Thursday, June 15, 2006

Can You Tell It's an Election Year?

State Senators Mike Ellis (R-Neenah) and Rob Cowles (R-Allouez) recently asked the Legislative Fiscal Bureau to estimate the state budget picture over the next biennium taking into consideration the projected cost of appropriation commitments under current law and assuming stagnated revenue.

This is actually something the LFB does prior to every biennial budget process to determine how much added revenue is needed to balance the budget in upcoming years.

The requested LFB analysis confirms that such a scenario would result in a state budget deficit -- it always does. What else should be expected when expenditures increase while revenues remain stagnate?

Of course, there's nothing wrong with the LFB engaging in this type of analysis. After all, it's useful to know how much revenue is necessary to satisfy the commitments made in state law prior to starting the budget process.

But this isn't just any year -- it's an election year.

So, not surprisingly, the Green Team has picked up on the news, twisted it, and released a statement decrying Doyle's "shell game" that has supposedly led to a deficit of "nearly $2.6 billion heading into the next budget biennium" -- almost as if the 2007-09 budget process had already taken place.

And the figure Green quotes, $2.6 billion, doesn't even come from the LFB analysis -- it comes from Ellis and Cowles adding on tax breaks for businesses, a rise in public school and health care program aide, and pay raises for state workers (none of which are existing commitments).

Talk about a shell game.

As it turns out, over the next biennium, revenues are expected to increase a total of $1.45 billion -- that's without raising tax rates at all. The long-term deficit predicted by the LFB was actually $1.54 billion, which amounts to a difference of $90 million.

Considering that over the past decade most long-term budget deficits, minus revenue increases, have ranged between $1 billion and $2 billion, projecting the next one right in the middle of those figures at $1.54 billion is standard.

In fact, the real aberration in the recent long-term budget deficit pattern was prior to the last gubernatorial election.

When Doyle came into office in 2003 following 16 years of Republican governors, the long-term biennial deficit without revenue increases was pegged at $2.9 billion -- almost twice what it is now (see here, page 5).

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