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Analysts worry Walker budget sets WI up for an economic fall

By   /   February 21, 2013  /   News  /   2 Comments

By Kirsten Adshead  |  Wisconsin Reporter

HIS PLAN: Gov. Scott Walker proposes a $68-billion budget that includes $343 million in income tax cuts for Wisconsinites, but some economic analysts worry that the budget plan does too little to prepare the Badger State for the next economic downturn. (AP photo)

MADISON – Gov. Scott Walker’s biennial budget proposal increases borrowing, does little to prepare Wisconsin for unwelcome economic surprises and increases the state’s deficit as calculated by generally accepted accounting principles, a Wisconsin Reporter analysis has found.

Walker does leave the state with a financial cushion, but it’s minimal.

According to the nonpartisan Legislative Fiscal Bureau, relying on the governor’s numbers, the state would close out the biennium with $108.1 million, more than the legally required $65 million fund balance that is required.

However, that doesn’t include, for example, $20 million or so the governor hopes the Legislature will approve for workforce development, said Rob Reinhardt, a program supervisor with the LFB.

“I think if you factor the intention to the governor and the Legislature(and) some other bills, the (biennium’s final fund) balance is quite lower, but it’s still positive,” Reinhardt said.

The governor also has set money aside, twice, in the rainy day fund, including a $109 million deposit he pledged last October.

Yet Walker would fund transportation projects by transferring money from the general fund, selling power plants and borrowing money, including selling $200 million in bonds as part of $550 million he’d put toward the Milwaukee Zoo interchange project and the Interstate 90 North-South Corridor — proposals that trouble some of Wisconsin’s fiscal analysts.

“If more money is needed there (in the transportation fund), it’s probably better policy to think, ‘How do we fund transportation in a more sustainable way?’” said Dale Knapp, research director for the nonpartisan Wisconsin Taxpayers Alliance.

Increasing bonding for transportation and selling power plants is one of the “oddest budget proposals that has been floated recently,” Jon Peacock, director of the Wisconsin Council on Children and Families’ Wisconsin Budget Project, blogged recently.

“Apparently, there was a concern that an increase in long-term debt wouldn’t be appreciated by fiscal conservatives (or by liberals less enamored of highway spending),” Peacock wrote. “I presume that selling off the power plants is supposed to alleviate that concern — yet it creates a long-term liability for the cost of power needed for University buildings.  Unless I’m missing something, that scheme would be a slight of hand that takes many years of debt service costs incurred by the Transportation Fund and trades them for an indefinite period of General Fund liability for energy costs.”

Said Knapp: “We’ve really built up debt over the last 15 years, so funding these things with even more debt is still a concern.”

Walker’s $67.999-billion budget plan for 2013-15 relies on January estimates of revenue and uses almost all of the $484 million projected “surplus,” including a $343 million income tax break.

But as Wisconsin Reporter has reported, the LFB memo announcing those revenue estimates itself notes looming questions that may negatively affect how much money Wisconsin collects in the coming years, including the now all-but-certain federal sequester, and the nation’s slow economic growth projections.

The Taxpayers Alliance noted in a Wednesday blog post that the ending balance of state budgets has been narrowing since 2000.

In Walker’s latest budget plan, state budget reserves drop to 2 percent of spending in 2014 and 0.7 percent the following year, according to the blog, which states: “Budget reserves are important because state budgets are based on estimates of revenue over two years. A reasonable ending balance is necessary so programs are not cut should the economy, and tax revenues, grow less than expected.”

Knapp’s final concern is that the state’s deficit, as calculated using generally accepted accounting principles, actually grows under Walker’s proposal

During his 2010 gubernatorial campaign, Walker pledged to use generally accepted accounting principles to balance every state budget.

Under his administration, the  deficit dropped from what had been a $3 billion hole to $2.2 billion in 2012, and is expected to decrease to $2.1 billion this year, Knapp said.

But, according to the governor’s own budget synopsis, his proposal would increase the deficit to $2.4 billion in 2014 and $2.6 billion in 2015.

“Maybe long-term we’re not setting ourselves up to be in a great position,” Knapp said.

Walker spokesman Cullen Werwie did not respond to an email asking why Walker wasn’t using generally accepted accounting principles to balance the budget or whether the governor was concerned that the deficit grows under his proposal.

Contact Kirsten Adshead at kadshead@wisconsinreporter.com.


Kirsten formerly served as staff reporter for Watchdog.org.

  • Interesting left wing bologna. Walker just eliminated a $3,600,000,000 deficit left to him.

  • Interesting left wing bologna.