Sheboygan Co. Chamber ▪ 05.03.2013. Well, Toto? Oz- consin or Wis - consin? Where the heck are we?...

Sheboygan Co. Chamber ▪ 05.03.2013


Well, Toto?Oz- consin or Wis -

consin?

Where the heck are we?Where the heck are we?So, if this ain’t Kansas, Toto . . .

Assessing Wisconsin’s fiscal condition & direction

?


Budgetary choices Forward . . . or Back to Oz?

1 Backdrop: DC and state economy

2 Recap: State finances ‘til now

3 The new state budget

4 Budget sticking points

5 Hard questions with future consequences

WISTAX: 80+ years of research & education

Overview: State finances at crossroads

OZ?

WI?IL?!


“. . . a growing level of federal debt would also increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget . . . the abrupt rise in interest rates would reflect investors fears that the government would renege on the terms of its existing debt or . . . boost inflation.” ─ CBO 7.10

199

149

10178

54

37

0

50

100

150

200

250

300

1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023 2028 2033 2038 2043

'05 '13 '31 '37

CBO 6.12

US Debt Held by Public as % GDPAlt. Scenario: Most Likely Given Past Cong. Action CBO: 6.12

Background: DC — No help? Future hurt?1


2001 Rk 2011 Rk % Chg. Rk

US $35,857 $48,079 34.1%

DE 54,841 1 72,486 1 32.2% 33

IL 38,998 8 52,119 12 33.6% 31IA 32,095 33 48,652 22 51.6% 6MI 33,774 23 39,008 40 15.5% 50MN 38,934 9 52,707 11 35.4% 24

WI 33,946 22 44,613 29 31.4% 35

MS 23,685 50 32,839 50 38.6% 18ND 29,927 39 58,965 7 97.0% 1

State

State GDP per capita & chg.

2.9

2.2

3.0

2.2

0

1

2

3

Wis. US Wis. US"Births" "Deaths"

Background: State economy (= taxes)


-6%

-4%

-2%

0%

2%

4%

6%

1984 1988 1992 1996 2000 2004 2008 2012

US

WI US/WI

US

% Mo'ly Job Chg. WI Job Growth Tracks/Diverges From US

87 mo: 100% 124 mo: 35% 102 mo: 27%

Wis > US ?

Trend: Wis & US

And jobs? The whole story


‘Bipartisan’ rhetoric: Jobs!

Silly, partisan job number games

The (R) rhetoric: Credit and lure

The (D) rhetoric: Programs create jobs

Another (persuasive) viewStartups and young companies dominate net job creation in the United States – and have done so for the last 30 years . . . Ewing Marion Kauffman Foundation (2010)

Digression: Job rhetoric


0

2

4

6

8

02 03 04 05 06 07 08 09 10 11

4.3

5.8

9.3

5.9

s

s

WI

US

Cum. Population Growth: 2002 - 119.3

5.9

Young people: workforce, new families,

cons. goods

Underlying trends — changing population


New firms in ‘96:

WI US Alivein ’06 44% 34%

Alivein ’10 36% 27%

Firm creation rates: 1992-2009

Rate RankUnited States 5.4

Alaska 7.4 1

Illinois 5.3 25Indiana 4.5 43Iowa 4.2 48Michigan 5.8 17Minnesota 5.5 23Wisconsin 4.5 42

Connecticut 4.0 50 * Less new seasonal firms = 49th

New as Pct. of All

Lack of new firms – another key


1990s-2010: Boom, splurge, crash, deny

Delay, delay: Dig a hole, file a hole, dig . . .

Tricks, transfers, gimmicks, borrowing 2011-13: Inherited deficit, big Medicaid

hole;Cut everything, add $1b+ to Medicaid

Now: No ‘deficit carryover’, surpluses 2013-15? Budget crossroads, return to

Oz?

2 State finance recap: The ‘Oz’ decades

?


