By Ryan Ekvall | Wisconsin Reporter
MADISON – By now, you would think all Gov. Scott Walker would have left to unveil from his 2013-15 budget proposal would amount to $174 for light bulbs in the Department of Corrections cafeteria, and a handful of “World’s Greatest boss” mugs at the Wisconsin Economic Development Corp.
The Republican governor will issue the second biennial budget of his tenure Wednesday, although he seems to have covered a lot of ground in his spending blueprint — at least in installments — during a statewide tour over the past few weeks.
Some of Walker’s policy priorities – rejection of federal Medicaid expansion and expansion of school choice – have been met with liberal fury, but nothing compared to the months-long political storm over collective bargaining reform.
Two years ago, Walker announced that Wisconsin was broke. The state had a $3.6 billion budget shortfall. The way to fix it, the new governor said, was for most public-sector employees to contribute to their pensions and more to their health care benefits.
Through that effort, along with reducing tax credits for low-income working families, renegotiating $400 million in bonds to carry the debt further into the future and cutting aid to public schools and the University of Wisconsin System, the state was able to balance the budget and seemingly put Wisconsin on its way to fiscal stability.
Now, as Walker prepares to deliver his budget address, at 7 p.m. Wednesday, the price of his plan is adding up.
Asked if funding his priorities will require budget cuts, Walker previously told Wisconsin Reporter, “No. I mean, there might be little issues here and there, but we’re not talking broad-based cuts.”
Rather, he said, his priorities are “about things we’ll be adding on to, not subtracting,” relying heavily on the “surplus,” the fiscal bureau is projecting.
Overall state spending increased about 2.7 percent under Walker’s first budget, from $62.6 billion in 2009-2011 to $64.3 billion in 2011-2013, and the state will likely spend more this biennium.
Walker’s budget will not include billions of dollars in federal Medicaid cash. Budget watchers say that’s the major plot to watch this government taxing and spending cycle.
“When the dust settles, the story of the (2013-15) budget is that we had some reasonable growth in revenue and a disproportionate amount of that growth went to fund Medicaid,” said Todd Berry of the non-partisan Wisconsin Taxpayers Alliance, adding that education, income tax cuts and transportation funding would be juicy secondary threads.
Walker last week said he will reject billions in federal Medicaid expansion cash, asserting he didn’t trust the federal government, with its $16.5 trillion debt and $1 trillion-plus deficits, to fulfill its promise to pay for 90 percent of the expanded Medicaid bill over the long run.
Still, Walker announced a $645 million increase in Medicaid spending over the biennium, more than half the additional revenue the state projects.
“Medicaid has become the single largest cost driver in our budget,” said Assembly Speaker Robin Vos, R-Rochester, before Walker’s announcement. “Last time around, every single new nickel of revenue went into Medicaid. This time around I’m certain the biggest chunk of new revenue is going to go into Medicaid.”
The Legislative Fiscal Bureau projects new revenue of $1.2 billion over the next biennium, along with a general fund balance of $485 million to begin the budget cycle.
Part of that revenue might go to Walker’s proposed $45 million increase in state funds over the biennium for school choice expansion, something Democrats have blasted and several Senate Republicans have pushed back on. Another $28 million for the program would come from local property taxpayers in districts that qualify for choice expansion.
Walker also announced $475 million in new spending for K-12, University of Wisconsin System and Wisconsin Technical Colleges. That price tag includes a modest $129 million increase for K-12 schools, along with a new $64 million incentive program for schools that improve their educational results. Tens of millions more were earmarked for economic development initiatives at the University of Wisconsin-Madison, and $110 million-plus in additional UW-System block grants.
The $129 million for K-12 schools offsets property taxes paid in the state, not actual in class spending. If approved, the cash for incentive program money would be allocated beginning this budget, but spent over time.
Walker also said he wants to cut income taxes some $350 million as a “down payment” for future income tax reform in Wisconsin.
Wisconsin’s 2010 state-level individual income tax collections were $1,020 per person on average, good for 11th highest nationally, according to the Tax Foundation.
Last session, Walker announced manufacturing and agricultural corporate income tax cuts that begin to phase in this year.
Tally it up
In recent weeks, Walker has announced hundreds of millions of dollars for jobs training and business subsidies. That includes $11 million for the embattled Wisconsin Economic Development Corp.’s marketing program and $6 million more for start-up businesses. Walker called for more than $100 million in tax credits for businesses and investors and another $100 million for jobs training.
Monday, Walker asked for another $25 million in venture capital subsidies.
On Valentine’s Day, the governor announced a sweet $824 million in new spending for transportation projects. Where Walker’s predecessor, Democratic Gov. Jim Doyle took from the transportation fund to fix the budget books, Walker plans to take more than $100 million from the general fund to pay for transportation projects. Walker wants to fund the remaining $600 million-plus from new bonds and selling off state power plants.
Walker, too, announced $14 million for law enforcement, in part to take DNA of people arrested, but not convicted, of felonies and some misdemeanors.
That’s more than $1 billion in new spending for on-budget items.
It would appear the governor no longer considers Wisconsin broke.
Budget watchdogs, however, say not so fast.
“The budget may be balanced, but is it sustainable?” asked Berry. “If you’ve balanced the budget on paper but you have nothing set aside for mistakes and errors, you can’t forecast revenue perfectly. You can’t forecast what the federal government is going to do. You certainly can’t forecast this economy.”
The Legislative Fiscal Bureau memo refers to the possible sequester in Washington, D.C, the Federal Reserve’s asset buying programs and long-term near zero percent interest rates and sluggish national economic growth projections.
And while Walker touts that his budget made possible $125 million in deposits to the state’s rainy day fund, so did Doyle.
“Because of real fiscal responsibility, Wisconsin now has a growing economy and a healthy rainy day fund,” Doyle said in 2007, transferring $56 million to the fund before taking it back out not a year later.
Wisconsin could be one economic hiccup away from reliving the 2011 budget debacle.
“Really the question is: are we going to budget to the edge or are we going to try to look out for six to eight years and allow us for some room for error and some cushion for the next recession? If the answer is no, then what you’re going to eventually get is another round of spending cuts or tax increases,” Berry said.
“It appears this budget will continue a long tradition where they really haven’t left themselves much room for error.”
As budget watchers know, the devil is in the details. There will be much budget watching in the days ahead.
Contact Ekvall at [email protected]