Wisconsin Budget Smoke and Mirrors

by Phil Anderson

 

  In Wisconsin the governor has released his proposed budget for 2017-19. As is typical it contains a lot of gimmicks, political games, and non-budgetary policy. Many observers are considering this budget the beginning of Walker's reelection campaign.

   All the details and and fine print are not known. The legislature has to weigh in and there are indications that even the anti-government reactionaries in the legislature may not go along with some of Walker's proposals. But what is known indicates a lot of smoke and mirrors and PR games. This budget does not support good governance with sound, sustainable management of the state's finances.

   The basic budget outline consists of about $600 million in tax and fee reductions which is the standard Republican dogma. Surprisingly there is a $649 million INCREASE in school funding (after cutting K-12 $782 million in 2012). It calls for $500 million in borrowing for roads despite there being a billion dollar backlog of needed repairs. There is highly questionable “self insurance” scheme for public employee health insurance. The two year budget increases spending to $76 billion. This is an increase of 4.2% over the two years. The budget claims a $82.7 million surplus allowing Walker to claim a “balanced” budget. This is one tenth of one percent of the total budget so the “balance” is definitely precarious.

   There are a number of gimmicks included to bolster Walker's poor ratings. One example is a proposal for "back-to-school" sales tax holidays. For TWO DAYS each year you can buy specified school supplies without paying sales tax. This is projected to “save families” (but COST the state) about $11 million a year. Obviously this is pure PR that will have no significant impact on family budgets.

   Surprisingly after building his career on bashing teachers and cutting funding for education, the budget includes increases for schools and the university system. But he is tying most of the school aid increases to fully implementing the Act 10 requirements for public employees to directly pay at least 12% of their health insurance costs. This pits funding increases for schools against compensation for teachers. This is a plan to shift the cost of the school aid increases to teachers. And rather than fixing the damage from prior school cuts, this is a election tactic to defuse the school funding issue.

   These school aid increases would not go through the state's normal aid formulas. This may benefit suburban (Republican voting) areas more than urban (Democratic voting Madison and Milwaukee) ones. There are additional aid proposals for rural schools including $20 million to districts with sparse populations and $10 million for high-cost transportation aid. These are certainly needed as many rural districts have higher costs per student and get less aid under the current state aid formulas. The small amount of money per district is more PR than serious assistance. But it does throw crumbs to Walker's rural supporters.

   On tax cuts Walker is calling for reducing the lowest two income tax rates. He says the change will save a median income family of four $69 in the 2017 tax year. SIXTY NINE BUCKS! LET THE GOOD TIMES ROLL! This is obviously a PR stunt that will have NO impact on people's lives. But under funding important public infrastructure and services will continue. Another PR gimmick is eliminating the state portion of property taxes. The administration estimates this will save $139 for an average home over the next two years.

The bottom line is the tax cuts save $200 bucks a year for the average family while Wisconsin moves closer to Mississippi in the race-to-the-bottom.

   In higher education, Walker wants to freeze university tuition next year and cut it 5 percent in 2018. Overall funding would be boosted by $100 million (after having cut $250 million). He for freezes resident tuition in the tech colleges providing $5 million to pay for it. This would save students an estimated $150 per year. This is tiny in comparison with total student costs.

   To pay for it all, Walker is relying on rosy revenue estimates which is a standard budget smoke screen. He claims there will be $714 million in increased revenue through June 2019. He claims Act 10 “savings” allow increases in school funding. He hopes to achieve $60 million in savings from the public employee “self insurance” gamble. Under this proposal the state would directly pay the bills for public employee health care instead of purchasing insurance coverage. The state assumes all risk instead of the insurance companies. The current program has done well at holding down annual cost increases. The new proposal is risky and may cost the state more. But Walker is claiming $60 million in “savings” to balance the budget.

   Then there are non-budget policy items. Prevailing wage requirements would be eliminated statewide. This law sets minimum salaries for construction workers on public projects. Prevailing wage was eliminated for local government projects in 2015. Walker wants to put the Judicial Review Commission, a watchdog for judicial ethics, under the direct control of the ethically suspect state Supreme Court. There are several provisions to change state boards overseeing private colleges, unemployment disputes, and prison parole requests. Whatever the merits of these items they don't belong in the budget.

   Good governance and responsible public financial management requires CONSISTENT support for the vital government activities that are the backbone of our economy. Schools, roads, and other public services must be adequately funded EVERY YEAR not just when a crisis develops or it is politically expedient. The reasons we have budget problems are corporate tax breaks, loopholes, corporate welfare, and failure to collect enough revenue to support vital public functions. Shaky revenue estimates, nickel and dime tax cuts, risky insurance schemes, and tax gimmicks do not advance long terms fiscal health for the state. Wisconsin needs responsible fiscal leadership, not politically motivated smoke and mirrors.