The Wisconsin State Journal editorial on the “Rainy Day Fund” deposit by the Walker Administration sang the governor’s praises for righting the fiscal ship of state:

Last year, $14.8 million was contributed to the fund, according to the Legislative Fiscal Bureau. And on Monday, the administration announced an additional $108.7 million.

Walker’s record on fiscal responsibility isn’t perfect. But this week’s contribution to the long-empty rainy day fund deserves praise.

In his weekly radio address released today, Walker took the opportunity to tout the magical restoration of Wisconsin’s economic health:

We are depositing money into the state’s rainy day fund in two consecutive years for the first time in our state’s history.  Unlike other states, instead of burying the next generation under a mountain of economically crippling debt, we are making responsible decisions—leaving our children and grandchildren with funding reserves for future hard economic times.

In reality, Walker’s magic is no more than any other magic – illusion, smoke, and mirrors. His so-called surplus has been achieved not by fiscal conservatism or responsibility; but by the same accounting gimmicks he criticized his Democratic opponents of in previous elections. Worse, it has been achieved at the expense of those most in need during a deep recession, and paid those who are already well-off and wealthy. The result is a cautionary tale on what a Romney/Ryan budget would reap on a national scale…

Budget Cuts

Scott Walker and his allies made clear their moral priorities in Act 32, the biennial budget. Significant cuts were made in General Fund programs directly impacting children, education, and the economically disadvantaged. The 2012 Annual Fiscal Report from the Department of Administration (DOA) itemizes the budget choices on page 9 of the document (in millions of dollars):

1. School Aids     -$412.4      -7.7% (an additional $143.6 million taken out of General School revenue was allocated to Milwaukee and Racine private charter program)

2. UW System     -$189.1      -17.2%

3. WI Technical College System     -$35.7      -26.2% (as a footnote – over $600 million in education cuts (K-12 + higher ed) at a time when conservatives cry out for more “skilled labor force”)

4. Correctional Services     -$55.8     -4.9% (Includes $3.9 million in cuts to “Youth Aids” funding – providing local support for delinquent juvenile services)

5. Individual Tax Relief      -$22.6     -7.7% ($22 million cut in the form of a tax increase on low-income adults – a result of a change in the Earned Income Tax Credit in Act 32)

Over $700 million in budget cuts were directed at students of all levels and disciplines, at-risk youth, and the economically disadvantaged. Not everyone was required to sacrifice as much for the state, however. There were a select few that received a direct benefit from the sacrifices of the aforementioned groups.

Taxes  - The June 13, 2011 Legislative Fiscal Bureau Memo itemizes the tax and fee increases/decreases for the biennial budget – much of which passed as proposed in this memo. The beneficiaries and payers are well documented. Low-income families bore the lion’s share of tax increases:

Tax Increases 2011-2013 

1. Earned Income Tax Credit – $56.2 million - “With the proposed changes, it is estimated that the maximum state credit for families with two children would fall from $716 to $562, and the maximum credit for families with three or more children would fall from $2,473 to $1,955.”  

2. Homestead Tax Credit – $13.6 million - Act 32 repealed the existing indexing formula, virtually freezing the Homestead Tax Credit in Wisconsin. “Based on these provisions, the 2011 indexing changes that would increase the maximum income level to $24,990, the maximum property taxes or rent constituting property taxes to $1,480, and the income threshold to $8,160 would not occur. Subsequent indexing for tax year 2012 (2012-13), and thereafter, would also not occur.”

After a nearly $70 million tax increase on low-income households, the benefits of tax cuts went to less than 5% of the population, most to private corporations:

Tax Decreases 2011-2013

Capital Gains deferral for “reinvestment” in Wisconsin Business – $36.3 million - Capital Gains tax breaks benefit a very small number of taxpayers, primarily those with adjusted gross income over $200,000/year:

Under this provision, investors can sell off assets and reinvest the proceeds without being taxed on income from profits. Investors would only have to pay taxes on these profits after the new, Wisconsin-based assets are sold. The cost of this provision is $36.3 million over the next two years and $197.9 million over the next 10 years.

