Can Wisconsin handle the truth? We’re about to find out.
Think back to all the politicians you’ve seen that go back on campaign promises. Make a list of all the candidates that tell you just what you want to hear. Your pen will run out of ink before you get halfway through. WPRI polling has shown record levels of distrust towards elected officials, as the public doesn’t think most politicians have any courage or any convictions.
And yet here in Wisconsin, we have a new governor who is both carrying through on a campaign promise and being honest about the state’s fiscal situation. And he will be excoriated for it.
Today, Governor Scott Walker will be officially introducing his plan to significantly reduce the influence of public employee unions. His plan will require unionized state workers to contribute 5% to their pensions (they contribute nothing now), and 12% to their health insurance (doubling the 6% they now contribute.) If Walker’s plan doesn’t pass, unions can expect over 6,000 worker layoffs in order to aid in covering the state’s deficit.
Naturally, the public employee unions will act as if Walker has just personally thrown their grandmother out into the street. They will use verbs indicating physical violence – “Walker assaults public employees,” or “Walker declares war on government workers.” Walker will be taking a “meat cleaver” to the children of the state, or better yet, from Senator Spencer Coggs: Walker has introduced “legalized slavery.” (As if slaves in the South were saying, “boy, I’m glad we don’t make an average of $50,000 per year with full health and pension benefits. Thank God we’re not Wisconsin government workers.”)
Democratic Assemblyman Mark Pocan fell just short of actually urging state workers to strike, saying he hopes “public employees will make their value expressly known in the days to come.” Public employee strikes are illegal and have been virtually nonexistent since passage of a landmark mediation-arbitration law in 1977. How often do you see a publicly elected official urging citizens to break the law?
You’ll see these public employee histrionics because they have been lulled into complacency. We’re coming off a decade where unions were told they could operate as-is despite budget cuts. We’ve been told we can continue to spend despite plummeting tax receipts. We’ve been told we can eat all we want and never get fat. We’ve had a Legislature and Governor unwilling to make tough decisions, thereby throwing the state budget $3.6 billion out of whack.
In November, we elected a governor who said he was going to do something about it. And now he is. And the unions and their sycophantic legislators are serving notice – don’t ever take the steps necessary to balance the state’s books, or else. A lesson Scott Walker’s predecessor took to heart.
This week, Milwaukee Magazine’s Bruce Murphy cites a recent New York Times analysis to make the point that Wisconsin’s budget deficit isn’t really so bad after all. According to the analysis, Wisconsin’s $1.8 billion deficit in 2012 represents 12.8% of the previous year’s budget, which puts us right in the middle of the 44 states that reported budget deficits.
Fair enough, but that’s not the whole story.
Wisconsin is well behind the nation in the tools it grants itself to deal with budget deficits. As I laid out in this lengthy research paper in 2009, most states require healthy “rainy day” funds to help ameliorate revenue shortfalls. Wisconsin’s is virtually nonexistent:
According to the National Association of State Budget Officers (NASBO), nationwide ending balances reached 10.4% of expenditures in 2000, and 9.4% in 2001. During the 2001 recession, states were able to draw on $25.8 billion of reserves to help balance their budgets. As a result, ending balances were reduced to 3.7% of expenditures. Balances built up over the previous years helped ameliorate many of the budget problems caused by lagging revenue.
Following the recession in 2001, most states set aside significant amounts of money in budget reserves. In 2006, nationwide ending balances in state budgets had reached $62.1 billion, or 10.9% of expenditures. Increased revenue due to a growing economy contributed to these new funds, as states learned the importance of setting aside money for emergencies.
Wisconsin never learned its lesson. Wisconsin remains one of only four states with a minimum statutory balance under 1% of expenditures. Wisconsin had ending balances of 0.4% of annual spending in 2006 and 0.6% in 2007, and budgeted a minimum balance of 0.4% in the fiscal year 2008 budget. This compares to a nationwide average of 8.2% in 2007. By the standards set by other states, Wisconsin’s government has been running on fumes.
Furthermore, Wisconsin has been using debt to finance more and more of its state government operations. When the state issues bonds, the debt service on that borrowing is inviolate – it cannot be reduced unless the bonds are refinanced:
In the past three budgets, the Governor and Legislature have generously used debt to fund ongoing appropriations indirectly. Additionally, new types of bonds have been created that allow government to circumvent the constitutional prohibition on bonding for general operating expenses. In several instances, Wisconsin’s elected leaders opted for short-term gain over long-term fiscal responsibility, and their creation of new types of borrowing carried risks for the future.
In 1969, when the state constitution was amended to allow the state to issue bonds, Wisconsin had $392.8 million in outstanding debt. In December of 2006, Wisconsin had $19.3 billion in outstanding debt, or $3,476 for every state resident. Shortly before the 1969 constitutional amendment passed, Wisconsin ranked 40th in the nation in state debt per capita. By 2003, Wisconsin had risen to 10th in per capita debt outstanding – and state debt has increased substantially since then.
