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So, if this ain’t Kansas, Toto. ?. Where the heck are we?. Assessing Wisconsin’s fiscal condition & direction. Well, Toto? Oz- consin or Wis -consin?. Overview : Where now, Wisconsin?. Overview: State finances at crossroads. Budgetary choices a Forward . . . or Back to Oz?

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Well toto oz consin or wis consin

So, if this ain’t Kansas, Toto . . .

?

Where the heck are we?

Assessing Wisconsin’s fiscal condition & direction

Well, Toto?

Oz- consin or Wis -consin?


Well toto oz consin or wis consin

Overview: Where now, Wisconsin?

Overview: State finances at crossroads

Budgetary choicesa Forward . . . or Back to Oz?

1Backdrop: DC and state economy

2Recap: State finances ‘til now

3The new state budget

4Budget sticking points

5Hard questions with future consequences

uWISTAX: 80+ years of research & education

OZ?

WI?

IL?!


Well toto oz consin or wis consin

1

Background: DC — No help? Future hurt?

“. . . a growing level of federal debt would also increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget . . . the abrupt rise in interest rates would reflect investors fears that the government would renege on the terms of its existing debt or . . . boost inflation.” ─ CBO 7.10


Well toto oz consin or wis consin

Background: State economy (= taxes)

State GDP per capita & chg.


Well toto oz consin or wis consin

And jobs? The whole story

WI Job Growth Tracks/Diverges From US

Trend: Wis & US

WI PCPI as % US

Wis > US ?

87 mo: 100% 124 mo: 35% 102 mo: 27%

Wis > US:


Well toto oz consin or wis consin

Digression: Job rhetoric

‘Bipartisan’ rhetoric: Jobs!

Silly, partisan job number games

The (R) rhetoric: Credit and lure

The (D) rhetoric: Programs create jobs

Another (persuasive) view

Startups and young companies dominate net job creation in the United States – and have done so for the last 30 years . . . Ewing Marion Kauffman Foundation (2010)


Well toto oz consin or wis consin

Underlying trends —changing population

Cum. Population Growth: 2002 - 11

9.3

5.9

uYoung people: workforce, new families, cons. goods


Well toto oz consin or wis consin

Lack of new firms – another key

New as Pct. of All

New firms in ‘96:

WI US

Alive

in ’06 44% 34%

Alive

in ’10 36% 27%

* Less new seasonal firms = 49th


Well toto oz consin or wis consin

2

State finance recap: The ‘Oz’ decades

1990s-2010: Boom, splurge, crash, deny

Delay, delay: Dig a hole, file a hole, dig . . .

Tricks, transfers, gimmicks, borrowing

2011-13: Inherited deficit, big Medicaid hole;

Cut everything, add $1b+ to Medicaid

Now: No ‘deficit carryover’, surpluses

2013-15? Budget crossroads, return to Oz?

?


Well toto oz consin or wis consin

3

New budget: Revenue growth? (GPR)

  • Notes:

  • Tax cut carried over

  • New LFB rev. est’s



Well toto oz consin or wis consin

New spending in few places

 All increases

Programs w/ Largest Increases, One/Both Years

Over ’13 Base ($m) for Tot. Biennium (14+15 vs. 13)

Net incr. 

Big 2 = $717.6m !

Total = $731.7 m



Well toto oz consin or wis consin

4

Budget sticking points: Debt

State Debt

CAFR (through 6/12)$ Billions

$16+ bill?

2013-15 Gov. Proposals

$1.03b in budget

($0.99b transpt’n)

$1.15b in capital bud.

= $2.15b total

’13-’15 proposed


Well toto oz consin or wis consin

Budget sticking points: Ozian imbalance?

Return of the ‘structural deficit’?

None +!

$326e

’15e


Well toto oz consin or wis consin

Sticking pointZ, Oz II: GAAP deficits?

Pending/Proposed

13 14 15

-2.06

-2.36

-2.64

G.A.A.P?

$16 bill. ?


Well toto oz consin or wis consin

Budget sticking points: Tax cut?

About $343m, two years

How? Lowest marg’l rates

Critique: Too small? Too large—reserves?

Prop. tax? Top 7.75 rate?

Missed opportunity?

▪ Cash as ‘political grease’

▪ Tax law as regulation

Broader base/cut rates

Assembly CPA changes?


Well toto oz consin or wis consin

Budget sticking points: School finance

Largest part of state budget, 35% - 45% of GPR

Overall, largest source of revenue for K-12

Evolution: Big bucks, little bucks, fewer bucks

Political geography

▪49 sch. dists.

rev. now < ’03

▪2/3rds in

R sen dists.

About $343m, two years

How? Lowest marg’l rates

Critique: Not Doyle’s 7.75%? Too small?

Prop. tax? Reserves?

Missed opportunity?

▪ Cash as ‘political grease’

▪ Tax law as regulation

Broader base/cut rates

CPA changes? (Kooyenga, Marklein, etc.)


Well toto oz consin or wis consin

5

Choices: Wis- or Oz- consin?

Decades of the fiscal revolving door

Career politics = short-term thinking

= GAAP deficits, low bond ratings

= Painful cuts and tax increases, little or no strategic planning

Coming questions and choices:

▪ Delayed vs. instant gratification (up spending, cut taxes?)

▪ Long-term fund integrity vs. addiction to transfers

▪ Pay-as-you-go vs. return to increased borrowing

▪ Fundamental reform vs. tinkering:

Income tax, transportat’n, higher ed. finance


Well toto oz consin or wis consin

Questions? Jokes? Critique?

Wisconsin Taxpayers Alliance

80 years of nonpartisan policy research and citizen education

www.wistax.org

Z zz zzz z z z z

Are we gonna get a brain?