More Walker "credit card" budget tricks

Thanks to good leg work by the four Democrats on the Joint Finance Committee, we just found out one of the ways the Walker Administration hopes to fix their current-year budget deficit - put it on the ol’ credit card! The two Dem Reps on the Joint Finance Committee, Gordon Hintz and Chris Taylor, put out this humorous but also dead-serious press release today exposing the trick, which was never approved by the State Legislature.

“DEBT. IT’S EVERYWHERE GOVERNOR WALKER NEEDS IT TO BE.”

(MADISON) The Legislative Fiscal Bureau released a memo late Friday revealing the Walker Administration intends to close part of the $283 million shortfall in the current fiscal year by delaying payment on $108 million in debt that was due to be paid off in May. Putting off this payment will impact the next budget in the form of additional debt service payments and interest costs.

“The credit card has been Governor Walker’s favorite tool wherever he’s been in charge. He borrowed as Milwaukee County Executive. He borrowed money as Governor to balance the state budget. He wants to borrow money to pay for roads. And he effectively wants to borrow money from the future to pay for his tax cuts today. That doesn’t sound fiscally responsible to me,” said Rep. Gordon Hintz (D-Oshkosh).

In a February 5 letter responding to concerns about the shortfall raised by Democratic members of the Joint Finance Committee, Department of Administration Secretary Mike Huebsch stated that “we will end with a positive [budget] balance by reducing government spending and making fiscally responsible decisions”. There was no mention of the decision to effectively borrow more money in the future to pay for poor decisions of the past four years.

So how is the Walker Administration able to do this on their own without legislative approval? Let’s go to what the LFB sent to the Dem legislators, which not only goes over the types of refinancings that can be done with state debt, but also how they were able to try to sneak this one over in the first place.

The proposed restructuring of the May 2015 GPR (general taxes) principal repayment of a portion of the state’s outstanding commercial paper, which is identified in the attachment, would involve delaying $108,000,000 in GPR principal that had been previously scheduled to be retired. Unlike outstanding bond principal, restructuring a commercial paper payment does not require the Legislature to authorize any refunding bond authority in order to carry out such an action. Rather, the administration can simply direct the Department of Administration Capital Finance officials to not make the scheduled principal repayment. This can occur because the state’s commercial paper program is effectively a short term line of credit, in which the state, under the agreed terms of the line of credit, is only required to make annual interest payments on the principal borrowed on the line of credit.... As a result, DOA Capital Finance has established a principal repayment schedule for the state’s outstanding commercial paper, including a May, 2015 payment of $108,000,000 budgeted for in the 2013-15 budget. However, because only the interest on the outstanding principal is due under the credit agreement, the administration can defer paying the principal on these obligations in any given year.

So they’re using this commercial paper delay to avoid $108 million in expenses in this year, and kick it into future years, with previously-unforeseen interest payments going on top of that, driving up overall expenses to the state….with the plan that Scotty and much of this WisGOP crew will be long-gone before it hamstrings future budgets.

And the LFB memo notes this extra cost starts to be realized in the next budget.

While the 2015-17 budget bill does not include debt restructuring, the expenditure reduction from the May, 2015 restructuring action is included in the opening general fund balance for the 2015-17 biennium under the Governor’s budget proposal. In addition, the Governor’s biennial budget proposal would increase GPR debt service by $544,900 in 2015-16 and $18,746,900 in 2016-17 relating to the administration’s decision to restructure $108,000,000 in outstanding state commercial paper principal that would otherwise be due in May, 2015.

Cool deal, huh? In other words, this trick is costing taxpayers more than $19 million in the next budget, and likely between $90-$100 million in future budgets. All to avoid having to do a one-time budget repair bill, in order to pump up his “fiscally conservative” talk to a few hundred rubes in Iowa.

By the way, that same LFB memo also notes that this is far from the first time the Walker Administration has pulled this type of refinancing stunt. You may remember State Sen. Kathleen Vinehout uncovering $558 million in refinancings done in Walker’s first 18 months in office. Add in this $108 million, and now you have more than $666 million of can-kicking that has been part of Walker’s “balanced” state budgets, and this is merely General Fund money (I swear the $666 million number is pure coincidence). It does not include the $991 million that was borrowed for the state’s Transportation Fund, nor does it count the $1.3 billion in borrowing that is part of the next Walker transportation budget.

Between this $108 million debt trick and last week’s hasty suspension of raises for state workers over the final five months of the 2015 fiscal year, does anyone else notice that the Walker Administration is running scared and running out of options to take care of their busted budget? They’re praying hard for strong revenue numbers over the next 2-3 months to take care of their self-inflicted problem, but as I’ve said before, don’t bet that paying off.

Which makes me wonder, what other panicked measures are going to be taken over the last 4 ½ months to make the numbers look like they balance in Fiscal Year 2015? And the longer the Walker Administration stalls on admitting their failure and putting up a budget repair bill, the worse a correction it is going to have to be.