Here's a billion dollars, now what?
A slow but steady national economic recovery has overturned political talking points once mired in gloomy, negative budget outlooks.
For some, such revenue abundance hasn’t occurred since the start of the 2007 Great Recession.
Even at the national level, the United States government collected $53 billion more in revenue than expenditures last month.
The state of Wisconsin is also projected to be awash in extra revenue for 2014, with an amount approaching $1 billion.
In his Jan. 22 State-of-the-State speech last week, Gov. Scott Walker said Wisconsin’s economy is now “strong and improving every day.”
Regarding this year’s anticipated surplus and what to do with it, Walker said: “Give it back to the people who earned it. It’s (their) money.”
Walker labeled what he called a “blueprint for prosperity” for distributing the surplus money.
The governor wants a special legislative session to ask lawmakers to provide $800 million in tax cuts. These would be in the form of income and property tax cuts, plus rewriting withholding rules so worker paychecks have less in state taxes deducted.
Walker’s property tax reduction is $406 million. The typical homeowner could see a $101 reduction on the next property tax bill.
Walker’s income tax rate reduction totals roughly $100 million. Maximum savings for an average household is said to be about $58 a year.
Walker’s withholding tax reduction totals $326.6 million. The claim is that a typical family of four will see about $58 more per month in paychecks.
Most of the remaining surplus money would go into the state’s Rainy Day Fund.
Walker also proposes spending an extra $35 million to help technical colleges eliminate waiting lists for students entering high-demand fields such as manufacturing, agriculture and computer technology; help high school students get similar training through dual enrollment programs through their high school and local technical college; and assist people with disabilities find jobs.
Area lawmakers react
Through news releases, columns and answers to questions, legislators representing parts of western Wisconsin reacted to the budget surplus, the governor’s plan for it and their own ideas.
State Sen. Sheila Harsdorf (R-River Falls) said the budget surplus “shows Wisconsin is continuing to move forward and building upon the success of our past two budgets.”
Harsdorf said those budgets have brought new “fiscal responsibility” that is reflected by the now “growing economy.”
Harsdorf said the governor’s plan reaffirms his commitment to reduce the state’s tax burden on wage earners.
“As we continue to enact tax relief, there is a recognition of the importance of keeping our fiscal house in order,” she said. “While discussions are ongoing, I anticipate that prioritizing the use of the budget surplus for tax relief will be broadly supported in the state Senate.”
Harsdorf is pleased the governor set aside some of the surplus for the Rainy Day Fund.
“I led efforts earlier this session to protect the Rainy Day Fund from raids by limiting its use to only during below-normal economic growth when state revenues are less than anticipated,” she said.
Harsdorf said contributions to the Rainy Day Fund, totaling just under $300 million, “have been made for three consecutive years for the first time.”
State Rep. Dean Knudson (R-Hudson) was equally upbeat.
“The governor confirmed what we already know: Wisconsin is moving in the right direction,” he said.
Knudson said when Walker and the legislative Republicans took control in 2010, the state’s economy had tanked, with the jobless rate at a “staggering 9.2 percent.” Unemployment by December had dropped to 6.2 percent.
“In the last three years, nearly 13,000 new businesses have sprouted, thousands of new jobs have been created, and the unemployment rate is the lowest it has been since 2008,” he said. “Our reforms are working.”
Knudson said Walker’s plan is spot on.
“I am fully committed to meeting the governor’s call to return the surplus to those who need it most,” he said. “If passed, the Legislature will have provided about $2 billion in total tax relief to Wisconsin taxpayers since 2011.”
State Rep. John Murtha (R-Baldwin) also supported tax cuts as a way to return surplus money.
“My colleagues and I made very tough decisions over the last few years in order to turn the $3.86 billion deficit into a $912 million surplus,” he said. “It is time to give the money back to the taxpayers of Wisconsin.
“Now it is the families and citizens of Wisconsin’s time, who paid their taxes and created this surplus, to have their hard-earned money put back into their pockets.”
Murtha added that even with the good times here, the future can be uncertain. For that reason he supports keeping $100 million for the Rainy Day Fund.
What others say
Democrat State Sen. Kathleen Vinehout’s 31st District extends to Eau Claire, but also includes parts of Pierce County, including Ellsworth and the towns of Clifton and Martell.
Regarding Wisconsin’s budget surplus and the governor’s plan for it, Vinehout says hold on: “Let’s first pay the bills.”
She was unavailable for an interview but these are excerpts from her latest column:
“Imagine you came into a bit of money. Not a lot — less than $500 on your annual salary of $35,000 — but enough to make you happy.
“This is the pleasant situation state government faces: New revenue estimates predict the state will close its books on the current budget with a little less than a billion more on its $70 billion biennial budget.
“Lawmakers are falling over themselves to come up with the best tax give-away. But maybe they should check the pile of past due bills first.
“So returning to my story…You delayed paying some of your mortgage, you got behind on your son’s college tuition, you skimped on supplies for your school-age daughter, you didn’t pay all your property tax and you missed a few car payments.
“Instead of catching up on the bills you missed – with new money that comes nowhere near getting you caught up – you propose to your spouse to give the money away to your friends.
“If I were your spouse, I’d send you outside for a while and hope the weather cooled off your foolishness.
“Such is the foolishness of lawmakers who want to cut income taxes – giving most benefit to high income earners – rather than pay the bills postponed over the past years.
“The $900 million (plus) in estimated new revenue comes with a caution to Legislators.
“When reporting the new revenue estimate, the Legislative Fiscal Bureau (LFB) reminded lawmakers that about half of the surplus should be put away in the state’s Rainy Day Fund – as is required by state law. This fund is woefully inadequate and was underfunded by governors of both political stripes.
“The LFB cautions that federal highway funds may be reduced – leaving Wisconsin with more of the responsibility to pay for already promised road and bridge construction.
“The LFB does not give a figure on the estimated drop in federal funds but this fact underscores the importance of putting money away in a Rainy Day Fund.
“In addition, LFB staff point out the structural deficit going into the next budget year in the Transportation Fund alone is $224 million. Promised spending in this last budget, including the service on new debt, raises the mismatch between estimated money coming in and money going out at almost another $120 million in the next budget.
“The new LFB memo does not begin to touch the problems in the state’s General Fund.
“Every part of the five major spending items – schools, health care, local government, corrections and universities – needs attention.”
Like Vinehout, Robert Burke, Libertarian Party chairman for Pierce and St. Croix counties, says Walker is out of touch, unrealistic.
“The governor takes far too much credit for our recovery, and we predict he has far less success in the coming months,” said Burke, of Hudson. “People in government have a bad habit of claiming credit for improvements whether they were responsible or not.”
Burke said the governor and Republicans seem to think rising tax revenues will go on unabated.
“We disagree,” Burke said. “A Libertarian administration would reserve the dollars in case of a return to the tough economic times, such as 2008-09, which we see very likely in the short- to mid-term as the surplus was created by an asset bubble and, as it pops, it will be destroyed.”
Burke also pointed to a December report showing a big drop in new-home sales as well as a recent tumble of Stock Market prices as reasons for caution.
“The governor and politicians in general are clueless about what is ahead,” Burke said. “They should be planning as if the 2008 housing bubble was a practice run and it’s game time.
“Asset bubbles always create tax surpluses. A smart administration would plan for when the asset bubble drops.”
Regarding the question of how best to use the budget surplus, Burke replied: “How do I propose something for the surplus when it is a one-time manifestation of Central Bank liquidity spillover?”