-10

-5

0

5

10

1990 1995 2000 2005 2010 2015

Avg.=6.8%

Avg.=5.0%

1.8

3.3

3.1

Notes:1. Tax cut carried over2. New LFB rev. est’s

3 New budget: Revenue growth? (GPR)


3.2% 3.0%

0.6%1.3%

4.0%

5.9%

-5.8%

3.3%

$15,257

$14,297

$13,579

$12,744

$13,526

$12,727

8,000

10,000

12,000

14,000

16,000

06 07 08 09 10 11 12 13e 14b 15b

-8%

0%

8%

16%

24%

Annual Pct. Chg.

GPR Spending ($ Mill.)

New budget: Spending growth (GPR)


Programs w/ Largest Increases, One/Both YearsOver ’13 Base ($m) for Tot. Biennium (14+15 vs. 13)

Total = $731.7 m

Big 2 = $717.6m !

Net incr.

All increases

New spending in few places


108.1

487.7

70.9$49.2

-$2,150-2,645

-2,056

-2,995

-1,500

-1,000

-500

0

500

06 07 08 09 10 11 12 13e 14b 15b

-4,500

-3,000

-1,500

0

1,500GPR Surplus(left axis)

FY ends

% Spdg 0.4% 0.6% 3.4% 0.7%

GAAP Deficit(right axis)

Budget bottom line: Surplus? Deficit?


11.4

13.613.0

12.110.1

5.8

0

4

8

12

'02 '04 '06 '08 '10 '12

7

State DebtCAFR (through 6/12)$ Billions

’13-’15 proposed

2013-15 Gov. Proposals

$1.03b in budget ($0.99b transpt’n)

$1.15b in capital bud.

= $2.15b total

$16+ bill?

Budget sticking points: Debt4


None +!

’15e

$326e

Return of the ‘structural deficit’?

Budget sticking points: Ozian imbalance?


-0.7

4

-1.0

8

-1.1

7

-1.1

3

-1.2

2

-1.1

3

-0.9

2

-1.4

7

-1.2

7 -0.9

1

-0.8

3

-1.2

1

-1.4

8

-2.2

4 -1.9

3

-2.1

2

-2.1

5

-2.4

4

-2.5

0

-2.7

1

-2.9

4

-2.9

9

-2.2

1

-$4.0

-$3.0

-$2.0

-$1.0

$0.0

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Gen

. Fu

nd D

efic

it in

$ B

illio

ns (

GA

AP

)

$16

bill. ?

-2.0

6

-2.3

6

-2.6

4

G.A.A.P?

13 14 15

Pending/Proposed

Sticking pointZ, Oz II: GAAP deficits?


About $343m, two years

How? Lowest marg’l rates Critique: Too small? Too large—reserves?

Prop. tax? Top 7.75 rate?

Missed opportunity? ▪ Cash as ‘political grease’ ▪ Tax law as regulation

Broader base/cut rates

Assembly CPA changes?

Budget sticking points: Tax cut?


Budget sticking points: School finance

Largest part of state budget, 35% - 45% of GPR Overall, largest source of revenue for K-12 Evolution: Big bucks, little bucks, fewer bucks Political geography

▪49 sch. dists. rev. now < ’03 ▪2/3rds in R sen dists.


Decades of the fiscal revolving doorCareer politics = short-term thinking= GAAP deficits, low bond ratings= Painful cuts and tax increases, little or no

strategic planning

Coming questions and choices: ▪ Delayed vs. instant gratification (up spending, cut taxes?) ▪ Long-term fund integrity vs. addiction to transfers ▪ Pay-as-you-go vs. return to increased borrowing ▪ Fundamental reform vs. tinkering:

Income tax, transportat’n, higher ed. finance

5 Choices: Wis- or Oz- consin?


Wisconsin Taxpayers Alliance80 years of nonpartisan policy research and citizen

education

Questions? Jokes? Critique?

Are we gonna get a brain?

www.wistax.orgwww.wistax.org

Z zz zzz z z z z

Sheboygan Co. Chamber ▪ 05.03.2013. Well, Toto? Oz- consin or Wis - consin? Where the heck are we?...

Documents

Transcript of Sheboygan Co. Chamber ▪ 05.03.2013. Well, Toto? Oz- consin or Wis - consin? Where the heck are we?...