Friday, February 12, 2016

Wisconsin’s Self-Inflicted Budget Problems

Just six months after Wisconsin’s two-year state budget was passed, state revenues are projected to come in below expectations due to slow economic growth. Less revenue makes it more difficult for the current Legislature to pass bills with any cost. Even worse, the slower economic growth projections forecast significant budget challenges for the future 2017-2019 budget.

But don’t take it from me. On February 2, Republican Senate Majority Leader Scott Fitzgerald said “I think this next state budget is going to be just as rough as this past one. The economy is not going to continue to soar, it's going to lag”.  As a reminder, that ‘past one’ Senator Fitzgerald is referring to is the budget that slashed $250 million from the UW System and failed to even attempt to address the $1.05 billion cut from public schools over the last five years.  What is most frustrating is these cuts cannot simply be chalked up to a lack of money, since they were made during a budget that spent over a billion dollars more than the previous one.

So why is Wisconsin state government in such bad financial shape? The answer is short-sighted budgeting and poor state economic growth.

Two budget decisions continue to stand out. The first is the ongoing decision to refuse the Medicaid expansion that would save Wisconsin taxpayers $320 million in our current budget alone, while providing health insurance for 83,000 more people.  Wisconsin is the only upper Midwestern state to reject the federal money. Governor Walker and legislative Republicans have decided that denying health insurance to those earning less than $16,240 a year (to make a political point) is more important than funding K-12 public education and the UW System.

The second budget decision has been blindly supporting an expansive tax credit passed in Governor Walker's first budget in 2011 that eliminates most state income taxes on owners of factories and agriculture producers. Originally estimated to cost $128 million a year by 2016-17, it is now estimated to cost more than twice the amount ($283.9 million). Simply delaying the final phase in of this credit by two years could have saved nearly $78 million in the current budget.

These tax cuts are among the more than $4.7 billion in state tax cuts passed over the last 5 years in an effort to drive economic growth. But the reality is that it hasn’t worked: Wisconsin’s economy has continued to lag behind the nation as well as neighboring states.  Over the last four years, Wisconsin has been 32nd in private sector job growth, last in the Midwest, and over the last year Wisconsin has had a job growth rate that is nearly half of the national rate. Last week, the Philadelphia Federal Reserve Bank announced that Wisconsin is one of only seven states that likely has a shrinking economy in spite of the growing national economy.  This news is made worse by the fact that Wisconsin is one of the only states in that group that cannot attribute its sluggish performance to historically low oil prices. This data mirrors the U.S. Bureau of Labor Statistics preliminary estimates that show Wisconsin lost 8,800 private sector jobs between October and December of 2015.

So, while Senator Fitzgerald and I don’t agree often, I must agree wholeheartedly with his assessment that our next state budget is likely to be ‘rough’. And I will go even further and make the not-so-bold prediction that rough budgets will continue as long the Governor and Republican majority continue to sacrifice valued Wisconsin institutions, like education, on the altar of badly-crafted tax cuts that mostly benefit the wealthy and aren’t designed to create jobs.


14 comments:

  1. The most powerful economic force in the state is the middle class. The Tea Party cabal that controls the state has done everything possible to crush the earning power of the middle class vis a vis refusing to increase the minimum wage, right to work, suppressing unions, etc. Putting more money in the hands of the average consumer would add rocket fuel to the economy.

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  2. The economy was supposed to bloom like roses in the desert!
    The Arabs have a saying for that, "Tomorrow there will be apricots!"

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  3. These idiots can't bring themselves to understand that when you take $1 billion in spending power from public employees via Act 10 and then institute low wage policies for the private sector employees that the citizens of this state will have less money to spend and consequently the economy can't go any where but down. In the last budget year they spent$700 million more than incoming revenues. We all saw this coming as Walker's ideology is to cut taxes, thereby reducing revenues, thereby creating budget shortfalls, thereby necessitating cuts in government programs and rinse and repeat each budget cycle. That enhances his conservative credentials while the rest of us take it in the shorts. We must remember that Walker and Grover[ drown gov't in a bathtub] Norquist share the same bed !!!!!

