Cognitive Dissonance at the Capitol

Governor Doyle and legislative leaders tell us we have a $5 billion budget deficit, and that “tough choices” are going to have to be made.  Yet according to Doyle, none of those tough choices are going to involve reducing state spending in any meaningful way.  Instead, we’re going to see higher taxes on oil companies and hospitals, so we can get more “free” money from the federal government.  Not exactly a profile in courage.

What is truly amazing about this budget Kabuki theater we’re seeing at the Capitol is how the governor and legislators are acting as if they had nothing to do with the budget shortfall.  They pretty much say, “yeah, the economy is bad, and we’ll have to tighten our belts,” as if they bear no responsibility whatsoever for the current shabby financial state we’re in.

Imagine a bank robber going in and holding up a bank, and running off with a million dollars.  Then, imagine the same robber going in two years later and making off with two million dollars.  When the bank finally has to close, the robber holds a press conference blaming the whole thing on the bad economy.  The only thing the governor and legislature are missing are the ski masks.

Take a look at this Legislative Fiscal Bureau document.  On page 7, it details the structural deficit left to taxpayers by the most recent budget adjustment bill, passed earlier this year.  According to the Fiscal Bureau, the budget left a $751 million hole in fiscal year 2010 and an $883 million hole in 2011.  That adds up to a $1.6 billion budget deficit even before the housing market sunk the economy.

Page 8 continues to add up the state’s liabilities.  The $1.6 billion number above assumed a zero increase in school aids and medical assistance funds.  When these cost-to-continue commitments are considered, the budget hole balloons to $2.4 billion – before anyone even considered the current bad economy.  When the legislature passed the budget and the governor signed it back in May, they knew these numbers.  They also knew nobody would care.

But now, with the economy in a recession, sales and income tax receipts are dropping – which makes the deficit much larger.  And, as I demonstrated in a paper earlier this year, Wisconsin is completely caught with its pants down.  Our elected officials are the worst in the nation at planning for fiscal downturns.  We have virtually no rainy day fund and no minimum statutory balance to soften the blow when the economy goes bad.  Most states reserve between 5% and 10% of their general fund revenues to maintain programs when tax receipts fall.  But not Wisconsin, which holds less than 1% in reserve.  As a result, we’re driving our state’s economy on a flat tire – the axle is going to break in half, sending us careening into a ditch.

And you know whose fault that is?  It’s not the economy’s fault – it is Jim Doyle and the Legislature’s fault.  They have absolutely no one to blame but themselves.  In January of this year, I pegged the coming budget shortfall at $4.2 billion.  Months later, the Legislature purported to “fix” the budget hole, but in fact, they actually made things worse.  They can’t say they weren’t warned.

Given this shoddy record of fiscal management, it is amazing that they now stand before us, trying to convince taxpayers that they can “fix” this problem.  In fact, each budget they have passed has made things progressively worse.  Yet nobody in the legislature is willing to step forward and be a grown-up in this process.  The recession of 2001 apparently taught out legislators nothing – it’s going to be the taxpayers that learn the lesson.