Furthermore, the state has issued debt in excess of taxpayers’ ability to support that debt. In 1979, outstanding GPR supported GO bonding was 16.1% of state GPR revenues. By 2006, that number had more than doubled, to 33.9%. GPR funded GO bonding has grown substantially in relation to tax revenue.
Increased debt further ties the hands of the Governor and Legislature when trying to address budget shortfalls. Debt service simply can’t be cut like other government programs. General obligation bonds are backed by the full faith and credit of the state, and defaulting on those bonds is not an option.
So while Wisconsin may appear to be in the middle of the pack, it has far more restrictions on dealing with budget deficits than other states. The lack of long-term planning over the years has caught up with the state, and makes earnest attempts to balance the budget all the more painful.
Today, the Milwaukee Journal Sentinel uses our polling data to make the case for more state employee benefit “flexibility:”
What’s surprising is that Walker is willing to consider what amounts to abolishing public unions. And with the news Wednesday that Walker’s Republican colleagues might introduce right-to-work legislation next year, the climate for labor is growing chillier by the day.
Tough talk. But when it comes to the public employee unions, it’s justified.
Walker is not asking the impossible here: He merely wants state workers to pay more of their share for their benefits – just as most employees at companies do.
Walker wants them to pay 5% of the contributions to their pension plans – they don’t pay at all now – and to pay a larger share of their health insurance premiums – up to 12% from 4% to 6%.
These eminently reasonable ideas would save $154 million between January and June 30, he said.
There is little doubt that a fed-up public is on his side. In a statewide poll conducted last summer for the Wisconsin Policy Research Institute’s Refocus Wisconsin project, 76% thought that public employees should contribute to their pensions. Only 17% said it was understandable that they did not.
As the Great Recession rolled across the heartland, Wisconsin’s budgets got harder and harder to balance. In the current fiscal year, which ends June 30, the state faces a shortfall of at least $150 million. That gap grows to a whopping $3.3 billion in the next biennium.
Trimming worker benefits is one tool needed to fill those budget holes. To do that, the state needs more flexibility.
They don’t say specifically what type of “flexibility” would be needed, but the board objects to the idea of “stripping the unions of their bargaining authority.” Of course, any unilateral mandate the state imposes on unions (requiring more of a contribution towards health care and pensions, for instance) will be viewed by the unions as “stripping” them of their bargaining rights. But as we’ve shown in report after report, state employee benefits are a primary driver of state spending, which has to be curtailed to fill the $3 billion hole Wisconsin faces.
Say what you will about the Wisconsin State Legislature: they stick with what works. And in the case of the looming state Medicaid deficit, they’re going right back to the same playbook that allows them to slink silently away from their problems without making any real decisions – while leaving us with larger deficits in the future.
According to the Milwaukee Journal Sentinel, the state is facing a $1 billion hole in its Medicaid program. For the purposes of scale: A billion dollars is a lot of money. The $1 billion shortfall makes up about 17% of the total amount the state spends on Medicaid in a year (although $1 billion is slightly less than the amount Tiger Woods is going to have to spend on a diamond ring for his wife to keep her around.)
Certainly, the state is taking this matter very seriously. Undoubtedly, our Legislature is combing through the state budget to find efficiencies, or cost-saving measures, or other state programs than can be cut in order to fund this program.
I’m sorry, I can’t keep a straight face anymore. In fact, what they’re actually doing is taking almost $200 million in payments and just pushing them off until the next biennium, so they’re off the books in this fiscal year. Then, POOF! The money just disappears! – Until next year, when they have to figure out how to fill that $200 million hole.
This is a textbook example of how the state has been running up huge structural deficits over the past decade. The Governor and Legislature decide they want a certain level of government, but have no way to pay for it. So they just keep pushing spending off into the future, until we end up with a $6 billion deficit when tax revenues slow down. Naturally, they wash their hands of any responsibility – blaming the deficits on the bad economy. (I wrote a 40 page paper demonstrating how it actually is their fault, and I think it’ll come in handy for you, especially if you’re an insomniac.)
Perhaps most entertaining is the quote from Governor Doyle’s Medicaid Guy, Jason Helgerson, on why the state is seeing deficits:
Jason Helgerson, who oversees BadgerCare Plus and other Medicaid programs, said the potential shortfall could be offset if the federal government extends the increased payments that states are receiving for their Medicaid programs under the federal recovery act.
“Every state in the nation is facing this,” Helgerson said.
Translation: “PLEASE, BARACK! WE NEED MONEY! PLEEEEAAAASE!!!!! PLEEEEEEEEEEEEAAAAAAAASE!”
