -$202 million
2017 -$505 million

You can see how things fall apart, and quickly. What are the culprits? Well, first is the Koo-Koo income tax cut, which built off of Walker's dumb initial tax cut proposal and took it to the next level of stupidity. The breakdown of the various tax and fee changes estimates the tax cuts to reduce state revenues by $647 million over the next 2 years, and the LFB adds that 2/3 of the tax cut among married couples will go to couples making more than $100,000. While my wife and I are looking at an average tax cut of $11 a month, couples making $300,000 or more are slated to get an average tax cut of more than $120 a month. Then, when you look at the property tax increases coming from this budget, that takes away about 20% of that tax cut for us. No help at all.

The other big culprit in the 2013-2017 deficits is Walker's decision to pander to the Bagger base instead of bend to reality and accept Obamacare's expansion of Medicaid (click here for why this is so stupid). The budget is slated to spend another $850 million in state taxpayer dollars for Medicaid and other Health Services over the next 2 years, but the state's extra costs could have been cut by $119 million in this budget and another $170 million in the next just by taking the Obamacare Medicaid expansion. But NOOOOOO, Walker thinks the 30%-ers that are the GOP bubble-world base are more important than the 100% of Wisconsinites that benefit from lower taxpayer costs and the improved economic stability that results from more people being covered by insurance.

And the DHS budget also gives us time to debunk the latest GOP talking point- as illustrated by this recent Walker ramble.
“Everybody acknowledges in that city (Washington D.C.) there’s a deficit. They can’t afford what they have now, let alone adding it, so there’s going to be a lot of states that bet on the expansion that I think aren’t going to see the money. I’m not going to expose my taxpayers to have them pick up that when the bottom falls out (because) of the lack of the federal government to be able to make their commitment.”
This is an absurd take, and not just for the fact that the federal budget deficit is falling fast, but because the Walker/ WisGOP budget has the state taking in more federal dollars than it was 2 years ago. This is true not just for Medicaid and other health services, but for the budget as a whole.

Federal assistance in budget
2013-2015 DHS base- $9.726 billion
2013-2015 JFC budget, DHS- $10.295 billion ($+568.1 million)

2011-134 Adopted budget- $19.079 billion
2013-15 JFC Gen. Fun budget- $19.733 billion (+$634 billion)

As you can see, Walker's budget relies on more than a half a billion dollars in additional federal Health Care funds, and there's even more added federal help in the state budget as a whole. If the concern about federal budget cuts was legit, then why wouldn't Walker demand a contingency fund be set up from the alleged budget surplus for just such an emergency (i.e., if his fellow Baggers pulled back federal money for the states)?

That's NOT what the GOPs are doing, as this budget keeps our rainy day fund at a tiny $65 million out of annual General Fund expenses of $15.55 billion (that's 0.42% for you scoring at home). Instead it blows the surplus on tax cuts that won't do anything to help the vast majority of Wisconsinites. So it's obvious that the only place Walker has these crocodile tears about federal funding for is Obamacare, proving that this is a shameless pander to the low-info right-wing bubble, because the rest of his budget shows he sure doesn't have a problem having us tied into federal funds for almost everything else.

When you see actions like this, and you realize that a big reason there's any alleged surplus to squander is because people like me had $300 a month taken out of our pocket due to Act 10, and you see the big picture take focus- Act 10 stole money from workers in order to give tax cuts to rich people. We know Act 10 didn't give relief to local governments and school districts (they had state aid cuts that offset any fiscal benefit they got from Act 10, and very little of those cuts are filled in for this budget), and our economy stagnated while the rest of the nation zoomed ahead due to the lack of demand.

The cuts in taxes and shared revenues also means our options are limited when the stock market bubble inevitably pops and our next recession hits - taxes will have to go up, either at the state level, or through the local communities having to make up for state aids being cut. The other option is massive reductions in services past what we already have, resulting in more economic distress, and/or the selling off of services (probably to GOP donators who would then jack around the public for big profits). What Walker and company are gambling on is that it doesn't happen until after the 2014 elections.

If this short-term thinking and bad fiscal policy sounds familiar it should. Because another Dubya signed similarly stupid tax cuts to blow our deficit sky-high last decade.

And this budget will screw us at the state level every bit that the Bush tax cuts cost us as a nation.


  1. If anyone's wondering how it's possible for such a retarded economy to produce general fund surpluses today, the answer is very simple: borrowing. Lots and lots of borrowing.

    At the end of 2010, Wisconsin's market disclosure showed that general obligations stood at $6,822,771,982. Two years later it was $8,014,705,521.

    So in his first two years Walker in net borrowed $1,191,933,539.

    Then another $410,250,000 was borrowed in April to prop up the general fund. From that link you can see that general obligations were up to $8,172,141,031 as of April 1st after a prior $173 million issue, so barely any is being redeemed right now. Further there are plans for another $211 million in G.O. bond issues this year that are not for bond rollover purposes, including getting a $50 million loan from the Clean Water Fund (it's not like the CWF will need the money since there are surely no existing plans for a 5 mile long open pit mine leeching anything into the water supply, after all).

    Add those all up and we're looking at very nearly $2 billion of borrowing by the end of Walker's first 3 years - and that's all before the new budget with its jacked-up borrowing requirements is in place.

  2. And that extra borrowing means more debt service to be paid off in future years for both the General Find and Transportation Fund. Again, this borrowing could have been reduced and the budget stay in balance, but these guys chose tax cuts instead.

    Nice priorities, eh?

  3. The crazy thing in that is that right now, borrowing is very cheap. Well, it is at the Fed level, I presume it's pretty cheap at the State level also.

    If that borrowing would be allocated to infrastructure construction (and NOT just indiscriminate road-building, which tends to incur additional stresses on other parts of infrastructure) the multiplier effect would actually increase revenues and jobs might start moving towards Walker's 250,000 promise.

    Instead, it's borrowing against public spending to provide tax benefits that won't be returned into the economy.

    Of course, extending and strengthening the middle class is not wat Republicans are about, regardless of the amount of lip service they give to it.