Wednesday, August 16, 2006

Clearing the Air on the State Deficit

Before every biennium, the Legislative Fiscal Bureau examines fiscal commitments for the upcoming state budget and determines how much more revenue will be needed to meet those commitments above the current revenue levels.

How much more revenue will be required above and beyond the current levels has been referred to in the media as a “structural deficit” (and that phrase was repeated on this blog), but that’s actually not accurate. In fact, this figure is simply known as an “advanced commitment” because it involves the cost of future commitments based upon current revenue levels.

Here’s a chart from a recent Department of Administration report that shows the level of “advanced commitments” over the past decade:

(Click image for larger view.)

The 2003-2005 figure (red) represents the “advanced commitments” Governor Doyle faced upon entering office in 2003. The 2007-2009 figure (light blue) is what Doyle or Green will face for the upcoming biennium, which appears on par with figures in the late 1990s, but in fact represents a smaller portion of the state budget as a whole because revenue levels are higher today than they were a decade ago.

Another figure that is being tossed around by conservatives is $2.6 billion, which they claim is the size of the current state deficit. This figure is based upon a special request by State Senators Mike Ellis (R-Neenah) and Robert Cowles (R-Allouez) to add anticipated expenditure increases in school aids, Medical Assistance, and state employee compensation to the advanced commitment figure outlined above.

This $2.6 billion figure has been subsequently compared to the $3.2 billion deficit Doyle faced when he entered office. Republicans, in turn, make the claim that Doyle hasn’t done much at all to help the deficit because it’s only 19 percent less than it was four years ago.

This comparison is flat out false.

As the recent DOA report makes clear, the $2.6 billion figure cited by Ellis and Cowles DOES NOT include expected revenue increases, which amount to $1.9 billion over the next biennium.

The $3.2 billion figure Doyle faced in 2003, however, DOES include projected revenue increases for that biennium.

So, in reality, the $3.2 billion figure should be compared to the current figure of $700 million, not $2.6 billion. And that shows us that Doyle, in fact, decreased the budget hole by nearly 80 percent since taking office.

And to put that into broader perspective, the current $700 million figure – relative to the percentage of total estimated spending, including projected increases – represents the 3rd smallest figure since the 1989-1991 budget.

Considering four years ago the figure was the worst it has ever been in Wisconsin history, the Doyle Administration has made quite a turnaround when it comes to the state budget.

But something tells me the GOP doesn’t want to hear any of that – at least not in an election year that sports an incumbent Democratic governor.


Blogger Paul Vandervelden said...

So long as we are clearing the air, let's mention a couple other tidbits you conveniently omitted:

1. Doyle's repeated vetoes of the property tax freeze cost Wisconsin taxpayers over $600 million.

When he finally recognized he was getting killed by the issue, Doyle agreed to work with Republicans in the last budget to hold property tax increases to a nine-year low.

2. Doyle attempted to increase fees $368 million in the 2005-07 budget.

3. It was the Republican Legislature (you know, the branch of government that makes laws) that chipped away at the state deficit, not Doyle.

In each of the past two budgets, the Republican-backed budgets taxed less, spent less and borrowed less than the governor's bloated budget proposals.

August 16, 2006  
Blogger Seth Zlotocha said...

Oh, I get it. When there's good news about the state budget, it's all the legislature's doing. But when the GOP spins the same budget to look bad, it's all Doyle's fault.

I don't even think the RPW is bold enough to peddle that line.

August 16, 2006  
Blogger Seth Zlotocha said...

Now that I have a little more time, I'll respond more directly to your points, Paul.

1) Republicans and conservative pundits have been calling Doyle's property tax freeze "meaningless" for over a year and using it to attack him at every chance, and now that their beloved WI Taxpayer Alliance came out with a positive report on its effects, you want to give the GOP credit for it? Please.

2) Are you referring to the ridiculously misleading attack ad by CFAF that claimed Doyle was going to increase fees to help pay for domestic partnership benefits?

Here's how WISC-TV described that $368 million:

"Some of the fees don't necessarily mean more money out of your pocket, News 3 reported. For instance, each nursing home bed will be charged $50 more to bring in an additional $52 million. And HMOs will be seeing a surcharge of 6 percent of their gross revenues through a fee, adding up to $88 million.