Furthermore – it’s extremely doubtful that other states are facing the problems that Wisconsin now has to solve. After all, we’re the state that increased spending 6% at a time when we faced a $6 billion deficit. And we’re the state that has no rainy day fund to use when times gets tough. And we’re the state that allows drunk Santas to drive around, terrifying kids (which isn’t really relevant, but entertaining nonetheless.)
So here’s a test – call your bank and tell them you’re a little short on cash this month, so you won’t be making any mortgage payments until July. Congratulations – you just balanced your books, Legislature-style! Then call me from jail and tell me how the experiment went.
Bonds. Sosa. McGwire. A-Rod. Manny. Clemens. All names that just years ago were exalted as American heroes, each having re-written baseball’s record books. Now every one wallows in shame, having been exposed as a cheater.
In doing so, each one of these players has stolen something. They’ve stolen records from our most revered heroes like Hank Aaron. They’ve stolen millions of dollars, having been paid enormous contracts based on numbers they didn’t earn. And they’ve stolen championship rings from other, more deserving players.
For years, the American media and baseball fans simply refused to see what was in front of their eyes. Roger Maris’ single season home run record of 61 stood for 37 years, then was broken by two players in the same year in 1998. Three years later, the new record of 70 was bested by Barry Bonds, who hit 73. Sammy Sosa hit more than 60 home runs three times. Roger Clemens won three Cy Young awards before age 34, and four afterwards – including one at age 41, when he went 18-4 with the Houston Astros.
We came up with plenty of excuses. The ballparks were smaller. The balls were juiced. Players were eating better and working out more. We were so enamored with the fairy tale that we refused to believe the most obvious of explanations. Even after it became clear that steroids were wiping the record books clean, the players’ supporters made excuses – steroids couldn’t make you hit the ball farther, they said. Pitchers couldn’t use it because they’d get too bulky and muscular.
The example of steroids in baseball has uncovered what truly has become America’s newest pastime – choosing to ignore facts that are staring us in the face. We put on a blindfold and jam our fingers in our ears to block out any information that might be uncomfortable in the short term, but could be disastrous over time.
Sadly, baseball is perhaps the least important instance where we’re willfully deceiving ourselves based on the evidence before us. For years, we thought it would be a great idea to give zero percent down home mortgages to high risk homeowners, merely so we could say we were helping people afford houses. Naturally, when these lenders began to fail, the economy came crashing down faster than Rafael Palmiero’s Hall of Fame chances.
Today, we’re being told that we can have government spend its way out of a recession, despite all the historical evidence to the contrary. We are being told that when health care is free, that people will actually use less of it. (Remember the lines outside George Webb restaurants when the Brewers started the season 13-0 in 1987 and the restaurant was giving out free burgers?)
We are told that we need to make it more expensive for employers to keep their employees, then we’re shocked when businesses move jobs overseas. We are told that the same government that has reigned over years of massive deficits is going to teach General Motors how to turn a profit. (Which is somewhat like baseball putting Jose Canseco in charge of its steroid policy.)
In Wisconsin, we continue to choose to ignore facts that should instruct our behavior for the better. We seem to believe that the growing structural deficits our state government is running have nothing to do with higher taxes, as the state raises taxes by over $3 billion to try to fix it. Our politicians tell us that they can prevent businesses (oil companies, hospitals) from passing along tax increases to the consumer, despite no recorded case in human history where consumers didn’t end up paying more for goods and services to offset the tax. We vilify banks who loan exorbitant sums of money to individuals, then our state government turns around and increases its own borrowing by $3.3 billion during a recession.
And yet we roll on, completely unwilling to draw any connection between our current plight and the actions of our government. To Americans, two plus two now equals “don’t bother me right now.”
Baseball still has the ability to do what’s right. It can grant Hank Aaron and Roger Maris their rightful records back, and permanently recognize the Steroid Era for what is was (and continues to be).
But where do we go to get our economy back? Where do people who have lost their jobs because of excessive taxes and business regulation go to recoup those lost paychecks? How do we un-do all the damaging programs set into motion for the aggrandizement of political careers and not for the betterment of our citizens?
Ironically, many Americans this summer will seek respite from such questions out at the ballpark. In a bad economy, they will enjoy paying six dollars for a hot dog to pay Alex Rodriguez’ steroid-inflated salary.
-June 29, 2009
In researching my commentary on Scott McCallum yesterday (and it appears that I remain the only one willing to publicly defend McCallum), I ran across this tidbit of info that didn’t quite fit:
When running against McCallum in 2002, then-Attorney General Jim Doyle ripped the Governor for revenue forecasts that Doyle deemed too optimistic. From a Milwaukee Journal Sentinel blog in 2006:
Four years ago, then-candidate for governor Jim Doyle attacked a prediction that future state revenues will grow by about 5%. But that’s exactly the growth that his own state budget director recently predicted, and said it will wipe out any future budget deficit.
On Sept. 25, 2002, the Democrat’s campaign ridiculed the prediction by the top deputy to then-Republican Gov. Scott McCallum that tax collections would go up by about 5% a year.
