Walker “Rainy Day Fund” a result of Dooh Nibor – Robin Hood in reverse

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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The $3.6 Billion Walker lie continues…all the way to Ireland (pass the potatoes)

Scott Walker made certain the projections were bleak, bordering on the catastrophic, and the media ate it up. In the Milwaukee Journal Sentinel on February 7, 2011 Walker spokesman Cullen Werwie was quoted as saying:

“Bill collectors are waiting at the door of the state Capitol. Without taking action to reduce the deficit in the current fiscal year, thousands of Wisconsin children and families could lose their health care coverage through BadgerCare, and there would need to be even more aggressive spending cuts in the future.”

Before presenting a budget, Walker had succeeded in creating a $3.6 billion deficit panic. The mantra continues today, as it continued on the campaign trail. Even across the border as Walker addressed the Illinois Chamber of Commerce in April.  The Romney Campaign is embracing Wisconsin as the role model for the nation. Scott Walker is the hero that conquered the deficit beast, and America must embrace the austerity measures to save itself – as they have saved Wisconsin.

The entire budgeting premise upon which Walker based his “deficit crisis” was a lie. Having been a legislator in Wisconsin, he would have known this, or he is a complete idiot. We also now know what these “austerity” measures do to a national economy, yet it is being largely ignored by the media. Should the Walker policies continue to expand, and Romney wins the White House in November pass the potatoes – because Wisconsin will look more like Ireland in two years than the state we all know and love. Read on for details.

Walker’s $3.6 Billion deficit was based on the 2011-2013 State Agency Budget Requests . Representative Mark Pocan (D-Madison) received and released a Legislative Fiscal Bureau memo from February 16, 2011 - but no media were paying attention. Scott Walker was intervening in the budget process prematurely – for the purpose of creating a fiscal emergency. As shown in the memo, the final Agency Budgets are never funded at the levels requested by the agencies. There are constant negotiations and compromises in both revenues and expenses during the budget creation process – much of which happens in the Legislature. The 2011-2013 requested increases of 7.2% contributed to much of the reported deficit, and would have been greatly reduced in the legislative budgeting process. The Agency appropriations for 2009-2011 actually received a cut of 2.6% from the baseline, due to one-time federal stimulus payments. This so-called “deficit” existed only on the paper from the Agency Funding Requests.

On January 31, 2011 (before the Walker “deficit emergency” took hold in the media) the Legislative Fiscal Bureau (LFB) sent a memo to Joint Finance Chairs Robin Vos and Alberta Darling. Based on the 2009-2011 Doyle budget in place, the LFB forecast a year-end SURPLUS of over $56 Million. This had actually been a revision of the Doyle Administration’s earlier forecast of a $112 million surplus due to several reasons:

1. Lower tax collections.

2. Debt payments being made in 2010-2011.

3. Budgeted Minnesota reciprocity lapse payment.

4. Some increase in department revenue and lapses.

That’s right citizens – before Scott Walker took office, Wisconsin had a budget surplus. In addition, the Agency appropriations had not been addressed as part of the budgeting process. The truth is, the $3.6 Billion “deficit” was only on paper – it was not functional. The lie persists; the result being an affirmation of Walker’s austerity measures. Where has that gotten us? On a road paved with intended and known consequences – known because we have an economic precedent.

The February 9, 2012 LFB memo submitted to Vos and Darling on  shows the effects of austerity. Unlike any DOA or DOR analysis, the LFB is the only truly non-partisan budget analysis taking in factors from all fiscal agencies, and using a consistent measure. Wisconsin is now faced with a $208 Million + deficit by the end of 2013. The memo specifies the effects of laws enacted in 2011 to decrease revenue, and increase the burden of state expenditures on a shrinking middle class. The memo also cites the decrease in tax revenue being collected and pursued from large corporations; a function of greater loopholes and deregulation of corporate taxes and collections.

As the GOP has already indicated, the answer to this decrease in revenue will be to cut, cut, cut – more austerity. A word of warning, which, based on the recall election may be too late. Wisconsin’s economy is only being bolstered by a slightly improving national economy. While we rise in the “business friendly” and “economic freedom” indicators of the Heritage Foundation, there are severe consequences for the policies we are pursuing. In the absence of any stimulus, Wisconsin would have gone from stagnant to depressed. The model exists for Wisconsin under Scott Walker and a potential Romney presidency. It is Ireland.

In an interview on the Colbert Report, June 18 2012, Paul Krugman put the Ireland economic example in perspective. In response to the suggestion by Colbert that electing Mitt Romney president would solve our economic problem, Krugman sates:

“Ireland is Romney economics in practice. They’ve laid off a large portion of their public workforce, they’ve slashed spending, they’ve enacted extreme austerity programs, they haven’t raised taxes on corporations or the rich at all. They have 14% unemployment, 30% youth unemployment. Ireland is what the US economy would be under Romney.”

In 2008, Ireland was ranked as the 3rd best economy in the world for “economic freedom” by the Heritage Foundation. Low corporate taxes, little regulation, the “Celtic Tiger” was a model capitalist state – having achieved its economic freedom and prosperity over a decade of free market growth. By 2009, the economy was in shambles, and Ireland was the first and most aggressive European nation to adopt austerity measures. In April 2009, Paul Krugman sounded the warning to us and Europe:

Unfortunately, we didn’t save for a rainy day: thanks to tax cuts and the war in Iraq, America came out of the “Bush boom” with a higher ratio of government debt to G.D.P. than it had going in. And if we push that ratio another 30 or 40 points higher — not out of the question if economic policy is mishandled over the next few years — we might start facing our own problems with the bond market.

Not to put too fine a point on it, that’s one reason I’m so concerned about the Obama administration’s bank plan. If, as some of us fear, taxpayer funds end up providing windfalls to financial operators instead of fixing what needs to be fixed, we might not have the money to go back and do it right.

And the lesson of Ireland is that you really, really don’t want to put yourself in a position where you have to punish your economy in order to save your banks.”

That is precisely what we are doing – the overall economy is suffering to save the banks, multinational corporations, and wealthiest among us. While Euro-zone leaders hail Ireland’s continued austerity, the people are suffering – 14% unemployment, wage cuts, healthcare cuts, public services slashed, and nearly 40,000 have left the country for greener pastures. On June 17, 2012, Paul Krugman addresses the “success” that the International Monetary Fund considers Ireland:

“…this was a statistical illusion, reflecting the fact that very capital-intensive industries, especially pharma, had weathered the crisis better than labor-intensive sectors. Meanwhile, the real thing — slight wage decline in Ireland while wages rise in Germany — has been proceeding at a relatively glacial pace. And the promised payoff in increased market share is still invisible.”

Continued austerity will have the same effect here – decreased wages, high unemployment, decreased revenues, the list goes on. So does the GOP austerity train…

The lie of the deficit emergency, if allowed to persist as the greatest threat to our state and nation, will have dire consequences for the ever-shrinking middle class. Either Scott Walker, Paul Ryan, Mitt Romney and the GOP powers know and want this – or they are idiots.

Stock up on corned beef, cabbage, and potatoes. Pass the Jameson. We’ll need good whiskey for the revolution.

Solidarity!

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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