Both Walker and Evers need more money to get what they want in the next budget

Before an election, there are always aspirational ideas about what can be done if a certain candidate is elected. But after November, when we say "SHOW ME THE MONEY", we find out it isn't doable.

With that in mind, longtime Capitol reporter Steven Walters went over the wishlists for both Tony Evers and Scott Walker, and compared it to the amount of funds that may be available. Walters notes a main problem is that there are a lot of pending bills and built-in budget increases waiting for whoever wins the Governor’s election on November 6.

$900 million in IOUs – past spending commitments for the two-year 2019-21 budget cycle that start coming due after July 1.

Topping the list of spending promises on that costs-to-continue list include the first installment of tax credits and tax breaks to Foxconn, if it can show it has met specific investment and hiring goals at its Mt. Pleasant manufacturing plant now under construction, according to the Legislative Fiscal Bureau.

State general-fund tax collections totaled $16.14 billion last year – a healthy 4% one-year increase. If there is no recession, and tax collections went up by that much again this year, it would bring in $645 million more. And, the state treasury had a $588-million surplus on July 1.

The problem is that much of that $588 million will be blown by June 30 due to Walker/WisGOP pre-election gimmicks such as the one-time child tax credit, the sales tax holiday in August, and one-time bumps in K-12 spending. The original amount of overspending for this year was $365 million, but since it looks like the Annual Fiscal Report tracked and credited the child tax credit payments to the 2018 Fiscal Year, that $93.6 million should be taken off of next year’s deficit.

So if I’m looking at it right, there should be around $317 million left over on June 30, if all numbers stay as budgeted, meaning about $600 million is needed just to pay for those IOU’s. Walters then adds in the various proposals that would then add to that $600 million deficit for 2018-19.

*Medicaid: +$494 million. State Department of Health Services officials submitted a 2019-21 budget that would require $494 million more in state tax dollars by mid-2021.

By that 2021 budget year, Medicaid is expected to cost a record $11 billion. State taxpayers pay about 31% of the cost of Medicaid, which provides health care to more than one in five Wisconsin residents.

If elected, Evers said last week his first budget will propose applying for additional federal dollars to expand Medicaid, which he said could bring in “hundreds of millions of dollars” more to pay for the program.

At least under Evers, you’d likely see a significant savings to take care of those extra Medicaid needs due to the expanded Medicaid. With Walker, not only would Wisconsin likely be on the hook for that extra $494 million, but it could be much more if his fellow Republicans in DC are allowed to cut their share of Medicaid funding to try to pay off the higher deficits that have resulted from their Tax Scam.

Whoever wins will likely have to trim that wish list.

Walters also notes that given both Walker and Evers have promised to restore 2/3 funding to K-12 public schools, which'll cost $130 million a year, and Evers wants an additional $1.14 billion for K-12 on top of that to pay for other needs like special ed. It seems clear that there will need to be other cuts and/or quite a jump in revenues from economic growth to make up the difference.

Now Walters notes that if we continue to get 4% revenue growth with an expanding economy, then that’s another $680 million a year or so (since total General Fund revenues are slated to exceed $17 billion by the end of Fiscal Year 2019), that it could take care of most of these wants. But that’s a risky proposition given that 2/3 of economists are saying the country will fall into a recession at some point during the 2019-21 budget.

In addition, there are income tax cut proposals from both Walker and Evers. Walters notes that Evers’ plan is basically revenue-neutral, since around 85% of the tax cut will be paid for by getting rid of “The Big Giveaway” tax cut for the rich and large corporations.

*Cut income taxes? Evers said he will propose a $340-million “middle class” income tax cut, which would help individuals with taxable incomes of less than $100,000 and couples with taxable incomes of less than $150,000.

About $300 million to pay for that tax cut would come from new income limits on who can qualify for the manufacturing and agriculture tax break – a tax break that will cost the state treasury $570 million in the current two-year budget.

So most of Evers' proposed middle-class tax cut is paid for. By comparison, Walker has thrown out proposals to expand the Homestead Credit, Child Tax Credit, and an incentive program to keep Wisconsin college graduates in the state. The price tag for all of these ideas would cost $184 million million for 2019-21 (and much more when fully phased in for the next budget). None of those Walker proposals ID the cuts or raised taxes to make up the difference.

And let’s not forget that there’s another $1 billion in unmet needs that have to be taken care of in the Transportation Fund. It is unlikely that there will be enough pork from DC to bailout our costs like we had in Fiscal Year 2018, so unless we want to see Scottholes multiply even more and/or see our already-huge highway debt explode, there will have to be a tax hike or transfer of extra money from the General Fund to take care of that as well.

So yes, while on the surface we might have a lot of money to take care of these candidate wish lists, the prior austerity and can-kicking in the Age of Fitzwalkerstan (including $368 million that was just refinanced last week) bites us in the backside enough that there still isn’t a lot left to throw around. This is assuming the 9-year economic recovery somehow stays afloat for the next 3 years, and that's something that seems unlikely as the Earnings Bubble pops and millions of Americans end up paying more to Uncle Sam when they file their taxes in the coming months.

If the country and the state fall into recession in the near future, then not only will there not be enough money to pay for all of these wishes, there are going to be even more spending that needs to be cut, barring a bailout from DC. And that's something almost no candidates want to admit, but will likely have to deal with.