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  4. We learn so much here in Bernie Fever Central:
    • Higher taxes = economic prosperity.
    • The Tea Party are all billionaires and millionaires (sure don't dress like it, from what I've seen)
    • Walker's economy is terrible but Obama's economy .. well, what did Hillary say Thursday night in Milwaukee? “A lot of Americans are angry about the economy, and with good cause.”
    Please explain.

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    1. Minnesota raised their taxes on the rich and their economy is booming.

      Are you really saying that the Koch Boyz, who founded and run the astroturf tea parties are paupers?

      With a majority of Republican governors, you're surprised that many states are having a bad time of it?

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    2. I have a slogan that I live by: Talking politics with a Republican is like playing chess with a pigeon--you just know at some point he'll shit in the board and strut around the room like he just won. Perfect example here.

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    3. David....Where did the $5 billion go that was returned to hard working taxpayers via Act 10. That kind of money in the hands of Wisconsinites should have lit a roaring fire under Wisconsin's economy. Instead the Philadelphia federal reserve report shows Wisconsin's economy contracting in the last quarter of 2015 and the projections for the first 6 months of 2016 are zilch. It has been 5 years now of the great conservative experiment in Wisconsin and we suck behind most other Midwest states in jobs, economic growth roads and the like. Public polling shows preference for increasing the minimum wage, ending big money in politics, more voter access to the ballot box, less lobby influence at the Capitol, more environmental protections, more local control and open and accessible government. Scott Walker and friends have delivered none of these. I have great difficulty holding the Wisconsin experiment up as something that has been good for the majority of us who live here. His budgets have increased spending and borrowing year after year and I can't find out where the money went and how it made Wisconsin better!

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    1. Dead cat bounce - Wisconsin had the biggest lost of average income in the nation for the year.

      The population has also dropped and many people have left the workforce. Furthermore, if you don't let people sign up for or stay on unemployment insurance, it's easier to artificially deflate numbers.

      OMG, really? Yes, they bought elections because, well, people like you aren't too bright.

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    2. Then how come the Kochs didn't buy Tammy Baldwin's election? And no, Wisconsin's population has not declined. Wisconsin's income did not drop. Wis' labor participation rate is 5 pts higher than national average. The national economy is so bad even Hillary is running away from it because Hard-blue states like Michigan, Illinois, and Maryland elected Republican governors? (Martin O'Baltimore, anyone?) But then, folks in those states "aren't too bright." Milwaukee county voters, stupid for electing Abele. I'm guessing you don't win too many arguments.

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  6. Wisconsin had the 9th-greatest increase in personal income growth in 3rd quarter 2015 (most recent available). (Minnesota was 11th.) Unemployment remains well below national average. If the Tea Party is astroturf (i.e. nothing but two Koch Bros.) how come they elected Marco Rubio in Florida, Ted Cruz in Texas, Dave Brat in Virginia, and Ron Johnson in Wisconsin? BTW: Chris Larsony will lose B.I.G

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  7. Wisconsin isn't the only one. Louisiana, Oklahoma, Kansas, New Mexico, New Jersey, and numerous other states that have been under Koch/ALEC control for the last 5 years are now near-broke, and underperforming the rest of the country.

    It's not a coincidence. Stealing from workers and giving tax cuts to the rich simply doesnt work for anyone other than the rich and well-connected. And it doesnt attract talent and entrepreneurship that leads to real growth and improvement

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    1. Bad rebuttal WHAAAAA-ska. We're blowing our budget through tax cuts, unfunded initiatives, and cronyist corruption just like Illinois did 20 years ago.

      Except at least when FIBs did illegal things, the people at least got a service and good wages from it. The ALEC states just give tax dollars to the inner circle and screw the other 98% of us. And they still go bankrupt

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