Sunday, September 21, 2014

WisGOP leggies can't lie their way out of exploding budget deficit

Boy, the Republicans must really be feeling the heat from the exploding Wisconsin budget deficit. Take a look at the crap that GOP Joint Finance Chairs John Nygren and Alberta Darling are trying to pull. They decided to take Department of Revenue Secretary Rick Chandler’s claim about “no revenue shortfall” (mentioned in the pathetic spin job DOA Secretary Mike Huebsch gave to Dem legislators earlier this week), and then they threw a set of rosy assumptions at the Legislative Fiscal Bureau, and asked them to “score” it.
1. Tax collections in 2014-15 would be $14,725, as suggested by Secretary Chandler.

2. Net appropriations would be reduced, on a one-time basis, in 2014-15 by $116 million in order to end the fiscal year with a gross balance of $0.

3. Revenues in 2015-16 and 2016-17 would increase annually at the rate of tax collection growth over the previous five fiscal years. The average annual growth in tax collections in tax collections for the five-year period (since 2008-09) has been 2.9%.

4. Net appropriatons for 2015-16 and 2016-17 would remain at the 2014-15 level, adjusted for one-time amounts and 2015-17 commitments
And so Bob Lang did his job, crunched those numbers, and said if all this happened, it would mean a balanced budget in 2014-15, and a surplus of $535 million to play with in the next budget. So the GOP co-chairs used this to say “Crisis? What crisis?”

One problem. THOSE ASSUMPTIONS AREN'T REALITY. For many reasons.

GOP Fallacy Number 1 “Secretary Chandler assumes FY2015 revenues will be at $14,725.” As mentioned before, that would mean revenue growth of 5.57%, well above the LFB’s own projection for 2015 of 3.49% revenue growth. And the “better revenues” that Chandler says happened in July and August 2014? Matt DuFour of the State Journal reported that those numbers were still 0.16% below the same months in 2013.Explain to me how that projects to 5.6% revenue growth?

So let’s stick with the LFB’s original projections of 3.49% revenue growth for this fiscal year, and that’s probably being charitable given the reduced job growth we’ve seen in 2014 and the disappointing revenue numbers that have hit since the second round of tax cuts were passed earlier this year. This means that the revenue shortfall would be around $290 million in year 2 of the budget, which means a budget deficit of roughly $406 million to make up.

GOP Fallacy Number 2 $116 million in “net appropriations will be reduced.” This is an additional step that will have to happen on top of the huge increase in revenue (which likely won’t happen, but for this, let’s assume they will). So these cuts will just magically be imposed? Ok, in which departments? We already have $317 million in lapses built into the 2014-’15 budget. So this’ll just be increased to $433 million? And given that we may well be overspending as it is (with programs with budget shortfalls- like Medicaid), there’s going to have to be overcompensation somewhere else. NAME THE CUTS, or admit you're going to tap the $270 million Budget Stabilization Fund to fill out the deficit.

GOP Fallacy Number 3 Revenues in 2015-16 and 2016-17 would increase annually at the rate of tax collection growth over the previous five fiscal years. OK, we’ll roll with this one. I won’t even assume that 2.9% figure for 2014-’15, and leave it at the LFB’s 3.49% (I’m a nice guy that way). Let’s see what we get, and I’ll also include the changes in tax laws listed on the LFB’s 2015-17 projections from May.

FY 2014 Revenues- $13,948.1 million
FY 2015 Revenues-$14,434.9 million
FY 2016 Revenues- $14,853.5 millon +$122 in changes = $14,967.5 million
FY 2017 Revenues- $15,284.3 million + $44 in changes = $15,328.3 million

Then you add in $559 million in extra revenues to the General Fund (gaming compacts, other items) with no changes to expenses, that means the budget balance in the following years looks like this.

FY 2015-16 -$205.5 million
FY 2016-17 +143.3 million
TOTAL -62.2 million + $65 mil reserve = $127.2 million deficit

OK, so Nygren and Darling were off by $662 million, but it’s a minor deficit that can be easily modified, right? Uhhh, no.

GOP Fallacy Number 4 Net appropriatons for 2015-16 and 2016-17 would remain at the 2014-15 level, adjusted for one-time amounts and 2015-17 commitments. THIS IS FANTASY, and it’s been proven by the budget requests that have come in so far the Department of Administration. Those numbers (which are merely to continue doing what we’re currently doing) are nearing $1.1 billion over current expenses before we even discuss items such as state aid to public schools and any General Fund money that goes to our deficit-riddled Transportation Fund. Nearly 75% of that number is due to a Medicaid shortfall resulting largely from the WisGOPs’ TeaBagging of Obamacare, and with Scott Walker running ads against Obamacare today, I’m guessing he wouldn’t be too keen on saving Wisconsin tax dollars by expanding Medicaid.

And as State Senator Kathleen Vinehout mentions, much of these requests are for services THAT HAVE TO BE GIVEN, and will continue to be given without changes in the law. So with that in mind, we need to count these requests, and rack up the figures.

$127.2 million revenue deficit
$1.1 billion in extra expenses
TOTAL $1.227 billion General Fund

If you split up the $1.1 billion in added budget requests over the two years, it comes to $820 million having to be made up in year 1, and $407 million in year 2, meaning there will be massive damage in calendar year 2015 in particular. And that’s using the WisGOPs’ assumptions of 2.9% revenue growth. If that continues to fall short…..the Scott Walker budget ditch will take more than a regular-size ladder to get out of. I'm not even mentioning the $1.1 billion likely needed to shore up the Transportation Fund, which means that even with normal revenue growth, we will likely need to make up at least $2.3 billion in the 2015-17 budget when the Legislature gets back into session in January 2015, and an estimated $406 million by the end of June.

Now you can choose to beLIEve Nygren and Darling’s spin job of a "surplus" if you want to stay in your little bubble. You can also choose to beLIEve the Brewers still have a chance to win the NL Central, despite being down 7 games to the Cardinals with 7 games to play. But those of us who are in the adult, above-ground world know better, and need to deal with the fact that unlike Karl Rove, we can’t create our own reality. And since the GOPs refuse to deal with the budget mess they’ve made, looks like we need Mary Burke and others to clean it up.


  1. It's so dumb, and so wrong, that the only people willing to go along with this con from Nygren and Darling are the MacIver Institute and "Wisconsin Media Check" whining about how the media that value what's left of their reputations are unwilling to sacrifice it for such a cheap stunt.

    If anyone else covers it the headline would be "Legislators Nygren and Darling establish that the LFB possess working calculators; LFB's deficit projections therefore confirmed" (well, either that or "WisGOP leggies can't lie their way out of exploding budget deficit", that is).

    You should also note that this is a fundamental disrespect of the Legislative Fiscal Bureau. It acts dutifully in the public interest to be open and nonpartisan, but Nygren and Darling use it here as a partisan tool to try to add its name to their own partisan fantasy through telling it what numbers to add up then claiming that it was the LFB, not they, who came up with a rosy projection.

    The reason this disrespect of nonpartisan bodies sounds familiar is that Paul Ryan has done exactly the same thing to the CBO for years.

  2. The comparison to Lyin' Ryan's flim-flam and magic asterisks are spot-on, Geoff. Today's GOP has no bounds on their level of cyncism, which is why I can't stand them.

  3. Jake, I really appreciate your blog. I'd love to see you write some letters to the editor and submit them to papers outside the Madison area.

  4. Nancy- my real life and Madison address makes me not such a good candidate to do that. However, if you or anyone else wishes to quote this info in a letter you write and communicate throughout the state, feel free.