Friday, March 31, 2017

Walker short-term hustle and spin means more budget pain

For three months, I’ve been waiting for the State of Wisconsin to release the 2016 update of the Comprehensive Annual Fiscal Report (CAFR), which usually comes out in December. The delay didn’t seem to be anything nefarious as much as it was involving first-year adjustments to the state’s new financial system, but it was frustrating to not get this more complete picture of where the state’s finances stood.

Well, the CAFR finally came out yesterday, and the reason I figured that out was because our Fair Governor tweeted out this piece of cherry-picking yesterday.

We already knew that the Fiscal Year 2016 budget had a carryover balance of $331 million, but what we didn’t know was the condition of the GAAP budget, which is included in the CAFR and the other figure Walker alludes to in the tweet. And a quick check of Page 161(Page 167 in the PDF) shows the GAAP deficit to be smaller than last year's $1.741 billion. But what Walker wants you to forget what was done (and not done) to get us to these allegedly good numbers in 2016, and how it screws up both this budget and future ones.

Let’s start with a reminder that that Walker’s Administration skipped $101 million in debt payments that could have been paid in May 2016. As it turns out, paying this $101 million bill would have easily fit under the $331 million that was left over on June 30, 2016, which made it an idiotic move to choose to make Wisconsin taxpayer pay approximately $13 million a year for the next 8 years vs paying the bill on time.

But interestingly, take a look at what paying that bill on time would have done for the GAAP balance in FY 2016.
FY 2015 GAAP General Fund deficit $1.741 billion
FY 2016 GAAP General Fund deficit $1.723 billion
FY 2016 GAAP deficit if debt paid off $1.824 billion

I don’t think the Walker Administration were thinking about the GAAP deficit when they made this reckless move to skip debt payments (I think they misread the cash numbers, forgot that there was a weekend at the end of the month, and panicked), but not making the debt payment allowed Walker to claim the GAAP deficit “improved.” Otherwise, it would have been the highest GAAP deficit in 5 years. Then add in the fact that the GAAP deficit in the 2017-19 Walker budget is slated to blow past $2 billion due to more delayed payments and because it spends more than it takes in BEFORE any extra borrowing is accounted for (see Page 57 of this PDF for more information).

The reasons why the GAAP deficit didn’t shrink more than it did should also concern you. For example, the GAAP deficit grew by $126 million due to a delayed payment in 2015-16’s per-pupil aids that didn’t happen until late July. At the time, this was considered necessary to make the lousy budget numbers add up, but again it turns out it didn’t need to happen (FYI, this is corrected by paying per-pupil aid twice during Fiscal Year 2016-17, once for 2015-16 in July, and again for 2016-17 in June).

Other reasons the GAAP deficit didn’t decline much were

1. An increased payment in the School Levy property tax credit that was also delayed until July as part of a Walker budget trick

2.A $126 million increase in net “payables for individual income taxes” (which is carryover losses and future refunds? I’m not a CPA, so someone let me know)

3.A $40 million “payable to the federal government for unallowable Title IV-E Foster Care and Adoption Assistance credits.” I have seen no stories on what this is or why we might owe the Feds $40 million, but it kind of seems important.

Another item that the CAFR goes into detail on is debt and debt payments. And it reiterates what we first saw around New Year’s in the state’s Continuing Disclosure report, which showed that the state’s debt is at an all-time high. As the CAFR notes
The State's total long-term debt obligations (bonds and notes payable) increased by $152.7 million during the [2016] fiscal year which represents the net difference between new issuances, payments and refundings of outstanding debt. Increases in debt resulted from new borrowings in excess of repayments of existing debt. During the year issuances of new general obligations exceeded repayments and refundings of debt by $211.3 million. Revenue bonds outstanding increased by$21.1 million. Offsetting those increases, annual appropriation bonds totaling $79.7 million were repaid.
There’s another segment in the CAFR that discusses debt in the state’s Transportation Fund, and how much of the state’s vehicle registration fees is used to pay off that debt each year. Basically, this sets aside a portion of the $75 a year that you pay the state for your plates, and instead of fixing roads or other needs, it goes to pay off past debt.

As you can see, debt is keeping an increasing amount of those registration fees from going back into the roads.

WisDOT vehicle registration fee 2014-2016
2014 net fee revenue $661.53 million
2014 debt service paid by fees $179.78 million
2014 left for other DOT needs $481.75 million

2015 net fee revenue $667.01 million
2015 debt service paid by fees $225.74 million
2015 left for other DOT needs $441.27 million
Change available vs 2014 -$40.48 million

2016 net fee revenue $688.07 million
2016 debt service paid by fees $231.77 million
2016 left for other DOT needs $456.30 million
Change available vs 2014 -$25.45 million

So that’s over $65 million lost from being available for other DOT projects over the last 2 years, and that number is likely to go up in the near future with the $850 million in borrowing that was included in the 2015-17 state budget- with much of it in the Transportation Fund.

Also in the CAFR is a rundown of all of the bonds that the state has to pay back, and when they have to pay them back. Because the CAFR only takes into account what things looked like on June 30, it doesn’t include the huge debt swap that happened last August, where a $363 million balloon payment that was due in 2018 got kicked into future years. That move and other refinancings mean that General Fund taxes needed to pay for these and other bonds will jump by $150 million for the budget after this one, helping to drive the structural deficit up to $1 billion for 2019-21.

And a check of the debt maturity figures in the CAFR shows that the amount that we already have to pay due to Walker’s can-kicking of debt stays at those high levels for much of the 2020s. So when you look at the record of the increasing GAAP deficit and overall debt combined with the budget tricks that we will be paying a price for in the coming years, and it makes all of WisGOP’s whining about federal debt in their Article V ALEC bill ring hollow, doesn’t it?

Maybe Wisconsin Republicans should get their house in order first. Or better yet, have them kicked out of the Capitol for their foolish, regressive actions, and replace them with politicians who don’t live in Supply-side Fantasyland.

No comments:

Post a Comment