Tuesday, September 16, 2014

DOA Secretary keeps digging hole on budget deficit spin

Another day, another dishonest statement on the budget by the Walker Administration that has to be refuted. This time, it’s from Department of Administration Secretary Mike Huebsch, who oversees the State Budget Office, and is clearly feeling the blowback from the current and future budget deficits that are projected due to Walker policies.

Huebsch sent a response letter to a request that Dem Senators made last week demanding to know what cuts the Walker Administration was planning to make to the budget between now and June 2015, in order to make it balance. Naturally, Huebsch ignores that question, but does bring a bit of news in his response.
….to help satisfy your inquiry, I asked Revenue Secretary Rick Chandler to provide me with a written update regarding collections in the first two months of fiscal year 2015. We are in a stronger financial position than forecasted with tax revenues $48.8 million higher than expected for July and August 2014, which keeps us on track to meet the Legislative Fiscal Bureau’s May 2014 projections for the current fiscal year.

As I’m sure you are aware, State revenue tax collections typically fluctuate month-to-month throughout a two-year budget cycle, and Governor Walker and the Legislature prepared for this variability when building the biennial budget. It is important to remember that the Legislative Fiscal Bureau forecast assumes zero revenue growth in this biennium or the next.
One problem with Huebsch's comments- that last sentence is FALSE. One look at those May 2014 Fiscal Bureau projections shows that there is revenue growth forecast for the current biennium.

General Fund tax projections, LFB May 2014
FY 2014- $14.229 billion (actual number $13.948 billion)
FY 2015- $14.725 billion
Projected rev. growth in May 2014 projections- 3.49%
Growth needed based on FY 2014 actual for $14.725 billion- 5.57%

As Sen. Dave Hansen noted last week, a 5.57% revenue increase is extremely unlikely, given the state’s past history. In addition, what does Huebsch mean when he says revenues were “$48.8 million higher than expected” in July and August? Compared to what? The end of June? July-August 2013? I’d like to see the actual numbers on that one (which of course, are not provided). Also worth noting is that the month of August got 1 extra day of the Labor Day weekend in 2014, which in a tourist-based state like Wisconsin is kind of a big deal when you’re talking sales taxes and related revenues. Let me see the September revenue numbers before I start thinking this budget is anywhere close to back on track.

For another clue on the budget, I found it interesting that Huebsch and DOA released the General Fund Cash Report to the Joint Finance Committee today. This is a regular report that gives a look at the state’s cash flow, and while it is not an exact match for General Fund revenues and expenses, it’s not a bad proxy. This cash balance number goes up and down throughout the year based on when certain bills come in and get paid, and it had slipped earlier this year, portending the revenue shortfall and bad budget numbers that followed.

Projected opening cash balance forecast for October 2014
April 30, 2014 +$1,785.5 million
July 30, 2014 +$1,260.4 million (down $525.1 million)
September 16, 2014 +1,537.3 million

Sept. #- UP $276.9 million vs. July. DOWN $248.2 million vs April.

So maybe there’s some truth to Huebsch’s claim that the current budget isn’t in as dire shape as it seemed last week. But it also shows that we’ve only made up a little more than half the hole that was dug in the earlier part of the Summer after two rounds of Koo-Koo tax cuts hit.

There’s also this interesting whine that Huebsch throws in for the Dem Senators in his response letter.
The only exercise more negligent [than to assume no revenue growth] would be to add the new agency 2015-17 budget requests DOA has recently received and proclaim that we now have a new financial crisis on our hands.
OH REALLY? So we can ignore the $760 million in extra state Medicaid spending and the $831.5 million in total state tax dollars that are needed just to keep the Department of Health Services operating at the same level as today? We shouldn’t add those figures to the base expenses for 2015-17, because this situation magically will be magically fixed over the next 9 months? And we should assume revenue growth will happen over the next two years but throw out any extra costs due to inflation or population or additional Wisconsinites in need of assistance?

Sorry Mike, it doesn’t work that way. Especially when in your letter you repeat the Walker Admin’s lie about a “$3.6 billion budget deficit” in the next paragraph- a number based on the same type of budget requests that Huebsch says shouldn’t be counted! I seem to recall you guys claiming that all these unmet needs meant there was a budget crisis in 2011, which is why the “bomb” of Act 10 had to be dropped. Were you lying then about a crisis, or are you lying now?

Sometimes it’s better to lay back and let the complaints drop instead of answering them, because trying to talk your way out of it just makes your dig your hole even deeper. And speaking of digging holes, look what’s hitting the airwaves….

Keep talking, WisGOPs. The spin on your failed record looks lamer by the day.


  1. I do have some FY15 revenue numbers right now, but they need big, big qualifiers: withholding is always in flux as the books are closed on the previous FY and the new one starts. This is precisely the reason why the DoR lumps the first three months of every FY into one revenue report: the numbers for those months in particular are far too noisy to have anything read into them, and it is poor form to look at any stretches of less than 3 months in any case for the same reason.

    The thing to remember is that the impact of the Act 145 election year giveaways on the current budget was -$976,649,800. If they had never happened, right now we'd be staring at a +$581m opening balance for FY16 and enough to cover the modest structural deficit for 2015-17 we would have had (\*) without the profligacy of the WisGOP.

    (\*) FY15 impact of the GOP recklessness is -$698m, which includes the last impact of the withholding changes. However, the FY16/FY17 structural deficit includes the expiration of this impact, revising revenues up. Without the election-year gimmickry, the structural deficit thus would have been the current $1,766 million less 2x $698m, or $370m, easily covered by a $581m starting balance and with high likelihood that revenue growth could not only cover appropriations growth but go a significant way to covering the Transportation Fund's structural deficit as well if so desired.

    These dire fiscal straits are of nobody's making but Walker and his legislative allies.

    1. Looks like sales taxes were up a little over 4%, which isn't very different from predictions. And you're right, September seems to be the bigger key for income taxes, as there's a major adjustment coming due to August ending on a Sunday followed by a holiday.

      If I'm reading this right, the LFB projections include the effect of the $96 million in rate cuts, so that doesn't need to be adjusted, correct?

    2. Since the LFB projections you've been using of late were made some months after the rate cuts and withholding changes, they include their effects, yes.