The Not-So Fiscally Conservative Governor
Scott Walker hasn’t solved the state’s longterm fiscal deficit. He may actually make it worse.
When Gov. Scott Walker proposed to slash public worker benefits in 2011, he famously said the state was broke and he had to take these measures to balance the budget. And in his first biennial budget he did indeed cut the state’s long-term deficit. But all signs suggest he will throw away most of those gains in his new budget, while greatly increasing the state’s bonded indebtedness.
A report by the non-partisan Wisconsin Taxpayers Alliance does an analysis using generally accepted accounting principles, or GAAP, to look at the overall state deficit. Walker cut it from $2.99 billion to $2.21 billion in 2012 and by this summer that is expected to drop to $2.06 billion.
But under the governor’s new budget, that figure is expected to increase to $2.36 billion by 2014 and $2.64 billion by 2015. Meanwhile he wants to greatly increase bonded debt. WisTax noted he is asking to issue an additional $2.1 billion in bonds, equal to 16% of all outstanding state debt.
Perhaps most alarming is Walker’s approach to funding transportation, which could leave the transportation fund so in debt that 25 cents of every dollar would be spent on debt service by 2023, as my colleague Dave Reid has reported.
A report from the bipartisan Transportation Finance & Policy Commission, alarmed by the growing transportation fund deficit, had recommended increasing the gas tax, which hasn’t been hiked since 2006, and comes nowhere near paying for the cost of roads in Wisconsin.
“They (commission members) were very nervous” about the growing transportation fund shortfall, notes Todd Berry, executive director of the taxpayers alliance. “Our revenue raising structure (for transportation) is very narrow.” The gas tax, which has been set at 32.9 cents since 2006, “doesn’t adjust for inflation as the sales tax does,” Berry notes. “I think inevitably Wisconsin will have some kind of quasi-toll tax. Transportation in other states is becoming very much like a utility where you are metered and sent a bill.”
Nor has this been the only commission to express nervousness about the state’s growing indebtedness. “Two years ago the state Building Commission told the legislature of ‘the concerns of the governor and the Building Commission over the state’s level of outstanding debt,’” the WisTax report noted.
Meanwhile, there seems to be little interest among Republicans to consider road tolls or raising the gas tax. Instead, Walker and Republicans intend to lower the income tax, which Berry has questioned. He notes all the controversy and recalls Republicans faced for slashing worker benefits and education funding.
“When you expend that much political capital and encounter that much difficulty in cutting the budget, it’s surprising you’d be so quick to give that up.” The income tax cut, he notes, is a key contributor to dissipating the progress Walker had made in reducing the state’s GAAP deficit.
In the longterm, the apparent progress Walker made on the GAAP deficit may turn out be a small footnote to a longterm trend that suggests Wisconsin is underfunded and under-taxed. Throughout the tenure of Republican Governor Tommy Thompson, the income tax was not indexed for inflation and poured in a regularly increasing stream of revenue. In 1999, the legislature finally put a stop to this. But by then Thompson had greatly increased spending on highways, prisons and local schools and governors have struggled ever since with this level of spending.
Thus, since the income tax was indexed the GAAP or “structural” deficit, as some refer to it, has steadily risen, from just $830 million in 2000 to just under $3 billion in 2011. Doyle campaigned against Republican Scott McCallum for ballooning the structural deficit and Walker campaigned against Doyle on the same issue.
“During Doyle’s tenure, you had state legislators talk about one-time deals that will hurt us, like a transfer of money from the transportation fund,” Berry recalls. “The Legislative Fiscal Bureau made it look worse than it was, and I said that on a number of occasions.”
The reality is that these kind of one-time fixes have always been done. Thompson’s “deputy governor” James Klauser was often hailed as a magician for pulling off these murky, one-time deals. And while Doyle raided transportation for the general fund, Walker’s budget simply reverses that, raiding the general fund for transportation.
The bonded indebtedness of the state has also risen steadily since the income tax was indexed. The WisTax report doesn’t go back to 1999 but does show the state debt has risen from $5.8 billion in 2002 to $13.6 billion in 2013, and that will jump to $15.7 billion if Walker’s budget is approved in this regard.
From a GAAP analysis, the WisTax report noted, Wisconsin had the third-highest deficit in 2011, trailing only California ($19.9) million and Illinois ($8.1 million), two states that serve far more people. The reality is that no governor has solved the mismatch between spending and tax revenues in Wisconsin, and Walker looks like he will be the next governor to fail.
-I have long argued that state constitutional offices like treasurer and secretary of state are antiquated and unnecessary and simply waste tax dollars. Republican Kurt Schuller ran for treasurer and won with a pledge to serve only one term and work to eliminate the office. He has gotten little interest from Republicans. Worse, they have now proposed to remove the state’s unclaimed property from the Treasurer’s office and fold it into the Department of Revenue.
This is Schuller’s main duty and the money made from the unclaimed property program pays his salary. Odds are this will require more staffing in the Department of Revenue to run this program, costing taxpayers more money. One sign of this is that state Sen. Glenn Grothman (R-West Bend), a hard-core fiscal conservative, opposed the move. There is clearly more to this story; the proposal doesn’t pass the smell test.
-The five county supervisors pushing a petition calling for the resignation of Milwaukee County Board Chairwoman Marina Dimitrijevic and requesting a special meeting of the Milwaukee County Board to elect a new chairperson have failed. The supervisors needed to get seven more board members to sign the petition and failed to get even one additional supporter. In a way, the passage of the state legislation downsizing the salaries and budget of the board members eliminated the major reason to dump Dimitrijevic. Her opponents on the board felt she had hurt their cause with state legislators by misleading them as to whether the board was negotiating with unions.
But now that the legislation has passed, the point is moot. Dimitrijevic still appears to have strong support from board members, who now face a reduction in their staff and powers, and may feel they need someone in charge who has strategically united them in their battles with County Executive Chris Abele.
People: Chris Abele, Glenn Grothman, James Klauser, Jim Doyle, Marina Dimitrijevic, Scott Walker, Todd Berry
Government: Milwaukee County Board of Supervisors, State of Wisconsin