Getting Realistic About Wisconsin's Fiscal Crisis

This was not the best of news: 10 states face looming budget disasters

Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin join California as those most at risk of fiscal calamity, according to the report by the Pew Center on the States.

Waxing America readers know that I am skeptical of so many of these 'studies' and surveys, but the Pew Center is reputable. The point is not whether Wisconsin is in the top ten - we know the situation is serious - but whether we have a plan to do something realistic that will address two very real budgetary issues.

First we need a plan to grow the state's economy. That means more than developing real estate; it calls for investment in human capacity (education) and infrastructure. Decisions on funding schools, transportation systems, and communications must be be based on sound economic and social principles, not political ideology.

Secondly, we must build upon the recent efforts lead by Governor Doyle to create a meaningful unreserved, undesignated fund balance for 'rainy days.' 

Both require that Wisconsin's taxes work as an investment, not torture.

Comments

[buckyblue]

But you know the full monty of conservative talking points will be to grow the economy by cutting taxes. Businesses are leaving by the dozen every day (according to Belling) and we just must cut these taxes to keep them. Which will mean even less for the schools, which are already hemorrhaging at the loss in state aid even as we speak. My local school district will be cutting 6 million over the next two years. My daughter is already in a class of 34, in sixth grade. It could easily be up over 40 by the time she hits high school. But that will then be proof that public schools don't work.

[anon]

There is an interesting piece (mostly graphic) on MSNBC's Web site about where the stimulus money is going. Hint: not here. Time to write a few letters to Washington or pick up the phone. Also interesting in that piece is the projects drawing a lot of money. Lots of transportation projects, many not particularly green. Many of these will probably save or generate jobs, but that we still have not seen a true jobs project that puts people to work creating something that we'll be able to point to 10, 20 years from now makes my heart sad.

http://www.msnbc.msn.com/id/33498869/ns/us_news-the_stimulus_tracker#/all/all/us/all/

[hieronymous]

The trouble with a rainy-day fund is that the politicians would know it exists. All "hands off" admonitions notwithstanding, when we need to reach for some of those stored cookies, the jar will likely contain only crumbs.

Somehow it still amazes me that the "conservatives" still get away with their crazytalk about growing the economy by cutting taxes. Why the electorate still hasn't caught a whiff of that overripe herring, I do not know.

Sure! Cut taxes ... for those who manufacture something, who hire workers, who invest and bring in new business and actually increase the gross domestic product of the state. Give them some incentive ... payable upon results, not promises.

Taxation is an instrument of public policy, a tool that can be used to build or destroy. Throwing tax money at the thanes of the WMC in the desperate hope that they'll spend some of it to improve the lot of the taxpayers is lunacy, and those who espouse that approach should not be taken seriously.

[R.J.]

What ever happened to all that talked-about casino cash?
We know what happens to 'rainy day' funds. They get raided like the state's medical liability compensation fund.
Suffocating the state's productive sector is not the answer. As much as you hate to admit it, our current situation was no accident.
It's time for hope and change in Wisconsin.

[Paul]

Hieronymous, your point is well taken. I cannot speak for the state governement, but it worked in Madison. If you create a culture among liberals and conservatives, that the money is not to be used unless a true emergency exists.

I do not recall the numbers off the top of my head, but I beleive we seat a goal to have a reserve of 12% of the city operating budget. When I left it office the Madison reserve was at about $8 million and it grew to over $14 million in the next decade.

In 2001 when the state of Wisconsin, with its much larger budget had a reserve of about $1,500, Madison's was near $14 million. It can be done.

RJ, as for the casino cash and the lottery revenues, those just disappered into the state budget and are lost in the shuffel. If a state wants to make it on gambling revenues - which I am not recommending - it needs the discpline and taxing structure for gaming revenues that Nevada uses.

Buckyblue indentified the most important issue, funding public education. Belling is wrong, of course, but what we need to do is grow state revenues by growing the economy.

[Alderman Steve]

The problem with rainy day funds is that once an amount of cash is squirreled away that is large enough to make a difference, alleged fiscal conservatives in the legislature start huffing and puffing about "giving the taxpayers their own money back." So then the pressure builds to the point where rebate checks get sent out with bipartisan support, typically in an election year.

Or you have a situation like we had with the Federal government, where Democrat Bill Clinton left a budget surplus to Republican George W. Bush, who then used it to justify tax cuts for his base. These tax cuts were not "revenue neutral" in any sense of the term, and most of the public was not demanding them (education was a much higher concern.) But Dubya rammed them through anyway, again with bipartisan support (didn't he use budget reconciliation to pass them?)

Paul's point is well taken: Wisconsin (or the US, for that matter) can't just cut its way out of its budget predicament. We have to invest in infrastructure that will allow Americans to create wealth over the long term. This means educating our kids (especially the ones raised in poverty) and upgrading our energy and transportation systems to cope with a world where cheap fossil fuels will no longer be available.

