The Ironic Rise and Fall of a Budget “Surplus”

Friday, October 24, 2014 at 4:56 PM by

The Department of Administration (DOA) announced last week that the state finished the 2013-14 fiscal year with a budget balance of almost $517 million, and many state lawmakers were quick to congratulate themselves for having a budget “surplus.”  I don’t fault them for that; I think I would have done the same thing. However, the fleeting existence of a budget balance doesn’t support the argument some lawmakers have made that Wisconsin has turned a corner with respect to careful budget stewardship and long-term planning. 

There are a number of reasons why I think it’s ironic that some lawmakers have been patting themselves on the back for getting halfway through the biennium with a relatively large budget balance. Consider the following points:

The “surplus” will be very short-lived – Because of the latest round of tax cuts, net appropriations for the current fiscal year exceed the budgeted revenue level by $569 million, so the state is very rapidly drawing down its budget reserves. Read more

Wisconsin’s School Funding Cuts among the Nation’s Deepest

Wednesday, October 22, 2014 at 9:35 AM by

Wisconsin ranks 5th worst in the country in depth of cuts to school funding since the start of the recession. These cuts weaken our schools and could make it harder for the next generation of Wisconsin workers to compete for highly skilled jobs in the global economy.

Wisconsin has cut state support for investment in schools by 15% per student since 2008, a deeper cut than all but four other states, according to a new version of a report released by the Center on Budget and Policy Priorities

 That 15% cut (in inflation-adjusted spending) means the state is spending $1,014 less on each student in fiscal year 2015 compared to 2008. When measured in dollars per student, Wisconsin’s cut is larger than all other states except for Alabama.  

Most states are spending less on education than they did before the recession, even if their cuts weren’t as deep as the ones made in Wisconsin. Read more

Delay in Revenue Transfer Makes State Budget Balance Appear Larger

Tuesday, October 21, 2014 at 7:36 AM by

A close look at Wisconsin’s annual fiscal report released last week reveals that state officials delayed a $25.75* million transfer, which made the budget balance larger than it otherwise would have been at the end of fiscal year 2013-14. However, that’s a cosmetic and deceptive improvement in the budget balance, since the payment will still be made during the current biennium.  And because the Department of Administration  (DOA) report buries mention of the delay in a footnote, that document presents a somewhat misleading picture of the difficulty of avoiding a budget shortfall in the current fiscal year.   [*That figure is a correction to the original post, in which I incorrectly wrote that the delayed amount was $27.5 million.]

According to the DOA’s fiscal report released on Oct. 15, the General Fund balance at the end of the last fiscal year was about $517 million, which was $207.5 million lower than what state lawmakers were anticipating when they passed a tax cut bill early this year.  Read more

Raising the Minimum Wage Would Boost Incomes for Wisconsin Workers earning Poverty-Level Wages

Monday, October 20, 2014 at 10:28 AM by

Poverty-wage work is widespread in Wisconsin, with 1 in 4 workers earning poverty-level wages, according to a new report from the Center on Wisconsin Strategy. Raising the minimum wage would give these workers a raise, provide a shot in the arm to the local economy, and help create a more inclusive version of economic prosperity.

There is a wealth of information about poverty-wage workers in Wisconsin in the COWS report, but one fact in particular stands out: The typical poverty-wage worker in Wisconsin is 30 years old. (The report defines poverty-wage work as work that pays $11.35 an hour or less, the amount needed to keep a family of four out of poverty with full-time, year-round work.)

Opponents of raising the minimum wage sometimes mischaracterize the issue as a disagreement about how much to pay teenage workers. In one of the gubernatorial debates, Governor Walker recalled working for minimum wage at McDonald’s, but said he knew he would be moving on to better-paying jobs. Read more

When “Tax Reform” Means a Tax Cut for the Richest, and a Tax Increase for Others

Wednesday, October 15, 2014 at 7:29 AM by

When you hear a policymaker advocating for “tax reform,” it’s worth checking the fine print.

There’s nothing wrong with the goal of improving Wisconsin’s tax structure. But two recent “tax reform” proposals would shift the responsibility for paying taxes away from those who are well-able to pay and toward everyone else, according to a new report from the Wisconsin Budget Project. Instead of true tax reform, these proposals are actually tax shifts – shifts that would require families with low and moderate incomes to pay more in taxes so we can give tax cuts to the highest earners.