“Scott McCallum has been spending too much time with his friend Rosy Scenario,” Doyle, then the attorney general, said in a statement. “That is exactly the kind of wishful thinking and dishonest budgeting that got us into a $2.8-billion (deficit) hole to begin with.”
Now here we are in 2009, in the middle of a recession, with state revenues dropping. And the number Doyle plugs in to his budget to make it balance out?
So while it took three years after the mild recession of 2001 for the state to show any tax revenue growth, Doyle thinks in one year we’re going to be all the way back to the 5% growth that he sneered at McCallum for predicting. Doyle ripped McCallum for his forecast saying tax receipts are going to grow 5% in a mild recession, and now Doyle has them growing 4.5% in a disastrous recession.
It gets even better:
Said [Doyle Budget Director] Schmiedicke: “Over the past 20 years, revenues have grown at an average rate of approximately 5% a year. Assuming only average growth — and without having to cut anything from the budget — the state will see revenue growth of about $1.9 billion. That more than covers the so-called ‘structural deficit’.”
Well, we know how that turned out. Even before the bad economy hit in late 2008, the budget Doyle signed in 2007 carried a $1.6 billion structural deficit, which ballooned to the current $6.6 billion deficit. This deficit occurred even after tax revenue growth of 5.5% in 2006, 4.9% in 2007, and 3.8% in 2008. So they got the growth they wanted, but didn’t even come close to closing the “so-called” structural deficit.
Basically, Doyle justified spending beyond our means by saying we’d make more money in the future to balance things out. Well, that money came, and he continued to deficit spend – which turned into the problem we have now. (And the problem we’ll have in the future, as the budget in its current form carries a $2.3 billion deficit into the new biennium.)
They called him a nitwit. A moron. A boob. A lightweight. And that was just his supporters.
Seven years ago, Scott McCallum walked out of the Capitol a defeated man. After serving 14 years as Tommy Thompson’s Lieutenant Governor, McCallum finally got his chance to run the state as Governor for two years, beginning in 2000. During his brief tenure, he presided over a mild recession that forced him to make choices which euthanized his chances at re-election. What McCallum did to fix the deficit, however, provides a stark contrast to the current administration’s budgeting practices, and serves as a warning to future politicians that back up their words with action.
We know what ended up happening – Jim Doyle won the Governorship in 2002, eventually facing a $6.6 billion deficit in 2009. This followed years of the Governor and Legislature raiding funds to plug budget holes, increasing taxes and spending, starting new programs, and using questionable gimmicks to balance the budget. Even Doyle’s solution, which relies heavily on new taxes and one-time federal stimulus funds, creates a $2.3 billion structural deficit in the next biennium.
What’s interesting to imagine is what could have ended up happening had 32,000 people (the size of the City of Beloit) decided to vote for McCallum instead of Doyle in 2002, sending the incumbent back to Madison. Or had Tommy Thompson’s brother, Ed, decided not to run, which siphoned off 185,000 votes – nearly three times Doyle’s margin over McCallum.
During his brief tenure, McCallum proposed a number of items that, had they passed, would have made the current recession infinitely easier to deal with. In his initial budget, in which he faced a $600 million deficit, McCallum proposed capping general fund spending to the same rate that tax revenues increase during a biennium. Even though it didn’t help him in that particular budget, McCallum looked ahead and saw the potential for large deficits in the future. In order to restore some fiscal discipline, he merely suggested that spending match up with revenues – a concept that would be ignored over the next eight years, forcing the state into deeper and deeper deficits.
In the final version of the budget, the Legislature kept McCallum’s suggestion for an expenditure cap, but riddled it with massive loopholes, rendering it worthless. For instance, school aids (around 45% of the state budget) were exempted from the cap, as were payments to the University of Wisconsin System.
In the same budget, McCallum proposed depositing 50% of any unintended revenues into a budget stabilization fund, in the event tax receipts fell short in the future. Generally, states set aside between 5% and 10% of their budgets for an emergency, yet Wisconsin had never put aside any money to plan ahead for bad times. This provision passed, creating a funding mechanism for a state “rainy day fund” for the first time. In 2007, Governor Doyle transferred $55.7 million to the stabilization fund (of course, taking credit for the fiscal responsibility mandated by McCallum’s law six years earlier – the money has since been spent, leaving the state once again with virtually no rainy day fund.)
Perhaps most importantly, McCallum made real cuts to real ongoing state programs – a decision which may have cost him his governorship. In the 2002 budget repair bill, McCallum proposed phasing out the state’s Shared Revenue program, in which the state sends $1 billion per year to local governments. Had McCallum’s plan passed, the state would today be in an infinitely more tenable position than it cuurently finds itself.
