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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?. 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?

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  1. 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?

  2. 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?!

  3. 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

  4. Background: State economy (= taxes) State GDP per capita & chg.

  5. 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:

  6. 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)

  7. Underlying trends —changing population Cum. Population Growth: 2002 - 11 9.3 5.9 uYoung people: workforce, new families, cons. goods

  8. 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

  9. 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? ?

  10. 3 New budget: Revenue growth? (GPR) • Notes: • Tax cut carried over • New LFB rev. est’s

  11. New budget: Spending growth (GPR)

  12. 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

  13. Budget bottom line: Surplus? Deficit?

  14. 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

  15. Budget sticking points: Ozian imbalance? Return of the ‘structural deficit’? None +! $326e ’15e

  16. Sticking pointZ, Oz II: GAAP deficits? Pending/Proposed 13 14 15 -2.06 -2.36 -2.64 G.A.A.P? $16 bill. ?

  17. 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?

  18. 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.)

  19. 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

  20. 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?

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