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WI's budget numbers get political spin

By   /   February 9, 2012  /   No Comments

By M.D. Kittle | Wisconsin Reporter

MADISON — The latest Wisconsin budget projections are a tale of two years of surplus and deficit.

And the response to the state Legislative Fiscal Bureau’s report on the status of the state’s general fund, presented Thursday to the Legislature, is a tale of two distinctly different points of view.

In the end, an economic expert said the down projections are the result of pessimistic economic forecasts, but structural changes to the state budget should put the state on solid fiscal footing heading into the next biennium.

By the numbers

Projections show a $12 million budget surplus in fiscal 2012, ending June 30, and a deficit of $143.2 million by the end of the biennium, on June 30, 2013, according to the nonpartisan fiscal bureau, which provides fiscal and program analyses to the Wisconsin Legislature.

The projected deficit, based on lowered economic expectations nationally and a decline in expected state tax collections, is a $215.9 million swing from the $72.7 million balance the bureau projected in October.

The shortfall would rise another $65 million, to $208.2 million, if the statutory requirement of maintaining a $65 million balance is taken into account. It usually isn’t.

Lawmakers and executives in both parties traditionally have disregarded the budget balance, claiming hard times and uncontrollable economic factors have demanded tapping into or failing to fill any reserve.

Fiscal fighting

The numbers have drawn the fire of opponents of Gov. Scott Walker and his fellow Republicans in the GOP-led Legislature.

Democrats blamed the governor and his party for deep budget cuts and tax breaks they see as big corporate giveaways.

“This is Governor Walker’s and Legislative Republican’s budget,” said state Sen. Mark Miller, D-Monona, in a statement.

Miller, the Senate’s minority leader, joined politicians on both sides who sent their assessment of the latest budget numbers through statements but did not return Wisconsin Reporter calls seeking further explanation.

Kathleen Falk, the Democrat and former Dane County executive hoping to run against Walker in a recall election, entered the fray.

“Gov. Walker has spent millions of dollars in campaign money to try and convince us he’s balanced the budget — and the nonpartisan Legislative Fiscal Bureau is showing he’s flat wrong,” Falk said.

State Rep. Robin Vos, R-Burlington, and state Sen. Alberta Darling, R-River Hills, have a different take on the numbers, inviting critics to take a closer look at recent history — and the present-day realities on the ground.

The GOP lawmakers, co-chairs of the Legislature’s Joint Finance Committee, pointed to the $3.6 billion budget shortfall that Act 32, or the 2012-13 budget, cleaned up, without tax increases.

They noted a study from the bipartisan National Conference of State Legislatures that found 29 states projected an estimated $31.9 billion in combined budget gaps for fiscal 2013.

“Unlike many other states, we’re tackling our fiscal problems head-on,” Vos and Darling said in their joint statement. Neither could be reached for comment Thursday.

In his statement, Walker talked about this fiscal year’s projected budget, declining to mention the projected deficit ahead. He said the administration is confident in its ability to finish the biennium with a balanced budget.

“As we have done in the last year, we will continue to manage the Wisconsin taxpayers’ money well, so we can keep the state’s fiscal house in order,” the governor said in the statement.

What his plans are to meet any deficit remain to be seen.

Walker pointed to neighboring state Illinois, where Gov. Pat Quinn, a Democrat, has proposed a $2 billion cut to Medicaid and higher taxes to solve the state’s budget problems.

“When compared to the past and to other states, Wisconsin is heading in the right direction,” Walker said.

Miller and other Democrats pointed to the disparity in job growth nationally and at the state level, with Wisconsin shedding jobs in each of the past six months, while the nation added 243,000 jobs in January. Still, Wisconsin added some 13,000 jobs total in 2011, and the U.S. economy was anything but consistently robust during that period.

And the hangover remains.

Federal Reserve Chairman Ben Bernanke this week warned the U.S. Senate Budget Committee that the latest U.S. unemployment rate of 8.3 percent, the lowest in three years, “understates” the overall weakness in the labor market.

Smaller revenue, deeper cuts

The fiscal bureau projects a $272.8 million reduction in tax collections.

Meanwhile, the state’s net expenditures are projected to decline by $67.7 million.

Dale Knapp, research director for the nonpartisan Wisconsin Taxpayers Alliance, a taxpayer advocacy group, said budget projections — particularly banking on them — have come back to haunt Wisconsin lawmakers in the past.

Case in point: Last May, the fiscal bureau re-estimated a windfall of revenue, at about $636 million, over the previous year, Knapp said. The budget was built in part on those cheerier estimates.

“Let’s be a little cautious here. Remember these are forecasts. They can change with the economy,” Knapp said. “Maybe it’s time to step back and wait until the money is in hand before we spend it.”

Or, by the same token, fear the financial sky is falling.

While substantial, Knapp said a projected deficit of $173 million isn’t unexpected and it could quickly be erased with even a small, better-than-expected showing in the economy.

Playing fast with the budget numbers is something Walker and the Republicans have not done much of, unlike their peers in the past, Knapp said.

As it stands, the structural budget, due in large part to deep spending cuts, sets up Wisconsin to move into the next biennium with a $100 million or better surplus, at least when it comes to promised funding for programs, Knapp said.

That would mark the first structural budget carryover since 1997, the economist said.

Still, the state budget is a long way from balance through generally accepted accounting principles, or GAAP. The GAAP gap, so to speak, stands at about $3 billion.