Monday, August 21, 2017

Has budget delay allowed a shortfall to appear?

After a long absence, we will finally see the Joint Finance Committee back in action this week. First, they will hold a "public hearing" on the Fox-con, which naturally will not be held in Madison, but near a likely site of the Foxconn campus in Sturtevant (that doesn't seem sketchy at all). Then, they will actually try to make some progress on the budget by discussing a few items, including property taxes and the DNR.

According to today's Milwaukee Journal-Sentinel, it looks like the GOP-run JFC is going to proceed with initiatives to move ahead on property taxes at state expense. In addition, there may be a bigger deal that gets revealed in the near future that finally gets this budget done.
Rep. John Nygren (R-Marinette), the panel's co-chairman, said there is an agreement in principle on transportation and the personal property tax between Gov. Scott Walker and GOP leaders in the Senate and Assembly. But Nygren declined to reveal the deal in detail, saying it was tentative and could still fall apart as legislative leaders share it with rank-and-file lawmakers.

"It's not final, but there's a framework," Nygren said.

A spokesman for Walker had no comment but the committee's other co-chair, Sen. Alberta Darling (R-River Hills), said progress has been made between Senate Republicans, who favor sizable borrowing for road construction, and Assembly Republicans, who oppose new borrowing without new revenue to pay for it.

"We're very close on transportation and both sides had to give to get to something," Darling said.

Both Nygren and Darling said the committee will vote Thursday to eliminate the property tax levied by the state for forestry programs, which would save $26 on the tax bill for a median-valued home.
That initiative would cost around $180 million over the next two years, but recent events make me wonder how prudent it is to throw that money out the door when we might need it in the near future. And not just because the Fox-con would cost taxpayers hundreds of millions of dollars for each of the next 2-3 budgets after this one.

A report came out a couple of weeks ago showing the state's cash position and outlook. While not an exact proxy for the totals in the state's General Fund, it usually gives us a good idea. So let’s take a look at what was projected at the end of April and how things looked at the end of July.

Gen Fund cash in millions, March 2017-June 2017
Mar 2017 $1,028.5
Apr 2017 $1,360.9 projected vs $1,269.8 actual (-$91.1 mil)
May 2017 $1,889.2 proj. vs $1,847.1 actual (-$42.1 mil)
Jun 2017 $1,552.6 proj. vs $1,369.5 actual (-$183.1 mil)

So why did we fall $141 million short in June and $183 million overall? Is it as simple as July 1 being on a weekend in 2017 and on a Friday in 2016, which means all expenses that were typically paid on July 1 got paid on June 30 (this happened with the federal government)? Or will we end Fiscal Year 2017 with a lower-than-expected carryover, which immediately would put the 2017-19 budget into a deeper hole? Lower revenues and cash balances was what Senate GOP Leader Scott Fitzgerald seemed to hint at recently when he implied that there may need to be a larger cushion built into the budget than the $12 million Walker left it with 6 months ago.

The 2016-17 final General Fund revenue figures are expected to be released in the next 2 weeks (last year it was on September 1), and that can tell us if we fell short on that side, and may need to compensate in this budget. So while bad GOP policies and dysfunction have led to a delay in the Wisconsin state budget that is approaching 8 weeks, it might now also present an opportunity to avoid further budget problems. If we aren’t going to see final floor votes on the budget or the Fox-con in the next 10 days anyway, we might as well wait to have a better idea of where we are.

Now, that doesn't mean that some items can be moved forward if certain parts of the government have funding changes that need to be finalized ( school aids and caregiver rate increases are among the items being held up due to the GOP's dallying on the budget, and should be moved ahead separately and quickly). But maybe we should hold off on the property tax giveaways and other big-spending pre-election gimmicks until the revenue numbers come in, because the current-year budget might already be messed up due to January revenue projections overshooting the weaker reality that appears in August.

Instead, I have a suspicion that GOPs will try to sneak everything out of Joint Finance late Thursday night right before Labor Day Weekend, in a repeat of the time 2 years ago when they tried to gut the state's Open Records law ahead of the 4th of July weekend. I hope that's not the case, and I hope they get it right and try to do more to fix the house-of-cards pile of garbage that Scott Walker sent to them. But with Walker at 40% approval and falling and Trump doing even worse than Scotty in Wisconsin, I can see the WisGOPs trying to pull lame gimmicks that make an already-bad budget outlook even worse.

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