Laughably, Governor Doyle is still trying to sell a line that his budget “cuts” government, when in fact it actually increases total spending 6.3% on the strength of federal stimulus money – leaving the state with a massive 2.3 billion deficit in the next biennium. Yet it was Doyle who savaged McCallum for his proposed cuts during the 2002 campaign.
In announcing his plan to phase out aid to local governments in 2002, McCallum indelicately referred to local elected officials as “big spenders.” This turned a lot of local officials, many of them Republicans, against him. It was clear he had none of the political skill of his predecessor, Thompson, and served as a stern warning to future elected officials that dared to cut an entrenched government program.
Of course, not every move McCallum made was gold-plated. He is open to criticism for using the state’s ongoing tobacco settlement to help balance the budget – a one-time funding source that began the ball rolling in future bienna. However, in his budget adjustment bill, McCallum essentially used the tobacco settlement to fund the remaining years of the Shared Revenue program – meaning, he wasn’t using it for an ongoing program, he was using it for a program that was disappearing. Instead, the Legislature kept the cash and kept the Shared Revenue program, blowing the hole wide open in future budgets.
Since his years in the East Wing, McCallum has gone on to start a successful non-profit business that matches corporate contributions to people in need of aid. In doing so, he is demonstrating the business acumen that would have served the state wonderfully over the past eight years, and made the economic downturn much more manageable. He’s also showing that you can do a great deal of good outside the realm of government – a lesson our Legislature should take to heart (but ultimately won’t.)
Instead, we are stuck with a disastrous budget that raises taxes, increases spending during a downturn, and drives the state further into deficit. It could have been so much better.
And now Scott McCallum, you may have your last laugh.
-June 15, 2009
It’s a the same song and dance we go through every year on School Choice, but with increased relevance given what Assembly Democrats did to the program last night. In a motion passed behind closed doors, Democrats capped participation in the Milwaukee School Choice program at 19,500, which could throw hundreds of kids back into the Milwaukee Public School system in the next two years.
Of course, it is in the Democrats’ best interests to try to handicap a program that demonstrates that kids can actually be educated by non-teachers union members, and for half the cost to boot. The teachers’ union continually tries to portray school choice as “costing” statewide school districts money, when, in fact, it actually saves state taxpayers.
Yesterday, State Representative Mike Huebsch released a memo from the Legislative Fiscal Bureau that demonstrates what would occur to non-MPS school districts if the School Choice program were reduced and Choice students were moved back into MPS – where they cost state taxpayers a lot more to educate, in a district failing miserably. The memo tells us what anyone paying attention already knows: it costs less to educate a kid in choice than it does in MPS – so if you dump those kids back into MPS, it steals money from school districts around the state.
Take a look at Table 1 of the memo: If the choice program were disbanded altogether, MPS would get $203 million more in state aid, while districts around the state would lose $145 million, since it costs so much more to educate kids in MPS. They would then jack up statewide property taxes to make up that difference, as the law allows them to do.
So if you don’t live in Milwaukee, and don’t care about School Choice because you think this is a parochial program just to help the kids in the city, you should reconsider – if only to save your own wallet.
And it can’t be said too many times – this has nothing to do with the “state budget” (as it doesn’t meaningfully affect state finances) and everything to do with strangling a program the teachers’ union opposes.
Yesterday, the Legislative Fiscal Bureau released their summary of the state budget as rushed through by the Joint Finance Committee last week. It’s a long and complicated document, so we here at WPRI have enlisted some help in explaining many of the big themes included the budget.
As it happens, most of what legislative Democrats passed can be explained by eccentric chocolatier Willy Wonka, star of the 1971 children’s classic “Willy Wonka and the Chocolate Factory.” Here are some famous quotes from the movie, and how they shed light on the budget currently before the Legislature. Cuddle up with your favorite little Oompa Loompa and read along:
Willy Wonka: [singing] There is no life I know to compare with pure imagination. Living there, you’ll be free if you truly wish to be.
For weeks, Legislative Democrats have been adamant that this budget “cuts” government, pointing to the fact that general purpose spending is down 3.2% over the base year doubled. By making the case that this budget “cuts” anything, they are living in a world of “pure imagination.”
In fact, total (all funds) spending increases in this budget by 6.3% over the biennium – in a budget that we are told balances a $6.6 billion deficit. This is primarily because President Obama “made it rain” federal dollars, which simply supplant much of the general fund spending that is reduced in the first year. This will leave us with a gigantic hole in the next budget, when the federal dollars aren’t there to support the ongoing programs we have created.
One needs only to look at the state employee numbers to see how deep these supposed “cuts” are. The budget passed by the Joint Finance Committee actually increases state employees by 367.8 positions over Governor Doyle’s proposed budget. These increases come in a year when not only is the Legislature supposedly cutting spending, but when over 118,000 private sector jobs have lost their jobs.
These “cuts” are pure imagination.
Willy Wonka: [making a mysterious formula] Invention, my dear friends, is 93% perspiration, 6% electricity, 4% evaporation, and 2% butterscotch ripple.
