Saturday, May 30, 2015

A future structural surplus? Uhh, NO

I've noticed that Scott Walker has recently tried to peddle a talking point to the out-of-state rubes that "Wisconsin will have a $499 million structural surplus in the next budget." The Milwaukee Journal-Sentinel's Politi-"fact" even looked into the claim, and gave it their seal of approval, with the following explanation.
The [Legislative] Fiscal Bureau examined Walker’s 2015-’17 budget plan and said it would create a positive balance of $300 million in year one of that 2017-19 budget and another $199 million in year two. This is the report that Walker spokeswoman Laurel Patrick cited to back up his claim.

That adds up to $499 million, as Walker said. His own budget document published a similar number....

A reliable, independent source made that estimate, so the figure is solid. Walker, though, makes it sound like a done deal when the budget is still undergoing legislative review.

We rate his claim Mostly True.
While it's not surprising that Dave Umhoefer would follow his bosses' orders and try to prop up Walker's Politi-"fact" ratings as much as possible, this is a remarkable shallow analysis, and one that doesn't come close to holding true after the education-related actions of the Joint Finance Committee in the last month.

If you go to the LFB's paper from two months ago that produced the "$499 million surplus" talking point, you'll notice that it has some assumptions in it that are based on Walker budget language, but totally unconnected to reality. This includes an assumption of a $142 million cut in K-12 education funding in 2017-18 (essentially repeating the per-pupil cut that was projected for next year that angered so many across the state), and a $21 million backdoor cut to the UW System that was on top of all the reductions for this budget.

But in the omnibus motions that did the magic trick of giving more money while screwing up K-12 education and the UW System even worse, these assumptions were wiped out. The K-12 motion not only restored per-pupil funding for 2015-16, and increased it for 2016-17, but it also made it an ongoing base cost, which is a difference from Walker's plan, which was to have that money cut off for 2017-19, artificially pumping up the structural surplus. Add in a $5 million kicker for "High Cost Special Education" and a couple of million more to the Milwaukee/Racine voucher programs (separate from the theft of $48 million that's funneled away from public schools into vouchers statewide), and the net increase in the 2017-18 K-12 budget base is just over $203 million.

Same for the UW System. Last night's UW omnibus not only added $25 million a year to the base budget (while leaving $250 million in cuts), but ended up adding funding for fringe benefits in both 2015-16 and 2016-17, instead of pushing it all into Year 2 (like it was under Walker's budget). The fringe benefit increase is also intended to continue into following years, instead of having those funds cut for the 2017-18 year, (as it was in Walker's budget), so both that and the new base amount must be figured into the structural balance.

Put those two figures into the 2017-18 base expenses, and you get a noticeable difference.

Changes since March 2015 LFB memo
K-12 increases $203.0 million
UW System increases $38.4 million
TOTAL $241.4 million

In addition, two expenses that the LFB memo counts on going down aren't going to factor in for the next budget, as the planned reductions for the School Levy Tax credit ($106 million) and WEDC "loans" ($55 million) have already happened through JFC actions, so while that may reduce overall expenses for this budget, it also washes out when we look at the 2017-19 budget. And I'm not even going to calculate the overall General Fund expense increases that may change the carryover balance or future base expenses, because those change by the bill, and I'll wait for the final product to figure it out.

But if we take the March 2015 LFB projection for the next budget, and also assume no changes in projected revenues (as the LFB did earlier this month), and let's see what we get.

Updated 2017-19 structural budget with ed. changes
2017-18 carryover +$123 million
PLUS 2017-18 revenues +$16,277 million
MINUS 2017-18 exp. before ed. $16,035 million
MINUS 2017-18 ed. expenses $241 million
MINUS 2017-18 reserves $65 million
NET BALANCE +$59 million

2017-18 reserves +$65 million
PLUS 2018-19 revenues +$16,251 million
MINUS 2017-18 exp. before ed. $16,052 million
MINUS 2017-18 ed. expenses $241 million
MINUS 2017-18 reserves $65 million
NET BALANCE -$42 million

So while the budget may be more or less balanced on a structural basis (which is a good thing), it's nowhere near a "$499 million structural surplus". And even that level of funding is disastrously low and massively unpopular, so good luck assuming that the costs can stay that low as the outrage grows over this budget (and with it, the likelihood grows that GOP legislators pay a dear price in 2016 for going along with such garbage).

There's one last note to bring up on the "structural surplus" that has made it a dishonest assessment from then day it was figured, and it goes back to the topline numbers that Walker's budget relied on to make the numbers add up when he submitted it nearly 4 months ago.

2016-17 LAPSES $699.993 million

That's $700 million in allocated expenses that aren't supposed to be spent in the second year of the budget. And the "structural surplus" assumes that another $700 million in lapses happen in 2017-18, and again in 2018-19. It's one thing to say that this combined $1.4 BILLION won't be spent, it's a whole 'nother thing to say who's absorbing those cuts, and what happen as a result. The $1.4 billion in lapses is a random number that has little to no connection to how the budget would look in those two years, and will likely not be figured in when budget requests are to be submitted in just over a year.

But that's not what Scott Walker is telling GOP rubes out of state when he says there's a $499 million surplus, so it's up to us to remind folks just how much of a stretch had to be made just to get to that number, and that it's certainly not true today.

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