Scott Walker’s budget lie (yes, LIE) he receives a “pass” from the media on again and again…

The lie has been told repeatedly by Scott Walker – in debate, in campaign ads, and more specifically, on his campaign website:

“Governor Walker Promised To Control State Spending And Eliminate The Historic $3.6 Billion Deficit Without Raising Taxes. The 2011-13 state budget signed by Governor Walker Eliminating the $3.6 billion deficit without raising taxes. (2011 Wisconsin Act 32)”

In addition – Walker has continually claimed to have achieved this without the use of “accounting gimmicks.” In reality, Scott Walker created this fiscal crisis – and he is using it to further his political ambitions.

Walker cited the memo from DOA Secretary Mike Huebsch on May 10, 2012 as proof that his “reforms are working.” The report contends that due to his diligence as DOA Secretary, Huebsch and the Department of Revenue discovered over $278.2 million in revenue the non-partisan Legislative Fiscal Bureau missed in its February 2012 report. The added revenue will result in a $164.7 million surplus for FY 2012, and an $89.5 million surplus for FY 2013. The change is dramatic, as the LFB estimate put the state in the red over $53 million for FY 2012, and negative $208 million for FY 2013. The combined difference  is nearly $500 million – quite a miss for the LFB, and unprecedented. Or is there more to this…

Setting aside the fact that this estimate relies heavily on Walker’s disputed quarterly jobs data, based on the QCEW (Quarterly Census of Employees and Wages) not yet released by the Federal BLS (note:In an interview this morning with Richard Clayton at BLS, the analyst in charge of the state data verification, Mr. Clayton emphasized for Badger Democracy that he only verified with Wisconsin DWD that their verification study had been completed – he did not verify or attest to the numbers being cited by the Walker Administration), and showed a net gain in private sector jobs, not a loss for 2011. Let’s give Scott Walker that one to expedite this analysis. 23,000 jobs created when 200,000+ are needed just to return to 2007 employment levels is insignificant. The information obtained by State Senator Kathleen Vinehout from the Legislative Fiscal Bureau have much greater impact on this budget analysis – and expose the LIE Scott Walker is perpetuating.

In January  2011, before Scott Walker took office, the non-partisan Legislative Fiscal Bureau (LFB) sent their annual letter to Joint Finance Chairs Alberta Darling and Robin Vos (2011_01_31Vos&Darling LFB Memo ). When Walker took office, the LFB forecast a $56.3 million SURPLUS – after accounting for the $65 million statutory “minimum balance.” That’s correct – Wisconsin was poised for a surplus on the day Scott Walker took office.

The same memo one year later shows the effects of the Walker budget, and GOP “business friendly” policies. In essence, Scott Walker created the crisis with his policies – as shown in the LFB memo to Darling and Vos dated  February 9, 2012 (2012_02_09_Darling_Vos_Revenue estimates). As cited above, the deficit in the biennial budget of a combined $261 million is attributed to Acts passed in 2011. Decreased income tax collections and personal revenue collections are attributed directly to the impact of Act 10 on working families (in essence, a tax increase):

“The revised estimates incorporate
the effects of a number of law changes estimated to reduce revenues by approximately $175
million in 2011-12 and $225 million in 2012-13. The most significant law changes are increased
deductions for medical insurance premiums, tax deferrals for capital gains that are reinvested in
Wisconsin-based businesses, and exclusions and deductions related to health savings accounts.
Income tax collections will also be reduced as a result of the additional state and local employee
retirement and health insurance contributions required under 2011 Act 10.”

The tax giveaways to corporations also have had an effect on state revenues, especially in the DOR’s ability to collect taxes due big, profitable corporations by opening up previously closed loopholes:

“The corporate income and franchise tax estimates have been adjusted to reflect the effect
of certain law changes, including requiring corporations that are members of a unitary group to
file combined returns, repealing the domestic production activities deduction, requiring
throwback sales to be included 100% in the apportionment formula, allowing combined groups
to use pre-2009 net business loss carry-forwards, and the phase-in of the state qualified
production activities tax credit”

The analysis shows that instead of CREATING jobs and increasing business activity, Walker policies are actually slowing output and production, as consumer demand and buying power stagnates – a function of the persistent long-term unemployment problem:

“…overall business activity is
projected to continue to expand, but at a slower pace than in 2010 and 2011. For example, real
investment in equipment and software, which increased by 14.6% in 2010, and by an estimated
10.3% in 2011, is projected to increase by 7.9% in 2012, and 7.6% in 2013. Real durable goods
purchases increased by 7.2% in 2010 and by an estimated 8.1% in 2011, but are forecast to
increase by 5.6% in 2012, and 4.5% in 2013. Manufacturing output growth is projected to be
4.3% in 2012 and 3.4% in 2013, after increasing 5.4% in 2010 and by an estimated 4.5% in
2011.”