The most recent tax shift proposal comes from the Wisconsin Policy Research Institute, which recommends extending the sales tax to a number of goods and services that are not currently taxed and using the revenue to lower other taxes. Among the 24 things that would be newly taxed are basic necessities such as food, water, and fuel for residential use. Read more

Replacing a Stable Revenue Stream with a Far Less Predictable Source

Tuesday, October 14, 2014 at 7:20 PM by

Governor Walker floated the idea this week of replacing the current gas tax with a sales tax on motor fuel. It’s an interesting idea, but I don’t think it would be good public policy because it would replace a stable revenue stream with a tax source that is far less predictable.   (You can read more about the idea in this Journal Sentinel article.)

Although we don’t have details of what the plan would look like, the Governor said it would be revenue neutral – at least at first. But clearly the intent is that the sales tax approach would generate more revenue over time, as gas prices increase, and I think that’s a reasonable assumption to make. However, fluctuations in gas prices mean that in any given year this source of revenue could fall well short of the anticipated level.  

From a political perspective the chief virtue of the plan, perhaps the sole virtue, is that it offers a way of potentially raising more revenue for transportation projects without periodically asking elected lawmakers to vote on gas tax increases. Read more

Proposed EITC Funding Shift Reveals another Budget Hole

Friday, October 10, 2014 at 4:50 PM by

TANF Funding Squeeze Creates a Substantial Budget Challenge 

The Department of Children and Families (DCF) budget proposes a very large cut in the portion of funding for the Earned Income Tax Credit that comes from the federal welfare reform block grant, which is known as Temporary Assistance for Needy Families (TANF). Specifically, the department’s 2015-17 budget proposes cutting $55.8 million from the TANF funding that gets transferred to the Department of Revenue, which would mean that state General Purpose Revenue (GPR) has to fill the very substantial gap. 

Assuming the Walker Administration isn’t planning to cut the EITC, I applaud DCF for wanting to use state funds rather than TANF funds to finance that credit for low-income working families. Unfortunately, the Department of Revenue (DOR) budget proposal doesn’t currently include an increased GPR appropriation for the EITC. Taking both agency proposals together, we have a $55.8 million hole that needs to be filled by state policymakers, and that problem is on top of the other structural budget challenges that have gotten more media attention. Read more

Proposed Changes to Electric Bills Would Raise Costs for Families with Low Incomes

Tuesday, October 7, 2014 at 4:09 PM by

Three Wisconsin electric utilities have proposed billing changes that would raise energy costs for people with low incomes.

We Energies, Madison Gas & Electric, and Wisconsin Public Service Corporation (WPS) have asked the state’s Public Service Commission for permission to change how the utilities bill for electric service. This request has gotten a great deal of news coverage (see here and here) focusing on how the change would make it less cost-effective for customers to install solar systems that generate electricity, and would reduce incentives to be energy efficient.

Mostly missing from the news coverage has been the fact that the changes would shift costs to customers with low incomes. The utilities want to increase the fixed monthly fee charged to customers, while reducing the usage-based kilowatt-hour charge. The result would be higher costs for people who use little electricity, and lower costs for customers who use a lot of electricity. Read more

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Empty Pantry: Too Many Wisconsin Households Can’t Afford Food

Thursday, October 2, 2014 at 5:00 PM by

One in nine households in Wisconsin has difficulty affording food, according to a new report from the U.S Department of Agriculture.

Nearly 12% of Wisconsin households did not have access to enough food for an active, healthy lifestyle over the period 2011 through 2013.That translates into about 270,000 Wisconsin families struggling to put food on the table.

     1-in-9-Wisconsin-households                  

The share of Wisconsin households that have trouble affording food shot up during the recession and hasn’t come back down; a decade ago, only 9% of Wisconsin families lived in food insecurity. That’s the same pattern shown by many other measures of economic well-being for Wisconsin families. For example, poverty rates in Wisconsin also remain stubbornly high, and household income levels don’t show much signs of bouncing back to pre-recession levels either. As a result, many families are continuing to experience the same levels of hardship that they did during the recession – even though some of the temporary supports for families with low incomes that were introduced during the recession have since been eliminated. Read more

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Five Things to Know about Poverty in Wisconsin

Wednesday, October 1, 2014 at 1:54 PM by

Four years into the nation’s recovery from recession, too many Wisconsin families are worse off than they were before the economic collapse of 2008. New Census figures give us an updated picture of poverty in Wisconsin, and what we can do to address it.

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