Mrs. Teevee: [as Mr. Wonka drinks the formula] That’s 105%!
Mr. Beauregarde: Any good?
Willy Wonka: [smacks his lips, then speaks thinly] Yes.
Legislative Democrats tell us this budget is “balanced.” Yet the Legislative Fiscal Bureau has issued a memo telling us that the new budget creates a structural deficit of $2.3 billion to begin the next biennium – over $700 million more than the state had at the beginning of this biennium (caused by prior imbalanced budgets.)
Clearly, the numbers don’t add up. Maybe they should add some butterscotch ripple.
Veruca Salt: I wanted to be the first to find a Golden Ticket, Daddy!
Mr. Salt: I know, angel. We’re doing the best we can. I’ve got every girl in the place to start hunting for you.
Veruca Salt: All right, where is it? Why haven’t they found it?
Mr. Salt: Veruca, sweetheart, I’m not a magician! Give me time!
Veruca Salt: I want it now! What’s the matter with those twerps down there?
Mr. Salt: For five days now, the entire flipping factory’s been on the job. They haven’t shelled a peanut in there since Monday. They’ve been shelling flaming chocolate bars from dawn till dusk!
Veruca Salt: Make them work nights!
The petulent Veruca Salt wanted that golden ticket, and was willing to make all her dad’s factory workers log in overtime to get it.
For 15 years, WEAC (the state’s teachers’ union) has been kicking and screaming to get rid of the QEO law that guarantees them at least a 3.8% salary and benefit increase per year. They wanted more, and it didn’t matter if the “twerps” working two jobs in the private sector had to work extra hours to pay for their increased salaries.
Finally, in this budget, they get their wish (although they lobbied to have their golden ticket pushed back one year, realizing what a good deal it was in a bad economy.)
Start working nights, twerps.
Mr. Turkentine: I’ve just decided to switch our Friday schedule to Monday, which means that the test we take each Friday on what we learned during the week will now take place on Monday before we’ve learned it. But since today is Tuesday, it doesn’t matter in the slightest. Pencils ready!
Ultimately, this budget will be judged on its contents, not necessarily how it was crafted. But the Joint Finance Committee’s attempts to schedule themselves out of any scrutiny of the contents shouldn’t be forgotten. Backroom dealings, late night votes, and committee meetings on holiday weekends became routine with the Democrats on the Joint Finance Committee. It’s a sure sign that they’re embarrassed about what they passed, and their 5:45 AM votes on Friday mornings confirm that.
Willy Wonka: A little nonsense now and then is relished by the wisest men.
Governor Doyle and the Wisconsin Legislature seem to live by these words.
Take, for instance, the so-called “oil franchise fee” Doyle has been pitching for years. According to the plan, oil companies would pay a higher tax on their gross receipts, and not be allowed to pass the cost on to consumers.
Yet there’s no court in America that would uphold such an “anti-pass through” provision. The scheme, which is expected to raise the price of gas between 5 and 7 cents per gallon, is a gas tax increase, pure and simple. This has been demonstrated time and time again. Yet delusional lawmakers still somehow believe oil companies will end up paying the tax, despite all the facts to the contrary. In fact, when the oil companies eventually sue the state, they will win, and taxpayers may be asked to foot the bill for all the taxes they paid, plus damages.
Relish the nonsense.
Willy Wonka: Bubbles, bubbles everywhere, but not a drop to drink – yet.
Wonka was wildly optimistic about his new flavorful concoctions – just as the Legislative Democrats’ budget may well be overly optimistic about the revenue numbers in the coming years.
While everyone agrees that general purpose tax receipts have dropped over the past year due to the sinking economy, this budget actually expects sales, income, and corporate tax revenues to jump 4.8% next year.
In 2001, when the state suffered a relatively mild recession, state revenues remained flat for a full three years after the downturn (even when one factors in the tax cuts that went into effect in 2000.) To expect revenues to rebound so quickly after such a dramatic economic downturn seems to be asking too much. Of course, the budget goes ahead and spends those hypothetical funds, which could send the state into another budget crisis should those new revenues not materialize.
Willy Wonka: It’s all there, black and white, clear as crystal! You stole fizzy lifting drinks! You bumped into the ceiling which now has to be washed and sterilized, so you get *NOTHING*! You lose! Good day, sir!
Grandpa Joe: [shocked] You’re a crook. You’re a cheat and a swindler! That’s what you are!
If Wonka was incensed by Charlie and Grandpa Joe sampling some of the factory’s fizzy drinks, imagine how angry he’d be with the Legislature stealing $140 million from the transportation fund to plug the general fund deficit. But rather than missing out on free chocolate for life, state taxpayers will instead be punished by having to pay 20 years’ worth of interest on the bonds used to replace those stolen funds. This, of course, is on top of the interest they are already paying for the $1.2 billion in bonds issued in past budgets to plug the general fund hole (which generally blows a hole in the subsequent budget – sensing a theme here?)
