About That $2.2 Billion State Deficit

How deep a potential fiscal hole did Republicans in the Capitol – Gov. Scott Walker and GOP majorities in Assembly and Senate – dig for themselves with three pre-election tax cuts and changes to paycheck withholding tables that gave us more take-home pay?

The number surfaced in a new state Department of Administration report: Walker is staring at a potential shortfall of $2.2 billion as he starts work on the 2015-17 state budget.

That’s a big number. But it’s also just another volley in the every-two-years Capitol badminton game of Deficit Looms/Deficit Fixed.

First, let’s put that DOA report in perspective: It’s the difference between what state agencies say they need to operate in the next two-year budget cycle (running from July 2015 to June 2017) and projected total general-fund tax collections for the same period.

Exactly four years ago, then-incoming Gov. Walker blamed outgoing Democratic Gov. Jim Doyle for leaving him with a $3.6-billion gap between agency requests and projected tax collections. In two re-election campaigns since then, Walker repeatedly took credit for fixing that Doyle-legacy $3.6-billion deficit.

Second, understand that all state agencies – except for the Department of Justice and Department of Public Instruction – are run by Walker appointees. So, no matter what their future budget requests total, agencies never get the amounts they seek. Governors often stamp “return to sender” on state agency budget wish lists.

And that will happen again, state Administration Secretary Mike Huebsch vowed: The $2.2-billion gap assumes “that all agency requests will be funded in their entireties. This is a flawed assumption.”

As constitutional officers elected on their own, the attorney general (Attorney General-elect Brad Schimel) and state superintendent of public instruction (Tony Evers) run the Justice and Public Instruction departments. Walker is likely to treat fellow-Republican Schimel’s two-year budget request more favorably than Evers, a Democrat in what is officially a non-partisan job.

Third, the $2.2-billion gap will change markedly when Walker submits his formal 2015-17 budget to the Legislature in late January or early February. But, no matter what budget magic Walker uses to make any deficit disappear, here’s why the next budget picture will give heartburn to Republican legislators who must pass it by July 1.

*Health care costs: The State Department of Health Services says it needs $760 million more through mid-2017 to continue to care for Medicaid recipients. One in five Wisconsin residents get health care through Medicaid. The shortfall partly results from Walker’s decision to reject federal cash that would have paid for an expansion of the program. Expansion would have brought in  hundreds of millions in federal funds, according to a state Fiscal Bureau report.

Another reason for the shortfall is because of Walker’s decision to make any adult at or below federal poverty guidelines eligible for Medicaid. That change, part of his response to the Affordable Care Act (ACA), added 30,000 more to Wisconsin’s Medicaid rolls.

But uncertainty over ACA is the single greatest threat to the next state budget, Huebsch warned: “ACA continues its unstable path while inflicting new taxes and regulations on both individuals and businesses. Despite this, Wisconsin is the only state that has closed any gap in health insurance coverage. However, this success has required significant state taxpayer resources.”

*Aid to public schools: Evers has asked for $613 million more by mid-2017 in tax dollars to boost aid to schools. For example, he wants per-pupil state aid raised by $200 in the 2015-16 school year, and $204 more in the following school year. Republicans will almost certainly not give Evers the additional $613 million he wants for public schools. But, in the agenda for 2015-16 that Assembly Republicans rolled out on Oct.21, they made this promise: “We will continue to invest in our schools…”

*Transportation spending: To maintain highways, keep major rebuilding projects on schedule and lower long-term borrowing, Transportation Secretary Mark Gottlieb has proposed a budget that raise taxes and fees by $750 million and gets $574 million more from the general fund. If Republicans don’t divert $574 million from the general fund – state government’s main checkbook – for transportation programs, which major highway project gets delayed? Or do Republicans borrow another $991 million for highways, as they did in the current two-year budget?

*Tax cut? Meanwhile, Walker and Republican legislators have insisted they want the next state budget to include another tax cut. But those three words – “another tax cut” – appear nowhere in Huebsch’s new report on state government finances.

Steven Walters is a senior producer for the non-profit WisconsinEye public affairs network. Contact him at stevenscwalters@gmail.com