Post-veto budget may look better, but still brutal for Wisconsin

The Legislative Fiscal Bureau came out this week with the “plain language” explanation of Scott Walker’s 104 vetoes to the State Budget, and their effects on the state’s bottom line. It’s a very good read that cuts through a lot of the BS spin, and I wanted to touch on a few of the items the LFB analyses regarding the vetoes.

On the good side, there were some special-interest tax breaks that the Governor dumped out of the budget. These provisions were part of the notorious “999” motion thrown in at the end of the Joint Finance Committee’s budget deliberations earlier this month (I outlined some of these when they happened). They include the following:

As passed by the Legislature, Senate Bill 21 would have required that, with regard to taxable sales on access to or the use of an amusement device, the state sales and use tax only be imposed on the sales of playing time on the device. Further, to the extent that playing time on an amusement device derives from playing specified digital goods ("specified digital goods" means digital audio works, digital audiovisual works, and digital books under current law) or additional digital goods ("additional digital goods" includes video or electronic games under current law) on the device, the state sales and use tax would not apply. The bill would have defined "amusement device" as a pool table, video game machine, video gambling machine, dart board, pinball machine, foosball table, air hockey table, shuffleboard table, or jukebox....

As passed by the Legislature, Senate Bill 21 would have increased the cigarette tax stamp discount from 0.7% to 0.8% for cigarette manufactures, bonded direct marketers, and distributors. It was estimated that this provision would reduce state revenues by $500,000 in 2015-16 and $600,000 in 2016-17....

As passed by the Legislature, Senate Bill 21 would have created a sales and use tax exemption for goods sold to construction contractors who, in fulfillment of a real property construction activity, transfer the goods to Wisconsin elementary and secondary school districts, municipalities, or nonprofit entities if such goods become a component of a facility in this state that is owned by the entity. The bill specified that eligible nonprofit entities would include those that are organized and operated exclusively for religious, charitable, scientific or educational purposes, or for the prevention of cruelty to children or animals, except hospital service insurance corporations. The bill would have defined "facility" as any building, shelter, parking lot, parking garage, athletic field, athletic park, storm sewer, or water supply system, but not a highway, street, or road.

The Governor’s vetoes mean that previous law stands, and that these businesses will still have to pay the same amount of taxes. This increases state revenues by an estimated $12.4 million over the two-year budget over what the Legislature approved of.

There were also millions of dollars that Walker removed from the Wisconsin Economic Development Corporation’s budget, likely to avoid having the JFC having to discuss WEDC’s slushy mess at a time that it could further damage the Walker 2016 campaign.

As passed by the Legislature, Senate Bill 21 would have reduced GPR funding by $17,900,000 in 2015-16 and $12,400,000 in 2015-16 from the Wisconsin Economic Development Corporation's (WEDC) operations and programs appropriation and, instead, provided those amounts in the Joint Committee on Finance's (JFC) supplemental appropriation. The Governor's partial veto retains the reductions to WEDC's operations and programs appropriation, but deletes $16,300,000 in 2015-16 and $12,400,000 in 2016-17 that would have been placed in JFC's supplemental appropriation. [The $1,600,000 that would remain in JFC's supplemental appropriation in 2015-16 from the amounts subtracted from WEDC's operations and programs appropriation was also vetoed by the Governor and is described under "Investing in Infrastructure -- Item D-70."]

As is becoming habit, the best ways in Walker World to deal with a problem is to avoid dealing with it, or to abolish the agency that is looking into the issue.

If you turn to page 8 of the PDF, the LFB lists the numbers of the budget as it stands under Walker’s vetoes. This will likely be the source of a Walker talking point on the campaign trail that will claim something like “Our budget has a $131.4 million surplus.”

First of all, it’s a silly comment because all Wisconsin budgets by law have to be at +$65 million or above, because of a requirement for reserves. Second, this ignores the $500 million (and possibly $850 million) in borrowing that will need to be done to balance the Transportation Fund’s budget. This “separate budget” trick does not work for the “unified” Federal Budget, but Walker won’t tell the rubes in Iowa, New Hampshire and South Carolina that.

And Page 8 also shows this: The “$131.4 million surplus” figure is only reached by assuming nearly $1.1 BILLION in lapses (i.e., unspecified cuts), including $740.8 million in Year 2 of the budget. That’s like a debtor saying “my checkbook will balance, if I assume I won’t pay anything for gas or parking for my job next year.” It would be nice if we didn’t have to do that, but it’s not very connected to reality.

So while the governor’s vetoes did improve the bottom line for now (assuming they’re upheld), it’s still a brutal budget with very little margin for error, and a document that will likely result in further cuts in the very near future.