Friday, March 15, 2019

Did Evers end up too ambitious in this budget? Or did he not go far enough?

In looking at the totals from Governor Evers' budget, I'm surprised I'm going to say this, but I think Tony went too far. I sayu this because the way the overall numbers and his spening plans are set up, it opens him up for attacks from the WisGOPs that allow the Republicans to avoid making the harder justifications (and spend the money) to keep their failed spending priorities in place.

The high numbers in Evers' budget means the GOPs aren't left to complain about the budget solely on policy reasons (which they wouldn’t win on with the public), but instead can whine that it has larger-than-needed amount of tax hikes and a sizable structural deficit built in for the future (even if it ignores that WisGOP’s unfunded tax breaks also have major structural deficits baked in).

As submitted, Evers’ budget would run a surplus in Year 1, but give it all back and then some in Year 2, as new initiatives hit full-force while revenue growth is projected to slow.

Projected balances under Evers budget
FY 2019 Proj Starting balance $691.5 million

FY 2019 Proj Revenues $18,319.3 million
FY 2019 Proj Expenses $18,072.9 million
FY 2019 Proj Ending balance $937.9 million (+$286.4 million)

FY 2020 Proj Revenues $18,665.3 million
FY 2020 Proj Expenses $19,497.9 million
FY 2020 Proj Ending balance $105.3 million (-$832.6 million)

That leaves nearly no room for flexibility if the economy doesn’t just slow down, but falls into a full-fledged recession. That seems like an iffy proposition at best when we are seeing retail spending and income growth slow down over winter, and sizable paychecks still to be written by many Wisconsinites due to the GOP’s Tax Scam.

On the spending side, let's look at what the Wisconsin Policy Forum had to say , as part of their high-level overview of Evers’ budget.
Evers would increase spending in the state’s general fund, or main account, by 3.8% in fiscal year 2020 to $18.5 billion and by 7.4% in fiscal 2021 to $19.8 billion. This two-year increase of $2.7 billion in general purpose revenue (GPR) does not factor in additional spending of federal funds or money from separate state accounts such as the transportation fund.

As shown in Table 1, 81.3% of the overall increase falls in just three agencies or areas: the Department of Public Instruction (K-12 education), the Department of Health Services (Medicaid), and aid to local governments and state tax credits.

The budget also calls for significant increases in overall spending. All funds expenditures would rise by a proposed 5.4% in 2020 to $40.7 billion and 4.9% in 2021 to $42.7 billion.
You can see over half of the spending increases are the result of restoring state funding in K-12 education and special education to levels this state used to have in the 1980s.

I understand that Evers had to back up the budget request that he sent for K-12 when he was the Superintendent of Public Schools, and I do like the idea of “going big” to showcase just how much public K-12 education was neglected n the Age of Fitzwalkerstan. But I also wish he would have tried to cut a few provisions.

For example, Evers wants to limit enrollment in the school voucher program to what it is next year, but it’ll still spend nearly $87 million more on vouchers over the biennium, $6.3 million on vouchers for special edu students (something that is redundant with the increases in public schools’ special ed aids, and $28.6 million for independent charter schools. Freezing the amount of money going to these privatized schools would save more than $120 million over the biennium – money that could well be needed for stabilization if the US economy slows as much as I fear it will in the next 2 years.

There’s also this provision where more than $203 million in additional spending in FY 2021 comes from “sum sufficient” measures.
The Governor recommends reestimating the following appropriations to reflect anticipated utilization: county and municipal aid account, public utility distribution account, state aid for tax exempt property, state aid for personal property tax, claim of right credit, jobs tax credit, business development tax credit, homestead tax credit, enterprise zone jobs credit, electronics and information technology manufacturing zone credit, research credit, lottery and gaming credit, farmland preservation credit, farmland preservation credit 2010 and beyond, veterans and surviving spouses property tax credit, cigarette and tobacco product tax refunds, earned income tax credit, and transfer to the conservation fund.
Some of these are good things, like transfers to the conservation fund, the EITC and credits for veterans and surviving spouses. But there are a couple of items in that list I want to single out.

1. “State aid for personal property tax” – this is a $75 million-a-year giveaway engineered by WMC/WisGOP that lowers the property taxes for businesses, and while it is intended to make up the difference to local communities, it still raises taxes on homeowners because they make up a greater part of the tax base due to this move. Why not ditch it and bank that $150 million, or use it for something like local road aids that benefit a lot more people than a few businesses?

2. “Electronic and information technology manufacturing zone”. These are the first incentive payments for the Foxconn project, and they are projected at nearly $212 million. From what I can tell, this includes the 15% kickback for capital expenses for the Foxconn facility as well as the 17% payback of any salaries that are created for Foxconn employees (no matter where they are in the state).

The Foxconn funds stand out for two reasons. First, it doesn’t seem like the Walker Administration allowed for this extra expense to be assumed as part of the budget requests for 2019-21 (if I'm wrong and you find it mentioned and paid for, let me know). So this was going to be a big post-election surprise regardless of who was in office. Sneaky…and scummy.

It also seems like the budget assumes a smaller handout for Foxconn in the coming years, because the LFB assumed $473 million in state tax credits were going to be spent in the 2019-21 biennium on the Fox-con. But since we know the Foxconn project is going to be smaller and employ fewer people than what were we told when this scam was set up 18 months ago (and might continue to fall short of the paltry minimum amount of jobs they need to get that state money), why should we assume that the state will even spend that much in year 2?

Further cuts in the money assumed to go to Foxconn would be a win-win for those of us that hate this boondoggle. Not only will this free up money for something more legitimate, but it also brings the spotlight onto the WisGOP Legislature and Evers to explain what has to suffer if we keep setting aside scarce funds for the Fox-con. And it could hasten a settlement and/or lawsuit to stop throwing money away on it.

By comparison, the proposed increase in DHS spending is actually $280 million below their budget request, because taking the ACA’s Medicaid expansion saves over $320 million over the two years of the budget. And those savings are then used to expand current health services and attempt to close health disparities in other parts of the state. That’s the way you do it – use savings from one move to help other priorities, and dare the GOP to stop you.

Overall, while I’m pleasantly surprised at how ambitious Evers’ budget is, and how it’s a long-overdue restoration of the investments that were lost in the Age of Fitzwalkerstan, I also think there were other spots he could have been bolder by reducing spending on GOP handouts that haven’t done anything to improve outcomes and our economy in the 2010s.

Now GOPs can just cut out some of Evers’ proposed spending increases while not having to justify adding back money to pet causes like vouchers and Foxconn that Wisconsin voters do not approve of. They also can point to certain proposed tax changes that might hit Wisconsinites who work, instead of making the WisGOPs have to talk about why they should allow giveaways for manufacturers and stockholders to end.

I understand that maybe there were enough issues with keeping things running smoothly and within budget. But it does seem like there was room for improvement and more fiscal responsibility, while also giving more political wins for Tony Evers and the Dems than they're already likely to get over the next few months.

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