Mr. Salt: Wonka, how much do you want for the golden goose?
Willy Wonka: They’re not for sale.
Mr. Salt: Name your price.
Willy Wonka: She can’t have one.
Veruca Salt: Who says I can’t?
Mr. Salt: The man with the funny hat.
Just as Willy Wonka had a golden goose, our legislators have figured out who lays their golden eggs – the taxpayers.
This budget, plus the “mini” budget passed in April, raises taxes by $3.3 billion – at a time when Wisconsin residents can least afford to pay more. Taxpayers can expect to pay more for gas, cigarettes, hospital care, nursing home beds, and they will also be asked to start paying sales taxes on an array of goods which were previously exempt. Property taxes are expected to go up by $316 on a median-value home. Even in cases where the new tax isn’t directly applied to the consumer (combined reporting, for instance), businesses will be forced to increase their prices to customers in order to make up their loss.
Of course, the business and taxpayer golden goose can always fly away to other friendlier states, leaving the rest of us to pick up the tab.
Mrs. Gloop: [Augustus Gloop is sucked into the suction pipe which takes him to the vertical pipe] Don’t just stand there, do something!
Willy Wonka: [unenthusiastically] Help. Police, Murder.
When Augustus Gloop is sucked into a chocolate tube, Wonka is unconvinced that any wrong necessarily had to be righted. Gloop, after all, had been gluttonous, and probably got what he deserved.
For some reason, the Legislature decided there were some imaginary problems for which they had to “do something.” For instance, the budget increases the amount of car insurance drivers must buy in Wisconsin. Has this really been a problem? Were lawmakers hearing from constituents who were clamoring to pay $300 per year more in auto insurance premiums?
In fact, legislators likely only heard from the trial attorneys, who will receive larger payouts as a result of the increased insurance coverage by Wisconsin drivers. As such, the trial lawyers’ gluttony dwarfs that of poor Augustus.
Mrs. Gloop: He can’t swim!
Willy Wonka: There’s no better time to learn.
This budget was the perfect time to make fundamental, systemic changes to how the Wisconsin budget works. The Legislature could have started to put money aside for future downturns, to ameliorate the effects of a slowing economy. They could have asked state workers to pitch in just a small amount to their own retirement accounts, in order to help balance the books. They could have ceased raiding state funds for cash, which has caused a large part of the shortfall in which they now find themselves.
While Augustus took being sucked into the tube as a chance to learn to swim, lawmakers in this budget learned nothing. They made no government worker reductions. They plug budget holes with temporary money, almost certainly causing another large deficit in the next biennium. They exacerbate the state’s fiscal problems by issuing more debt, and stuffed the budget with pork projects to get them through to the next election.
Sam Beauregarde: Don’t talk to me about contracts, Wonka, I use them myself. They’re strictly for suckers.
Wonka adheres strictly to contracts, as do state employees. That’s why, despite the budget eliminating 2% raises for state employees, the state only saves $72 million from the maneuver. Employees that are unionized don’t lose the raise, as their contracts are in effect. (They do, however, have to take part in the 16 day furlough plan in the budget.)
Mrs. Teevee: I assume there’s an accident indemnity clause.
Willy Wonka: Never between friends.
Wonka won’t be pleased when he finds out the Wisconsin Legislature has now made him liable for 100% of the damages to his visitors, even if he’s only 20% negligible. Perhaps he can pay the trial attorneys off with the everlasting gobstopper secret.
Willy Wonka: Not a speck of light is showing / So the danger must be growing / Are the fires of hell a-glowing? / Is the grisly reaper mowing? / Yes! The danger must be growing / For the rowers keep on rowing / And they’re certainly not showing / Any signs that they are slowing!
For years, our “rowers” (elected officials”) have been rowing our state’s finances into a ditch. And there’s certainly no sign that they’re slowing.
The Wispolitics Budget Blog is doing a great job of covering the briefing Assembly Democrats are receiving on the budget handed over to them by their colleagues on Joint Finance. There’s a bunch of good stuff in there, but this one stands out:
Currently, there’s a lively debate on joint and several liability language, which some are having trouble comprehending.
“Can you put it in layman’s terms?” Speaker Mike Sheridan asked.
“I’m a non-lawyer and I’ve dumbed it down as far as I can,” said an LFB staffer.
“We need a book ‘Legislating for Dummies,'” Schneider cracked.
Rep. Rob Turner suggested the proposal isn’t “ready for prime time” if the lawmakers are having trouble understanding it.
Pocan said there would be a clearer explanation for lay people handed out to the caucus by Monday.
Rep. Mark Radcliffe was not happy that the caucus was spending time worrying about joint and several.
He said he spent yesterday with a constituent who was losing her job because of the DMV center closure in his district. He said he wanted to talk about job creation “not some crap” that doesn’t matter to his constituents.
