Thursday, January 25, 2018

Costly Walker pre-election giveaways would handcuff state next year

You may have heard that our Governor announced a few new schemes at the State of the State address ahead of November’s election. So let’s look at how a few of these items would work, shall we? Startong with Walker's plan for a $100-per-child tax credit
Under Walker’s tax credit plan, all parents in Wisconsin with biological or adopted children under the age of 18 as of Dec. 31, 2017, would qualify for the credit. The Walker administration estimates 671,000 families would benefit.

The credit would be paid out through a tax rebate check in the current year to families that fill out an online form and through the typical income tax process in spring 2019.
So they are blatantly trying to buy votes by sending out the check in the months before the 2018 elections, and then doubling that up by allowing parents to write off another $100-per-kid credit during the 2018 tax filing season. Given that the tax bill that got through Congress already increases the federal Child Tax Credit and gives away the farm to the rich and corporate, I’m not sure multiplying those tax cuts at the state level are really the way we need to go if you want to use extra funds to give relief to Wisconsinites.

Another problem with this is that based on how Walker’s plan is described, this won’t cost $122 million in Fiscal Year 2019, but instead would be $244 million. And the effect on the state’s bottom line wouldn’t be accounted for until after the election. How convenient.

Here’s another item that came out with the State of the State speech yesterday.
The rural proposals announced Wednesday include a new $50 million rural economic development fund that would support economic development grants in 56 of the state’s most sparsely populated counties. The program would be overseen by the Wisconsin Economic Development Corp., which Walker created in 2011 to help fulfill his failed pledge to create 250,000 jobs during his first term.
So basically, we’re giving $50 million to set up a separate WEDC handout program for rural areas of the state. And I’m sure this won’t be racked with corruption, cronyism and wasted money like the other WEDC slush fund program do, will it?

When you combine these pre-election stunts with other initiatives that Walker has asked for in recent weeks, the price tag starts adding up.

Child tax credit = $244 million
Rural WEDC handouts = $50 million
Obamacare exchange payments = $50 million
Sparsity aid - $6.4 million
TOTAL COST $350.4 million

I’m not even counting the extra costs that are projected to carry out Walker’s panic move of copying Evan Goyke’s plans to close the Lincoln Hills youth prison and transfer those inmates to regional facilities throughout the state. The price tag I’ve seen on that is $80 million, which’ll likely be paid off over several years in debt, with the first payments not likely to come until after the next budget starts.

And despite the sunny picture that Walker tries to paint about the state budget, there isn't much room to pay for all of this and have any money left over to deal with other needs that may come up between now and June 2019.

Projected 2017-19 budget ending balance $460.15 million
Cost of initiatives $350.4 million
CUSHION $109.75 MILLION (0.63% of total expenses)
Minus required reserves $75 million
TOTAL LEFT OVER $34.75 million

The other thing this would do is turn what is already a $191 million deficit in FY 2019 into something notably higher, both by cutting revenues with the Child Tax Credit, and by the increased spending for these election-year initiatives which will continue in the next budget. And passing all of Walker's initiatives would cost another $456 million in the next budget, which is money that we already may not have. The 2019-21 budget already has a structural deficit built into it, particularly because of the full costs of the Fox-con coming on board.

Also notable is that the added spending is going to very specific populations – rural areas and people who get insurance from the Obamacare exchanges. It’s a crass election-year calculation by Walker that leaves the overwhelming majority of Wisconsinites behind. So while some of these ideas have merit, and would make at least some everyday Wisconsinites better off (unlike most of Walker’s and WisGOP’s bills during the Age of Fitzwalkerstan), I'm not convinced it's a great plan that helps us much in the short or long run.

And giving away this one-time, Bubbly surplus seems to likely to end up in a repeat of what happened right before Walker’s last election in 2014. At that time, a larger surplus was also blown on tax cuts, and it led to budget deficits and significant cuts in early 2015 that ended up cutting the state's job growth in half for 2016.

Maybe instead, we should use the extra money to give a one-time bump in aids that would either help all schools or local governments, and maintain services while keeping property taxes down and not having to see more referenda or wheel taxes. Or we could choose to add investment into the state’s crumbling roads and highways, which would also reduce the backlog of projects that keep piling up and cut into the $1 billion deficit in the Transportation Fund that will have to be taken care of next year.

Of course, we haven’t seen a bill or even a hearing schedule for any of these Walker proposals (other than on sparsity aid, which did get a committee hearing today), so let’s hold back until we see the fine print, and to see what details emerge from the Joint Finance Committee and other legislative discussions. Because given the way these guys operate, you can't count on the simple, easy thing being done without having some kind of unrelated right-wing garbage attached to it.


  1. As a rule, I'm not a fan of spending money we don't actually have. LFB does a pretty good job on the large stroke estimates, but I'm very dubious of their ability to predict down into the tens of millions range 18 months out.

    Too many unforseen forces can come to bear on the state's economy in that time.

    I'm not 100% against returning a surplus to the people, but it should be an actual surplus as opposed to a fuzzy prediction - something we'd have a better handle on in Jan of 2019 than we do today.

    What the heck, I suppose if we end up short again, they could always rescind the 2% raises for UW people.

    1. LFB has been shockingly good at its estimates after it gets a year of data back, and they were pretty on the money whe it came to 2017's economic performance (something I wrongly underestimated).

      But I agree that we are counting on a lot of growth in the next year, and maybe that we should wait to see if it actually pans out before we spend the money for this budget and the next one.

      Also, there are a lot of other ways to spend this money that work a lot better than Walker's pandering.

  2. Shouldn't the surplus be used to pay off our debt? At least in part. Isn't debt service the thing that is taking a lot of the revenue? Should we be pretending to "give back" to taxpayers when in fact aren't we just borrowing to give them a reason to vote for Walker?

    1. You are correct, particularly when we talk about DOT. Why not pay for more roads in "cash" that we have on a one-time basis?

      Also worth noting, debt service costs go up in the next budget as a result of the Walker Admin aggressively refinancing debt into future years. Yes, this saves money short-term, and in overall expenses, but it'll definitely be a handcuff in 2019-21 and 2021-23.