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Jan 23, 201407:20 AMVan Lines

with Joe Vanden Plas

Walker and the budget: Shorting the shortfall

(page 1 of 2)

Before his State of the State address, Gov. Scott Walker said addressing a projected shortfall (i.e., structural deficit) heading into the next state budget isn’t a priority for him. He reaffirmed that during the Jan. 22 address, saying he would, as part of a “Blueprint for Prosperity,” prefer to send $800 million of a $912 million surplus back to Wisconsin taxpayers.

For a man with a reputation as a fiscal hawk, this is more than a little disappointing. Our biennial budget shortfalls are still with us, which means the job is not quite done.

The structural deficit is estimated to be in the neighborhood of $725 million heading into the next state budget, the biennial spending blueprint the state will follow in 2015-17.

Yet in his State of the State, Gov. Walker spelled out a plan to return most of the projected surplus back to the taxpayers by cutting property taxes and changing income tax withholding rates.

As much as I appreciate getting money out of Madison before politicians get their hands on it, my property tax bill already has moderated (thanks in large measure to Walker) and we still have a structural deficit to deal with.

We also have the very real possibility of another looming Medicaid shortfall, and even though we’ve added to our rainy day fund in recent budgets, it won’t last very long in an emergency or an economic downturn.

Alas, it’s an election year, and passing out goodies is the order of the day.

Gov. Walker, all the members of the Assembly, and half the state senators face re-election in November, and this flood of tax revenue is burning a hole in their pockets.

Still, most of the Republicans on this fall’s ballot, including Walker, ran on fiscal responsibility, and while there has been hard-won progress on the structural deficit, it has not completely vanished.

“What do you do with a surplus?” the governor asked during his State of the State. “Give it back to the people who earned it. It’s your money.”

A fine sentiment, if we didn’t have this structural shortfall to deal with. But we do, and we should apply some of the surplus tax revenue to it.

I say some because there is one aspect of the governor’s proposal that I like, and that’s withholding less from our paychecks. The state takes more than is called for by law and returns it at tax time, which basically enables state government to secure an interest-free loan from you and me. I’d rather have it up front, thank you very much, and devote the remainder of the tax surplus to paying the state’s bills.

As for the rest of his plan, Gov. Walker pledged to work with the Legislature, and even though his party is in the majority of both houses, it looks like he’ll have to. That’s because wiser heads, even some heads that are up for re-election, want to devote some of that surplus to prudent things that aren’t politically expedient.

Walker therefore might not have the votes, especially in the state Senate, for his tax cut proposal. If not, he better be willing to deal.

Some Republican lawmakers are confident that revenue gains show that past tax rate cuts have proven their worth as economic stimulus, and that tax collections will continue to grow, thereby enabling them to play Santa Claus as election day approaches.

(Continued)

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Jan 24, 2014 06:33 am
 Posted by  Anonymous

I agree completely. I'm an average homeowner who would get that $101 tax break - in the face of the property tax bill, it really isn't that much. I'd rather the money be put toward road construction, always an ongoing project, or returned in some way to the public schools. Though an adjustment in withholding would be welcome and seems to make sense, as I always get money back from the state at tax time because too much was withheld.

Jan 24, 2014 11:21 am
 Posted by  Anonymous

A section of the non-profit world - those who read and understand state budgets are worried about the structural deficit in the next budget and possible extreme cuts to services to children and families. One thing not covered in the press is that part of the state's fiscal miracle was over spending a lot of the federal dollars targeted to low income families (instead of carrying them over into the next fiscal period). Those funds were shifted into areas normally funded by state revenue like funding the state's earned income tax credit to free up other funds for things like the Economic Development Office. Also as part of that budget deal $25 million in unspent child care funds were shifted from that budget line instead of using them to eliminate a 7 year freeze on rates instituted by Jim Doyle due to the recession. So we have an open for business government basically screwing existing small businesses across the state in order to give sometimes questionable grants to attract new businesses. (and the child care rates are set by a market survey based on real rates parents pay- and when there is a shortfall in state payments it is made up by middle and working class parents who pay out of pocket) So I would prefer the state pay down the deficit and use some (a relatively small amount) for corrections in its payments to small businesses to strengthen those sectors and correct those markets .

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