“This is ridiculous. Let’s talk about the budget and how we are going to save jobs in this budget,” Radcliffe said.
Of course, Mark Radcliffe is more concerned about saving the job of one of his constituents than he is about sweeping policy changes that could bankrupt businesses. Honestly, if we can’t cut a couple DMV centers when we have a $6.6 billion deficit, then we can’t cut anything.
Of course, shortly thereafter, the Assembly Democrats went into closed caucus, to avoid media coverage of their confusion.
In the world of linguistics, words actually mean things. In many cases, tacking one qualifying word on to another can completely change the meaning of the original word being used. For instance, everyone enjoys a juicy apple. But one would be hard pressed to find someone that enjoys a “horse apple” in the same way. We often associate “wind” with a cool, gentle breeze. But if someone “breaks wind,” it’s liable to clear out your dinner party. If someone offers you “water,” they might think you’re thirsty. If someone offers you “waterboarding,” then you should immediately begin digging a getaway tunnel.
Even state government has its own language that often employs such qualifiers to its own benefit. Under the Wisconsin Constitution, the state may not run a “deficit,” meaning the books have to be balanced on a cash-in, cash-out basis. Yet the state continually runs a “structural deficit,” meaning its government merely pushes off much of its spending into future fiscal years, leaving taxpayers to pick up the tab down the road. In the case of the 2009-2011 budget, Governor Doyle’s acceptance of the word “structural” is worth about a billion and a half dollars to the taxpayer.
Conversely, in the cases where it helps to grow government, meaningful adjectives are cast aside to allow for profligate spending. Take, for instance, the way we fund state government employee retirement benefits.
Under the current Wisconsin Retirement System (WRS), each state government employee earns a taxpayer-funded employer contribution of roughly 5% of their salary every year. These same employees are expected to kick in an annual “employee contribution” of a similar amount – but in actuality, state government pays each employee’s individual contribution for them. In 2007, 99.6% of all contributions made to the WRS – both the “employee” and “employer” portions – were paid by state taxpayers.
In short, the “employee contribution” is nothing of the sort – there’s a better chance of seeing a “clay pigeon” eating birdseed than of seeing a government employee contributing a cent to their own retirement benefits. In 2007, these contributions combined cost taxpayers $393 million, and that’s just for employees at the state level.
Several weeks ago, Governor Jim Doyle announced that the state’s fiscal situation is going to much worse than he had anticipated. Lagging tax receipts and previous fiscal mismanagement could very well drive the state deficit up by $1.6 billion. As a remedy, Doyle suggested state employee cuts and furloughs, as well as funding reductions for school districts and local services. Many local governments are also looking at cutting staff and services.
Yet to date, no one has proposed an obvious budget remedy – merely making the term “employee contribution” mean exactly what it says. Requiring the WRS’ 263,000 participants to invest just a small amount of their money in their own retirement system could save state and local governments in the neighborhood of $1.3 billion over the upcoming biennium. Consequently, these governments could eliminate many of the program cuts that they are warning would be so damaging. Children would continue to learn, fires would continue to be put out, and garbage pickup would proceed on schedule if governments took the term “employee contribution” literally.
According to the state Department of Workforce Development, Wisconsin’s private sector lost 128,000 jobs in the last year, while government jobs actually increased by 5,700. To this point, the only sacrifice made by state employees has been to avoid running over all the private sector unemployed people wandering the streets on their drive to work.
Putting the “employee” back in “employee contribution” can go a long way to leveling the playing field between the state’s public and private employers, and eventually save the jobs of many of those government employees that will inevitably resist such a plan.
In 2003, Governor Doyle said he would be “open to every solution” that would allow him to fix the state’s shortfall without taxes. He could start by making the term “employee contribution” mean something again.
-June 1, 2009
A couple weeks past its shelf life, but still instructive:
My column arguing for requiring government employees to kick in more for their retirement benefits appeared in the Milwaukee Journal Sentinel yesterday. It has undoubtedly riled state employees who have become accustomed to the generous retirement benefits offered by the taxpayers.
It seems, however, that state and local government employees should be willing to make a fairly small concession in exchange for saving their jobs. It seems that most on the left argue vehemently that fewer government employees makes for worse government. This issue exposes the schism between conscientious liberals who believe in effective government versus those who merely see taxpayers as a way to pad their own wallets.
In the article, I mention that the issue of requiring more employee retirement contributions is “an idea that nobody is talking about.” In fact, a requirement that new employees pay a portion of their pension was in the Assembly Republican budget that passed in 2007, and Representative Mark Gottlieb e-mailed me to point out that he introduced legislation on this in each of the last two sessions (2007 AB 449, and 2005 AB 267).
The Legislative Fiscal Bureau has an informative paper on the Wisconsin Retirement System which can be read here. The section on employee contributions begins on page 37.