Governor Walker's Budget

There will be much more to say in the days ahead, but for now let me highlight these numbers as reported by WisPolitics:

All funds spending:
Actual FY 2010 and adjusted base FY 2011: $62.32 billion
Agency requested spending 2012-13: $67.44 billion
Walker proposal 2012-13: $59.2 billion...

When the guv touted his budget yesterday for reducing all funds spending by $4.2 billion, he was comparing his proposal ($59.2 billion) to the fiscal year 2011 doubled ($63.5 billion), which is how guvs have traditionally built their budgets. 

You can read the budget bills here:  Senate Bill 27 & Assembly Bill 40 (they are both pdf's).

Don't be frightened by their length of these bills (about 1300 pages).  Only the first 45 pages or so are written in plain English describing the bill.  The remaining pages are the legal language changes that will be to the law.  I think we can all afford to read 45 pages when it comes to how we are going to spend our money in this state over the next two years, can't we?

County Nullification

It seems awfully early for this, but the 2011 Brown County budget is already in the news. From the Press Gazette:

Brown County Board Vice Chairwoman Mary Scray said the 2011 county budget, likely to be tighter than this year's, calls for a contingency plan if state and federal aids continue to drop.

Scray wants department directors to prepare budget cut alternatives that would reduce their proposals by 10 percent so the County Board has options when it votes on a new budget.

The story notes that Scray is not the only one concerned and County Executive Tom Hinz, "expects the 2011 county budget to force more difficult decisions than the current budget did."

The article ended with this slightly provocative thought:

Scray said mandated state programs aren't excluded from the list of possible cuts, and she plans to investigate those guidelines."What happens if we don't do a state-mandated program?" Scray said. "What's the penalty? In my opinion, if a department thinks an unmandated program is more important than a mandated one, let's go from there. Is the juice worth the squeeze?"

CBO Analysis of President's Budget

The Congressional Budget Office has issued a preliminary analysis of the President's budget. Here are some highlights from the CBO Director's blog:

Measured relative to the size of the economy, the deficit under the President’s proposals would fall to about 4 percent of GDP by 2014 but would rise steadily thereafter. Compared with CBO’s baseline projections, deficits under the proposals would be about 2 percentage points of GDP higher in fiscal years 2011 and 2012, 1.3 percentage points greater in 2013, and above baseline levels by growing amounts thereafter. By 2020, the deficit would reach 5.6 percent of GDP, compared with 3.0 percent under CBO’s baseline projections....

Revenues under the President’s proposals would be $1.4 trillion (or 4 percent) below CBO’s baseline projections from 2011 to 2020, largely because of the President’s proposals to index the parameters of the AMT for inflation starting at their 2009 levels and to extend many of the tax reductions enacted in 2001 (EGTRRA) and 2003 (JGTRRA)...

...Excluding funding for war-related activities and the Pell Grant program (which the President proposes to convert to a mandatory program), discretionary outlays over the 2011-2020 period would be $0.5 trillion (or 4 percent) greater than the amounts projected in CBO’s baseline.

Whether you generally support the President or not, I encourage you to go read the whole post. It's not that long and you will be better informed for having done so.

CBO vs. CBO

It's almost like Spy vs. Spy.

Former CBO director and current Obama Budget Director Peter Orszag on his blog:

It is thus correct that federal spending rose by roughly 4 percentage points of GDP between 2008 and 2009 -- and it is also the case that the increase in spending has helped to stabilize the economy -- but it is wrong to attribute that increase primarily to Administration actions since it took office. The increase was already on the books when we arrived. [E.A.]

While I agree the Obama administration inherited quite a bit of spending, this didn't seem quite right to me, so I went to the CBO Budget and Economic Outlook: Fiscal Years 2010 to 2020 and found this:

Much of the rise in outlays in 2009 came from mandatory programs. After growing by an average of about 6 percent a year from 1999 to 2008, mandatory spending (excluding net interest) soared by 31 percent ($499 billion) last year, to $2.1 trillion. Three initiatives accounted for nearly two-thirds of that increase. Outlays recorded for the Troubled Asset Relief Program (TARP) totaled $152 billion in 2009; net payments to Fannie Mae and Freddie Mac accounted for another $91 billion; and fiscal stimulus legislation, the American Recovery and Reinvestment Act of 2009 (ARRA), increased mandatory outlays by $80 billion (largely for Medicaid, unemployment benefits, payments to Social Security beneficiaries, and supplemental nutrition assistance). [E.A].

