Tuesday, October 15, 2013

Yep, property tax "relief" expands budget deficit

I knew there the WisGOPs were trying to rush this property tax "relief" through for a reason. And it looks like my instincts were right, as the Legislative Fiscal Bureau showed that passing the $100 million giveaway and the rest of Gov Walker's tepid "jobs package" will end up increasing the structural deficit in the next budget to $725 million. This figure also includes the "super expanded 2013 surplus" the was part of the DOA report released yesterday, and reflects a few items that can be laid directly at actions done since the November 2012 elections.

1. The Koo-Koo tax cuts are a big factor. Basically Walker and WisGOP have decided to blow this one-time surplus (which LFB pointed out was due in large part to a booming stock market, and not due to job or wage growth) on $648 million in tax cuts. If this sounds familiar, it should, because in 2001 another Dubya did the same strategy in D.C., and another Scott (McCallum) blew a big surplus on one-time fixes and spending in Wisconsin. The result? A major deficit blew up once the economy turned south later that year. And given how the Baggers are trying to blow up the country's credit rating with their dumb antics in D.C., does anyone else get a sense of deja vu coming along, in a lot of bad ways?

2. The Walker Administration refused to follow the advice of the state's Transportation Finance and Policy Commission, and did not raise the gas tax or other related fees in the latest budget. Instead, the Walker folks borrowed hundreds of millions of dollars for a road-building binge, and transferred $216 million from the General Fund to the Transportation Fund to help pay for public transit on a one-time basis (the raise in funding was relatively small, but the money for it essentially got paid out of the General Fund). The LFB assumes this transfer will not continue, which means the Transportation Fund faces a major deficit in the next budget as well, since it'll have to come up with that extra money somewhere. In addition, if that transfer to the Transportation Fund DOES continue, then it raises the deficit another $216 million, to $941 million. It is a classic "kick the can down the road" strategy that really puts the state up against the wall for the next budget.

3. Now there's this $100 million giveaway to make schools reduce property taxes, along with some smaller symbolic measures to close the alleged "skills gap" for certain jobs (something I have pointed out is largely due to employers refusing to pay Wisconsin workers a competitive wage over having unskilled workers). I'll leave out the debate about whether property tax relief is the right strategy as opposed to meeting other needs, and instead make the following point about how this alleged relief is being carried out.

If your goal is to give Wisconsin property owners a noticeable tax break, you wouldn't give a tepid tax cut phased in over 2 years, where $40 million is added in year 1 (and can pretty much only be used for tax relief) and $60 million more is added in year 2 (and can conceivably be used for other means along with tax relief). What you'd do instead is throw all $100 million of tax relief into year 1, and allow year 2 to stay as it is in the budget. This would do the following 3 things.

A. Gives a much bigger property tax break to Wisconsinites for year 1. Instead, LFB anticipates that overall school property taxes will still go up for 2014, even with this cut, so most people won't notice it, and will rightfully be skeptical when Walker tries to claim "I cut property taxes" in the 2014 campaign.

B. Total state funding for schools would face a minor drop of less than 1% for 2015, but that would be easy to absorb, coming on the heels of a major increase in state aid for this year. All Districts would do is use more state funding to make up for expenses in 2014-15, as opposed to only going for property tax relief, and it would give a full year for districts to make that adjustment, perhaps allowing for a smooth transition from year-to-year. Instead, this current plan will do nothing for increasing the level of services in public schools in either this year OR next year.

C. Putting all $100 million in year 1 would not increase the structural deficit, as year 2 totals would not change. Instead, the $60 million in added funds for year 2 under the current bill now becomes assumed in the budget for future years, which drives up the structural deficit, and means there has to be a place to cut or raise taxes to take care of those extra funds.

In other words, the school "relief" bill doesn't give enough bang for the buck, it doesn't improve education in Wisconsin, and it's fiscally stupid because it drives up our deficit for the next budget.

So why do it? Because Walker and WisGOP care a whole lot more about talking points than better outcomes, and because it allows things to be screwed up even more long-term, tying the hands of the governor that follows Walker, much like how Bush's idiotic fiscal policies left Obama in a major bind for deficits and debt, and encouraged more austerity-based policies. And if it's screwed up enough, then Wisconsin will have little choice but to sell off needed services to investors and other campaign contributors.

Which is just the way these d-bags like it. Yep, this silly $100 million giveaway is straight out of the "starve the beast" textbook.

1 comment:

  1. The 2015-17 structural deficit is expanded to $785 million, not $725 million.

    The $725 million in table 5 of your first link is the amount needed to balance those two years given a starting balance of $125 million, i.e. an unencumbered starting balance of $60 million. That is burned up as well as added to the $725 million that needs to appear from somewhere between July 1st, 2015 and June 30th, 2017 to stay within the law for a structural deficit of $785 million total.

    I see the 2015-17 structural deficit emphasized a lot, but rarely the 2013-15 one, which is simultaneously of comparable size ($634 million) and more immediate (and therefore less influenced by any general improvement in economic conditions there might be) and the budget for which is already set in stone. The only reason FY15 isn't projected to close with the General Fund drowning in negative numbers is because of the unencumbered starting balance of $694 million, bought with $750 million of extra general obligation borrowing in FY13 (and $550 million in FY12).

    The other reason for this is the following timeline:

    Monday, October 7th: Mary Burke announces that she's running for Governor
    Thursday, October 10th: A property tax cut bill is ordered drafted.
    Thursday, October 10th: Walker orders a Special Session to pretend Wisconsin is better off than we actually are.