Monday, January 5, 2015

At Walker's 2nd inaugural, the state budget is in worse shape

Are we better off fiscally in Wisconsin than we were 4 years ago? This is a question that is worthy of investigation as our fair Governor got sworn in for a second term today. Let’s look at the then-and-now, shall we?

As Governor Walker took office in January 2011, the best estimates we had of future budget numbers were from the estimates done by Jim Doyle’s Department of Administration that were done in Nov 2010. At that time, it said the following.

Nov 2010 DOA estimates
FY 2010 Ending balance +$71.1 million
FY 2011 Ending balance +$10.1 million

FY 2012 Revenues $13.651 billion
FY 2012 Projected expenses $14.392 billion
FY 2012 Ending balance -$731.0 million

FY 2013 Revenues $14.147 billion
FY 2013 Projected expenses $14.840 billion
FY 2013 Ending balance -$1.424 billion
PLUS $65.0 million required reserves

TOTAL TO MAKE UP FYs 2011-13- $1.489 billion

Here’s what the 2014 version of the same November DOA document shows for the upcoming budget.

Nov 2014 DOA estimates
FY 2014 Ending balance +$516.9 million
FY 2015 Ending balance -$132.1 million

FY 2016 Revenues $15.540 billion
FY 2016 Projected expenses $16.636 billion
FY 2016 Ending balance -$1.096 billion

FY 2017 Revenues $16.126 billion
FY 2017 Appropriation requests $17.244 billion
FY 2017 Ending balance -$2.214 billion
PLUS $65.0 million required reserves

TOTAL TO MAKE UP FYs 2015-17- $2.279 billion

Now it’s worthy to mention that the DOA figured $1.633 billion in lapses for the 2011-13 budgets, compared to “only” $918 million in lapses for 2015-17. But even so, the 2015-17 “zero-lapse” deficit is still higher by a total of $75 million (both are over $3.1 billion).

Let’s also compare the projected tax revenue growth for the year in progress for both of these reports.

FY 2010-11 DOA projected revenue growth +4.25%
FY 2011 year-over-year revenue growth thru Nov +3.61%
Final FY 2011 Year-over-year revenue growth +6.43%

FY 2014-15 DOA projected revenue growth +4.98%
What I estimated FY 2014-15 revenue growth to be after Nov 2014 figures +2.94%

And I’m not even taking into account the Transportation Fund’s issues, which had a surplus of $110 million in FY 2010 (even after $85 million was sent to the General Fund to shore up that budget), and had $200 million in the bank at the end of FY 2011 (see page 7 of this PDF). By comparison, that bank balance was barely half that by the end of FY2014, and that was with the General Fund and other sources kicking in $57.8 million. With $751 million in added taxes and fees being asked for in the next budget just to keep the Transportation Fund solvent, this is another area where we are clearly not better off than we were in January 2011.

The bottom line is that we have a current-year budget deficit (which we didn't have in January 2011), and a larger deficit looming in the 2015-17 budget than we had in the 2011-13 one (with a higher likelihood that current-year revenues will fall short, which would increase the budget deficits for all three of those fiscal years). We also are in significantly worse shape in the Transportation Fund, with a large number of freeway projects that have been started in the last 4 years, with nowhere near enough money to pay for them. I don’t see how January 2015 can be honestly portrayed as a better situation, especially when the one-time bullet of Act 10 benefit cost savings has been shot, and is now baked into the larger budget deficits of today.

So any talk from Governor Walker and his spokespeople on AM radio about how “our budget is better off than it was four years ago,” is simply not true. The numbers show that the Transportation and General Funds are in worse places than they were when Gov Walker took his first Oath of Office, and with tax cuts and other austerity measures having already been imposed, there are fewer options left to get out of the mess that we’re in. But I hope you enjoyed the small handful of tax cuts that you might have received along the way!


  1. Yes, we really enjoyed our pizza dinner.

  2. As always, thanks for the thorough analysis, Jake.

    Now, if only the Milwaukee Journal Sentinel would expose Scott Walker's budget funny business for sham it is.

    1. Dirty secret of the journalism business- most writers are just trying to crank out their story, and don't have the time or knowledge to look into and mention these details. Unless the attention becomes so large that they have to be spurred into doing more investigation and discussion of the topic.

      And beyond that, George Stanley and his bosses at JournalComm have a vested interest in keeping this on the down low, unless it starts costing them readers from their obvious bias and cover-ups. Doing more research and speaking out on this stuff (and letting them know we're onto them and will make them pay for negligence) keeps them from on the subject.

  3. Too bad they can't do their "investigative" reporting as news occurs rather than months after the fact . . .

  4. Well, it all starts to come clear beginning in January and continuing through April.

    The Walker people have said that the reduction in state personal income tax collections from their original estimates is due to the change in the withholding requirements reflected in the state withholding tables for 2014 (why their revenue estimates didn't adequately reflect that potentiality, is always greeted by mumbles, and comments like: "look over there!").

    I, on the other hand, think that a good part of the personal income tax collections gap in 2014 was generated by aggressive tax restructuring by taxpayers to take advantage of the Manufacturer's & Farmer's Credit (this re-structuring wave would also explain the dip in corporate income tax collections, and the large numbers of LLC, and LLP business entity creations reported by the Walker Administration).

    My position is that a good portion of the reduction is permanent and, more ominously, will increase as the M&F credit increases in 2015.

    The truth will start to be apparent as taxpayers begin to file their 2014 returns. If refunds are substantially reduced compared to the 2013 tax year, then the net collections will begin to even out. However, if refunds continue at levels even somewhat comparable to previous years, then the budget gap begins to resemble something out of Kansas, and a $3.5 billion dollar budget deficit for the next biennium is a clear possibility.

    Dr. Morbius

  5. The reduction in income taxes collected so far are indeed a function of the lower withholdings, and that's why I've been using the "adjusted" income tax figures. There's still a $250 million shortfall when you make that adjustment, by the way.

    The real kicker will be when state income tax refunds are lower over the next 3 months, because less was taken out in the first place. And as you mention, I think the corporate tax reductions will cost a lot more revenue than when it was first estimated. The likelihood is that tax revenues will be even lower than they expect today