Following the bouncing taxes and fiscal years

I think a lot of people get confused over how different levels of government work with each other in Wisconsin, and politicians and cynical talk show hosts use this to their advantage. I'm going to give the 3 of you who might read this blog a better understanding of how this all fits together, and then it's your job to tell others and lessen the chances of more duping of the "talk more than I know" crowd. Ready? GO!

We hear a lot about the federal government and their spending, because our media is based on national news and doesn't make a whole lot of effort to get out of their D.C./ NYC bubbles. So we get to understand that the federal government spends for programs like health care coverage, interstate highways and rail, and military expenditures (although our media doesn't do a good job of explaining that the money for these things come from the same place- us). I also think people mostly understand that these items are paid for by federal income taxes, but they don't get that capital gains taxes are significantly lower, or understand that cap. gains is for productive uses like day trading of stocks, house-flipping and other legalized forms of gambling (as opposed to more legitimate but illegal forms like betting lines on sporting events).

They get a bit fuzzy when you try to explain that Social Security and Medicare are paid for by segregated funds, although once you show them that FICA line, they get it a bit more. But they think any potential deficit there is somehow different than the deficits that come from spending more of the non-Social Security/ Medicare money, when it's really not. We get those deficit funds from the same place- China and various others we like to owe. But once you get to state and local spending, the just know that "they pay a lot of taxes" and have no idea where all that spending is from. And that's why I'm here.

First of all, the feds, state and local governments have 3 different fiscal years.
Fed- Oct. 1 to Sept. 30 (i.e. Oct. 2009 starts the first fiscal year under Obama, the record deficit recently completed was based on the last budget for Dubya).

State- July 1 to June 30. 2-year budget. We are currently in 2009-2010, and 2010-2011 is mostly set and starts in 6 1/2 months.

Local- Jan.1 to Dec. 31, so their new 2010 fiscal year begins in 12 days.

You can see where this becomes a problem if you are the city of Madison and get nailed with a 17-inch storm in December, because you're working on a budget you set 13 months ago in November 2008, when you anticipated normal snow and normal levels of opperations, and you're trying to ride it out till the end of the year. When this comes up, you usually have to borrow money or take it out of your contingent fund to cover it, but most citizens think that city budgets are set for the entire "winter season", instead of being two separate budgets that change over come Jan. 1.

This also leads to confusion on when states and localities receive their funding from one of their main sources - higher levels of government. Many government grants are handed out to lower levels with the idea that the more local levels might be able to direct resources to better places (which may or may not be true, depending on who you're dealing with). So when you hear all this whining about stimulus funds not being spent, the different dates of government fiscal years is a good explanation. For example, Wisconsin's new budget started on July 1, and generally used stimulus funds for those two years (July 2009- June 2011). Part of it was to fill their huge budget deficit, and part of it was to jump on projects they'd otherwise be spending themselves (Gov. Doyle's billion-dollar adventure on I-94 from Milwaukee to Kenosha is a good example). Likewise, Obama wasn't even elected when local governments made their 2009 budgets, so while they've had to change around some priorities and items this year, more likely they used the stimulus funds and programs to deal with their 2010 budgets. It's why you will likely see a ton of construction projects around Milwaukee and other communities next Spring and Summer, because it's the first budget year where the extra money from the feds kicks in, and local officials prefer that the feds pay for it than with property taxes, as it tends to help their future job prospects.

A problem comes up when the higher levels don't decide to help their brethren down below. For example, when huge amounts of federal money are going to overseas adventures and you have a president and Congress who don't like book-learning, often items such as medical research at universities are cut. A lot of states have schools like UW that rely on large amounts of research being offset by federal grants, since people in other states stand some chance of being helped by medical or producitivity advances that come out of thinking places. So now they have to find a place to get the money to do their jobs of research. Maybe that comes from the state, if you have a mindset that education is important, or maybe you hit up donors or corporations to help you out to get it done. Of course, that means you need to find someone that cares enough about the subject to help pay for it, and that person might want to see a certain result regardless of what the facts say, but that's the way it goes when you don't get cash from a taxpayer accountable entity. Or you might not get the money at all, and you don't do the research, regardless of the needs.

Another issue might be when a needed expense keeps rising, kind of like what is happening in Wisconsin with Medicaid expenses . If you think giving medical help to those without a lot of money is a priority, and if companies choose not to offer coverage or if economic conditions (like the deregulation-driven recession we're now in) drive down incomes enough to greatly increase the amount of people needing help, then these expenses go up. The same situation happens if you think locking up criminals for various offenses is worth doing and your prisons fill up, requiring you to feed and house more inmates (as has happened in Wisconsin). Since the pot of money is limited in what states can spend money on, and these items keep going up, you can either 1. Cut out some of these priorities, and therefore give less coverage to the sick (as Robin Vos would like to do in the article) or 2. You knock out some other item you usually spend on. In the state's case, this means they'll decide to give less money to previous priorities like the UW System, or they'll cut the money they share to all the local governments in Wisconsin, and tell these groups to come up with their own funding.

So you drop down to local governments, who handle needs like police and fire services, snow plowing, street fixing, and other extravagances. In Wisconsin, localities can only raise revenue in a handful of ways outside of state and federal allocations. Most of this is through property taxes, but they can also institute a sales tax (if the state lets them, which is has not done for the City of Milwaukee), some other user tax like rental cars or hotels (again, if the state will let them) licenses and fees to do certain actions (i.e. bartender licenses, building permits, parking on city streets), tickets from law enforcement, and selling locally-owned assets (cars, land, etc.) What they cannot do is put in a local income tax (the state explicity prohibits this), and they have to balance their books. So because the feds don't want to handle it, and the state doesn't want to handle it, the locals have to handle it. And the locals can't go many routes to handle it, based on the state not allowing them to do much other than raising property taxes and other fees, so that's what they raise to make sure cops are on the street and potholes get fixed and related things.

NOW, here's the fun part. Tea-baggers and corporates complain that taxes and spending are too high in D.C., so they try to limit tax levels and pass the buck to the state. Sykesist tea-baggers blame people in the Legislature for high taxes and make up stats about how the state is some kind of tax hell (they conveniently leave out the state's low sales taxes and license fees when they do), so the legislators are cowed into budget games to avoid raising state income or sales taxes (which despite all the squawking, they've pretty much done for most of us in the real Wisconsin), but they do it by cutting shared revenue and other state help to localities.

So when localities have to figure out how to come up with things the tea-baggers want to see (like cops on the streets or their roads plowed), they raise the one thing they can - property taxes - or they try to sell their land or services. Who does the land or services go to and who are they accountable to? In the Bush era, it was people like Blackwater and Haliburton for the feds, or maybe it's Scott Walker's buddy that runs a custodial service, or maybe it's former Bush Budget guy Mitch Daniels in Indiana, who sells off the state's Social Services (oops, scratch that last one) .

So in a nutshell in Wisconsin, the feds won't tax and pay their share and pass the buck to the state, who won't tax and pay their share and passes it to the locals, who raise property taxes and/or don't pay for what's needed, and the tea-baggers complain that government is dysfunctional and doesn't work. And the argument of "government doesn't work" means that there should be lower taxes and spending, which makes the feds pass the buck to the states who...and the cycle continues.

And the corporates who tell the tea-baggers what to say blame government for their property taxes and state taxes going up and not doing a good job, when it would do a better job, be more fucntional, provide better services and not need local or state taxes to go up if they didn't try to placate the corporates and cut the damn expenses at the higher levels in the first place!

There, now go forth and spread the good word this Christmas season!