A Reversible Fund Raid
“Wisconsin’s budget is broken due to an overreliance on one-time fixes, illegal transfers, unsustainable federal funding and economic weakness.” – Governor Walker’s Budget Summary, March 2011.
Those don’t sound like the words of a Governor who would use money from a one-time mortgage settlement to plug a budget hole. Nevertheless, back in February 2012, Governor Walker used $26 million from a one-time mortgage fraud settlement to address a gap that had opened in Wisconsin’s budget, a gap rooted in lower-than-expected tax revenues.
Now, new, higher, revenue estimates give Governor Walker an opportunity to live up to his ideals about the importance of avoiding fund raids and one-time money to address the deficit.
In February, federal and state officials brokered a $26 billion settlement with big banks and mortgage companies. Wisconsin’s share of that settlement was $140 million, of which $26 million was used to address the budget gap.
Wisconsin isn’t the only state using this money for purposes other than what it was intended for. “Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps,” according to an article in today’s New York Times.
Federal officials urged states to use the money for the purpose for which it was intended. “Other uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and the communities in which they live,” said Shaun Donovan, the federal housing secretary, in the New York Times article.
Last week, Wisconsin got some good news about the budget that could allow Wisconsin to use the entire amount of the mortgage settlement for the purpose for which it was intended – helping homeowners in need. New estimates predict that state tax revenue will be higher than previously thought, and debt service costs will be lower than anticipated. Wisconsin is projected to end the two-year budget cycle with $80 million more in its General Fund than planned for at the time of the budget.
That unanticipated balance gives Wisconsin some breathing room on this budget, and it means that the mortgage settlement money is no longer needed to address the state’s budget deficit. By reversing his earlier raid on the mortgage settlement, Governor Walker can stay true to his principles while also helping Wisconsin families affected by unscrupulous lending and foreclosure practices.