[R.J.]

Where are those highly educated grads going to work? Texas is only so big.

[Alderman Steve]

"Where are those highly educated grads going to work? Texas is only so big."

Where are you going with this, R.J.? Are you suggesting Wisconsin shouldn't invest heavily in education because some students might move somewhere else upon graduation? That seems woefully short sighted.

I suppose the cheapest solution that would appeal to free market fundamentalists would be to import well educated workers from abroad and just write off native born Americans as too expensive to educate.

In my own case, I chose to move to Wisconsin because the state invests so heavily in education, at least compared to Pennsylvania (a low tax state) where I used to live. By the way, Pennsylvania has a terrible time retaining younger people, so clearly underinvesting in education and low taxes and crummy infrastructure aren't enough to create a vibrant economy. Maybe something else is required...

[R.J.]

Ahhh yes, stay the course. Let's go for #1.
http://www.jsonline.com/news/milwaukee/69771807.html

As you have demonstrated, 'if you build it, they will come'...you're welcome. Now, where do you think that money came from? Throwing kisses to WEAC is not the same as creating well-educated grads.

Let's focus on building and maintaining the engine that PAYS for our future.

[Alderman Steve]

R.J.,

It is all well and good to carp and complain, but if you want to be taken seriously you have to have a plan, or at least a strategy. As anyone who has spent time in the private sector (where I make my living) can tell you, you have to spend money to make money. Investing in education has worked in this country for a long time, as it has in resource-poor places like Japan, Singapore and Hong Kong.

It helps if one makes investments in things that matter. China is making huge capital investments in education, transportation, and energy. By contrast, America invests heavily in developing the capability to make the rubble bounce in far away lands and creating bogus financial instruments no one understands. Which investments do you suppose are going to pay off better with respect to wealth creation over the long haul?

So what is your plan, R.J.? More of the same free market fundamentalist snake oil we've had since Reagan? (Hey! Didn't Reagan raise taxes back in the eighties? What will the Teabagger brigades do when they find out?)

Or do you make snarky remarks to mask your lack of ideas?

[Belleville]

Paul it may be to little too late. The Gov gave away the kitty for votes, the president had to stop by and set him straight. The state is deep in the whole for years to come. The question becomes, due we base our hopes of athe genius in biotech, that history shows, can't run an organization and need outside business expertise. Its much easier to cross the state line, and wait five years.

[R.J.]

Thank the unions and regulation for the off-shoring boom.

If our school system was run like the Chinese school system for 5 minutes, Al Sharpton and Jesse Jackson would be hoarse from marching and serving lawsuits.
Japan had the 'lost decade' which is the perfect model for where we're headed.
We will never come close to the cultural organization of Southeast Asian countries that gives rise to the do-or-die educational hunger...that societal path starts with caning as punishment for littering.

No, in America it is about incentive and positive reinforcement. When you over-tax and over-regulate you destroy that incentive.

Look at every major northern city. Most are screwed up, most are broke, most have high crime, most have failing schools, most have government corruption, and most are run by...Democrats.

To answer your question, the first idea should be to halt the bad ideas that got us into the bottom ten of fiscally mature states.

[buckyblue]

The northern cities, er, the Rust Belt, have lost their manufacturing jobs because they have been outsourced to China or some third world country like Honduras or Alabama. The states in the south are non-union, so the wages are low, and virtually tax free for these companies to move. Since the Dixie states don't tax much they have no investment in education or anything else, really. Services are awful, their schools are pitiful. Because of the competitive nature between the states we will all be forced to drop to the lowest common denominator, to all become Alabama. We will all get to live in a two tiered society of working for pitiful wages, no benefits (because the unions are gone) and shitty schools for our kids because the state government is in with the corporate heads so the taxes are zero. Tell me again how patriotic some of these low tax, free market Republicans are again.

[R.J.]

Alabama is the new Mississippi?
How are those wonderful Northern public schools in D.C.?
Yup, let all the factories move South, we'll show 'em.
Those jobs are a base for a town that then supports other businesses, then that starts an economy which churns up money for funding schools.
You want to cut us off at the knees and expect us to run a marathon.

[buckyblue]

You're right, you have to have jobs to create taxes to fund things, like schools. But in the current climate, where it is ok to throw a community in crisis by moving a large number of jobs to Alabama (and Mississippi, and ....), it is difficult for Wisconsin to compete. As long as there are large differences between states and their tax burdens, and as long as companies have no scruples or concern for communities, Wisconsin will be forced to become a new Dixie state. People look at Wisconsin and yell about the tax burden (Paul's done plenty on this topic as well) and think it has to change. How about we look at the southern states that do not tax enough to provide a decent education, along with other services, for their citizens? Make Alabama tax their corporations and wealthy individuals (which they don't) so they can educate their children.