Saturday, November 22, 2014

Wisconsin deficit already spiraling higher

The deficit that resulted from Thursday's Wisconsin Department of Administration's summary of budget requests and revenue projections were bad enough. To review, $197 million must be made up in the next 7 months, and over $2.2 billion more in the 2 years after that. But those numbers may be soft-selling how badly the situation really is, and Friday's release of October's numbers from the Wisconsin Department of Revenue indicate that the deficit may grow larger.

At first glance, the October figures look disastrous, as total revenues were down 3.7% compared to October 2013, and income taxes were down a stunning 11.0%. But I also know that approximately $55 million a month is being reduced due to the changing of the withholding that began in April, so I add in that amount, and...the numbers still aren't good. Income taxes still end up down 3.7% compared to last year, and adjusted total revenues were up less than 1%. That's well behind the 5.0% that the DOA projected for revenue growth in this fiscal year, and even fell behind the 3.5% that the LFB originally projected back in May. Based on the first four months of FY 2015, I projected all major components of the State of Wisconsin's revenues, to see where we're on track to end up at June 30, and the numbers I am comparing this to are the figures from the 5% revenue gains that were projected in the DOA report.

Projected Wisconsin revenues vs. DOA projections FY 2014-15
Individual Income Tax- DOWN $306.3 million
Sales Taxes- UP $33.5 million
Corporate Taxes- DOWN $19.2 million
Excise Taxes- In line, I'll say even.
Other taxes- No real difference

Being $292 million short on revenues from the DOA's rosy scenario would mean that Wisconsin would have a $489 million shortfall in this fiscal year, much more than the potential year-end deficit that Scott Walker faced in 2011 when he claimed the state was "broke" and had to institute Act 10 as a result.

In addition, if that revenue shortfall were to hold, it would lower the base in the following years, and cause those years to have higher budget deficits than the massive ones the DOA is already predicting. If you keep with the 2.9% average revenue increase that Wisconsin has seen over the past five years (straight from otherwise-BS assumptions that the GOP's Co-Chairs of the Joint Finance Committee pulled out before the election to claim the budget was in "surplus"), the deficit numbers for the two years in the next budget are as follows:

Deficit in Fiscal Year 2015-16 $1.364 billion
Deficit in Fiscal Year 2016-17 $1.575 billion

Obviously, there's a long way to go between now and June 30, 2017. But if there is no turnaround in the downward trends on revenues or the increasing amount of expenses (BadgerCare Plus enrollments have consistently gone up in the 6 months after Walker's Obamacare-related changes happened in April 2014), those bad numbers could worsen, making it extremely likely that there will be some kind of budget repair bill to fix the deficit for the 2015 Fiscal Year.

That's not the only bad budget news that broke on Friday, as WKOW's Greg Neumann posted an excerpt of his interview with Wisconsin DOT Secretary Mark Gottlieb, who previously asked for $751 million in tax and fee increases to pay for needs in the upcoming budget. Neumann quotes Gottlieb in a story on Friday as saying the Transportation Fund deficit is now as high as $900 million, with the assumption of that DOT budget is to fill much of that hole with hundreds of millions of dollars in transfers from the General Fund. With the General Fund's red ink growing by the day, it becomes less likely that those funds can be transferred over to the DOT, and that means there would have to be even more tax increases and/or cuts in aid and projects at the DOT as a result.

Stay on this story, because you can bet the fiscally-ignorant and paid-off Eastern Wisconsin media will continue to ignore what is truly becoming a fiscal crisis in Wisconsin. And if the Dems in Wisconsin had any guts or smarts, they'd be blaring this story wide, and pre-empting potential one-time gimmicks that Walker might try to plug this exploding deficit.


  1. We should really have the midterms in July 2015.

    There's nothing there to suggest that we're heading for anything but a shortfall of around about the $500m mark for FY15.

    Going by the [LFB's breakdown]( of procedures, Huebsch is just going to estimate away ~$500m of appropriated funds. The question is, which agency or agencies are going to get the shaft and which media outlets are going to recognize it for what it is?

    1. But I don't think lapses alone can close the deficit. I think by law there would have to be a bill that reduces appropriations and/or lapses. So we'd find out what that is. Same for using the $270 million in the rainy fund, if they want to use that.

    2. But the laws says that the determination of need for a Budget Repair Bill is in the hands of the DoA secretary:

      "Yeah, I figured the shortfall would be less than the $79.2m trigger. By the way, I also happened to withhold $500m of appropriations via the estimate process."

      There are no legal penalties specified for Huebsch should he do this. He's more than a little prone to ethical lapses himself, not to mention Walker's long history of appointing those who put his political career above the law.

      The only thing is, it's hard to hide $500m of forced lapses in the space of 6 months, especially if the big ticket item of school aids is specifically exempted by law. Who will notice? I bet we will, I'm just not so confident about the Walker apologists that pass for media journalists these days...