So much for the “job creators.” How could Walker show a balanced budget, much less a surplus, in the face of this LFB analysis? Simple – as with the disputed job numbers, he made his own surplus – empowered by Acts 13 and 32 of the 2011 GOP-controlled Legislature – who are all complicit in this fiscal fraud.

Simply stated – Scott Walker pushed off paying state debt in the amount of over $500 million to 2030. The interest paid will total over $156 million. This is all debt that should have been by the end of 2011-2012. It is critical to understand that the deficit Scott Walker created in 2011, and decrease in revenue collections from his fiscal policies are the very reason this debt is being pushed off over two decades – placing a higher burden on future generations.  In a memo to Vinehout dated May 18, 2012, non-partisan State Fiscal Analyst Al Runde details the impact:

“Under each debt restructuring
transaction, the principal on the state’s existing GPR supported general obligation and commercial
paper debt would have been paid off from the general fund through sum sufficient debt service
appropriations, but is instead paid off with the proceeds from the issuance of additional debt. As a
result, that principal will now remain outstanding for a longer period of time and thus an estimated
$156.2 million in additional interest costs could be incurred by the state.”

The debt principal would have been paid off from the general fund – but is now being paid off by issuing further debt. An additional $156.2 million in interest will be paid by the state. To use an apt metaphor, Scott Walker placed the existing debt, which should have been paid this year, on a giant credit card – to be paid long after he is out of office.

Conservatives will say, “but Jim Doyle did it all the time…” This writer would be as critical of ANY Governor who practiced this economic fraud – and is no defender of Jim Doyle. If you are a true fiscal conservative, this practice should strike at the heart of your sense of fiscal accountability and responsibility. In a second memo, Runde details the history of debt restructuring since 2001 ( 2012_05_18-Vinehout-Debt-Restructuring-Since-2001). The amount “restructured” by Walker is the equivalent of ALL debt restructured from 2007-2011. Prior to that, only $127 million had been restructured.

To say that he has balanced the budget without raising taxes, in light of this information, is a lie. No coincidence that $500 million is the amount the DOA estimate “found” to increase revenue from the previous LFB estimate. Over $500 million, and more in interest, charged off to future generations two decades distant – while Scott Walker insists his “reforms are working.” Where is the media on this issue?

If this is not sufficient grounds to recall Scott Walker, then nothing is; and those that stand with him, stand with a fraud and a liar.

 For the record, both the Walker Administration and Campaign were given repeated opportunity to respond to this information since Friday, May 25. They have not.  Share this information and VOTE. Solidarity.

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2 thoughts on “Scott Walker’s budget lie (yes, LIE) he receives a “pass” from the media on again and again…

  1. This analysis is intellectually dishonest. The debt was incurred during the last administration & its refinance would have occurred whether or not Walker, Barrett or Doyle would have been elected…had Walker chose to redeem the bond, the cuts associated with its payoff would have been passed on to the public services budget. Since repeatedly in this forum, many have cried bloody murder on these cuts, it seems somehwat hyppocritical to advocate that it would have better for Walker to have proposed more. Its actually rare that bonds are redeemed in full & even more rare has this been during this last recession. Typically States have a “Sinking Fund” for new bonds which put a portion of the priniciple aside each year as a budget line item. When bonds come due, the balance of the sinking fund is used to redeem bonds with the remainder being refinanced and a new sinking fund started. Doyle in order to “balance” budgets in the past, made a habit of borrowing from State funds (ie Patients Compensation Fund, Transportation Fund ) so its not surprising that Walker was left with very little options on redemption funds.

    • Thanks for the comment. Let’s get down to intellectual honesty. I have NEVER been a Doyle defender. He is as responsible for Scott Walker being elected as anyone, and laid the groundwork for Walker crying “crisis,” though unfounded. As far as cuts – Walker himself necessitated those cuts by his own acts – re-opening loopholes and tax cuts, and he chose which cuts to make as an ideological priority.

      Next – read the LFB analysis on the history of debt restructuring since 2001. Tony Earl was the last WI Governor to actually balance the budget, leaving no debt to be restructured:
      2001-2002 – debt left by Tommy Thompson – $127 million restructured
      2003 – $175 million – left from McCallum
      2007-2009 – about $500 million – as I said in the article – from Doyle

      The intellectual dishonesty is Scott walker claiming to have balanced the budget, with no tax increases or accounting gimmicks. If he was HONEST, Engy, he wouldn’t be elected. He would have to say “I did the same thing Jim Doyle did to balance the budget – and Act 10 was a tax increase on working families” – see the LFB impact statement on revenue due to Act 10. That would be honest. And he would lose. Period.

      The fact is, and you know it, this was never about balancing a budget. Because he didn’t. And if Barrett gets elected and does the same thing – I will be the first one exposing it on my blog.

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