Domestic Production Credit – $10.1 million in 2012-13 - This astonishing tax credit to big manufacturing and agriculture production is phased in over the next 4 years. The only qualifier is that the income claimed for the credit must be a result of production in Wisconsin. The credit phase-in schedule is as follows:

a. 1.875% for tax year 2013;
b. 3.75% for tax year 2014;
c. 5.526% for tax year 2015; and
d. 7.5% for tax year 2016 and thereafter.

The credit reduces state revenue by an estimated $10,100,000 in 2012-13, $44,200,000 in 2013-14, $72,300,000 in 2014-15, $104,400,000 in 2015-16, and $128,700,000 in fiscal year 2016-17 and thereafter. This budget provision alone creates a structural deficit in 2 years.

Combined Reporting loss revisions – $46.4 million – Simply stated, large multi-unit corporations can use pre-2009 losses from one business unit to offset current profit in other business units, out to the year 2031.

The tax score – $69.8 million in tax increases to poor families who already can’t afford it, and $92.8 million (ballooning to over $200 million in 2016) in credits to the wealthy and large corporations resulting in a loss of revenue during a recession.

General Fund Raid

The June 14, 2011 Legislative Fiscal Bureau memo itemizes a broken campaign promise by Scott Walker. In a time of supposed budgetary crisis, Walker inserts a boondoggle for one of his largest constituent groups – private transportation construction.  From the LFB memo:

General Fund to Transportation Fund
–2011-13 Transfer (Page 605, #5)                                                                                        $125,000,000
–Ongoing Transfer of 0.25% of General Fund Taxes (Page 605, #6)         $35,127,000

A two-year total of $160.1 million taken out of an already decimated General Fund (see tax decreases above).

Mortgage Settlement Raid

As a part of the nationwide mortgage services abuse settlement, the state of Wisconsin was set to directly receive $31.6 million was to “be used for future law enforcement efforts, additional relief to borrowers, civil penalties, funding of foreclosure relief programs and compensation to the state for its losses from the crisis.” Instead, the Walker Administration put $25.6 million of that money into the General Fund – eventually accounting for a large portion of the “Rainy day” fund.

Debt Restructuring

A May 18, 2012 Legislative Fiscal Bureau memo itemizes another broken Walker promise. Walker promised not to “kick the can down the road” or use any “accounting gimmicks” in “balancing the budget.” Not only did Walker kick the can down the road, he assured future generations of paying off more interest than accrued by the Thompson/McCallum/Doyle debt from 2001-2010. The total restructured by Walker will be paid off until the year 2030-31 is $558,275,756 principal, $156,122,992 interest, $714,398,748 total.

CHIPRA-Medicaid Bonus Raid

A $24.5 million bonus from the Federal Government for increasing child enrollment in the Medicaid  program was used not as intended (to support the Badger Care program), but rather to pad the budget surplus. From page 6-7 of the February 15, 2012 LFB memo on budget lapses :

(Wisconsin) showed that it had increased the average monthly number of children enrolled in the program by 85,557 above the FFY 2009-10 baseline for the state (368,429), for a total average monthly enrollment in that year of 453,986.

Wisconsin’s performance bonus payment for this year is $24,541,778. This amount was based on a FFY 2010-11 monthly average number of unduplicated qualifying children of 467,963.

Money earmarked for supporting an increase in poor children’s healthcare access was rerouted to pad a “budget surplus” in a purely political exercise.

What Walker and his legislative allies have done is nothing more than shifted the revenue burden onto those who can least afford it in a deep recession; and placed the burden of state debt onto the backs of our children already suffering the consequences of this economy. This “surplus” has been taken directly out of our pockets. The wealthy, corporatist barons have succeeded in plundering the good people of Wisconsin in their time of need. Robin Hood in reverse – “Dooh Nibor.”

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