"However, both of those fees are increased to get matching funds from the federal government. In the end, the state is raising the reimbursement rates to both nursing homes and HMOs for treating people on programs like Medicaid and Badgercare. In both cases: The HMOs and the nursing homes get back more money then they put in -- $12 million more for HMOs and $35 million more for nursing homes.

"The only group to actually pay more are the 22 percent of nursing home residents that completely pay their own way -- with no help from the government. They will likely see a $50 a month increase.

"What about hunting and fishing licenses? The ad says, ' ... and up to 60 percent more for hunting and fishing licenses.' But that needs clarification, too, News 3 reported. The governor proposed hiking a number of hunting and fishing licenses. The deer fee is a 60 percent increase from $20 to $32. But the annual fishing license fee was a proposed $3 hike -- from $17 to $20, which is roughly 18 percent. Most of the fees fall somewhere in between."

And as for the accusation that the fee increases would've been used for domestic partner benfits: "That statement is misleading, News 3 reported. First, neither the HMO fee, nursing bed fee nor the DNR fees could be used to pay for domestic partner benefits. Some of the $368 million could be used, but to show the two fishermen imply it's that fee and that's wrong."

Here's what the Wisconsin Democracy Campaign said about CFAF's misleading charge: "The public should be suspicious and skeptical when they're bombarded with ads from groups with motherhood-and-apple-pie-sounding names telling them what they should think about the state budget."

3) As for your civics lesson, budgets simply don't get passed in Wisconsin without the governor's signature. What's more, the governor is particularly powerful in Wisconsin when it comes to the budget because of the line item veto. In essence, the line item veto gives the governor more power over the budget than the legislature in this state.

In the end, the governor's budget -- the one that was signed into law after the partial vetoes -- was $25.8 billion, while the budget initially passed in the legislature was $25.5 billion -- hardly a huge difference when divided over two years. And most of that difference went toward restoring funding to the UW System and the public schools (which, in turn, helped to hold down property taxes) that were cut by the GOP-controlled legislature.

You can read all about the budget vetoes here.

August 17, 2006  
Blogger Paul Vandervelden said...

We can argue back and forth all day long ... but there are two indisputable facts you cannot deny:

1. In each of the past two budgets, the Republican Legislature passed budgets that taxed less, spent less and borrowed less than the governor's bloated budget proposals.

2. Governor Doyle, as you acknowledge, did not balance the state budget

I trust you will be sending the Doyle campaign a message urging them to correct the inaccurate "balanced budget" statements in the "Surprise" ad.

August 17, 2006  
Blogger whatsleftwi said...


It is flat out wrong to say the Republicans passed budgets that spent less and borrowed less than Doyle. The 2003 budget had 649 more state employees than the one Doyle proposed and had a deficit that was $282 million higher than Doyle's. The bill was SB 44 and you can read the June 13th, 2003 edition of the Milwaukee Journal Sentinel to confirm that.

August 17, 2006  
Blogger Seth Zlotocha said...

I second what Carrie said, and I'll add that Doyle did balance the 2005-2007 budget. In fact, there has been a positive budget balance after each of the four fiscal years Doyle has been in office (03-04, 04-05, 05-06, and 06-07). The DOA report I cite in this post has the details.

There cannot be a deficit for the next budget because it hasn't been created yet. When the time comes, it will be balanced, just like the previous two.

August 17, 2006  
Blogger Kevin Ryan said...

You all should take some time to check out how the state - through the efforts of both the Administration and the Legislature - balance the budget on the backs of property tax payers. There are several human service programs for instance where the state claims county or city expenses, gets reimbursed by the federal government, then keeps a share of the federal revenues much larger than is necessary to cover its administrative costs.

Check out too how it raided the transportation fund.

Both parties are to blame, but state budget tricks are a big reason your property taxes are so high.

August 18, 2006  
Blogger Seth Zlotocha said...


Thanks for your comment.

You're right that the way public finance operates in Wisconsin puts too much pressure on property taxes -- reform on this front is needed (TABOR and its friends, however, aren't the way to do it, as the GOP and Green suggest).

In terms of the transportation fund, while its not the most ideal move, my understanding is that by taking the surpluses from it to fund public schools actually helped to hold property tax increases down to a 9-year low.

August 19, 2006  

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