Certainly you can lay TARP and Fannie/Freddie bailouts at Bush's feet, but Mr. Orszag seems to have forgotten about the substantial contribution to increased spending by the Obama administration's stimulus bill.

If there was a case for the stimulus spending, then make the case. Don't make meaningful increases in spending then try to pawn them off on your predecessor just because he spent even more.

State deficits may hurt efforts to attract jobs

The state of Arizona is facing a projected $4.7 billion but like states all around the country, elected leaders are still seeking a way to attract businesses, and the jobs they represent, to their state.

An article on this effort in the Arizona Republic caught my attention with this warning:

Jack Boyd, a Princeton, N.J., consultant, said he and other consultants are telling clients looking for new sites to be careful about locating in states with high deficits.

"What concerns me is who is going to put the fiscal houses in order for states like Arizona, California and New Jersey. Our concern is that it will be on the backs of the business community," he said.

So states may be judged not just on their reputation for taxes and regulation, but also on how they have managed their fiscal responsibilities. The states that have mismanaged their finances and may have to take drastic steps to correct past mistakes may not even be seriously considered by businesses looking to relocate, expand, or start up.

No Runny Eggs (H/T Fox Politics) takes a look at the scary state of Wisconsin's finances. If businesses are avoiding states like California, can Wisconsin be far behind? At a time when Wisconsin needs to attract new business, our inability to manage our finances may prove a burden too great to bear. Putting Wisconsin back on sound fiscal footing will absolutely be job number one for the governor and legislature elected in 2010.

It's often said that mid-term elections matter little and are primarily noticed only by those voters that are the most ideologically motivated. It remains to be seen if that is the case in Wisconsin this year. What is not in question is the fact that how the next government addresses our financial mess and the issue of jobs will directly impact all of the people of Wisconsin. This could make 2010 the most important mid-term in a long time.

Appropriations Bills Move Forward.

What's another 1,000 pages of legislation among friends, huh?

All remaining appropriations bills with the exception of Defense, have been rolled into a single bill and passed the House. Open Congress is calling it a minibus (as opposed to omnibus) but that is only because it doesn't include defense. There is nothing mini about the spending.

Here's the Heritage Foundation on the spending bill:

Congressional leaders are attempting to rush through a mammoth, 1,088-page fiscal year (FY) 2010 omnibus appropriation bill[1] that:

• Provides an 8 percent discretionary spending hike for the third consecutive year;
• Provides these spending hikes in addition to $311 billon in earlier stimulus funding for these discretionary programs; and
• Includes approximately 5,224 earmarks, bringing the FY 2010 total to 8,939, with a pork-laden defense bill expected to push the final total over 10,000.

As worrying as the size of the bill is the manner in which it has moved through the House. Here's Open Congress on the process:

We’ve been advocating for a 72-hour rule for a long time, and I was planning to use this post to show that the bill was not going to be available online for 72 hours before a vote. Before I could do that, it was approved in the House (by a vote of 221-202, full roll call coming soon). We don’t even have a page on the bill here on OpenCongress yet.

That the bill wasn’t online for 72 hours is, in itself, not the biggest consideration: it is a 1,000+ page piece of legislation that contains more than a trillion dollars in spending for five of the largest federal agencies in the country, plus Medicare and Medicaid

Senatus reports that the Senate has now voted to begin debate and then quotes the Associated Press description of the bill:

Senators have agreed to begin debate on an omnibus spending bill (H.R. 3288) by a vote of 56 to 43. The measure was recently adopted by a House-Senate conference committee. House members passed it earlier today by a vote of 221-202.

The AP notes that this is a “massive year-end spending bill awarding generous funding boosts to domestic programs despite massive budget deficits.”

The wrapup measure totals $1.1 trillion, combining six spending bills for 10 Cabinet departments into a 1,088-page bundle packed with more than 5,000 back-home projects sought by lawmakers.

[…]

The bill combines $447 billion in operating budgets for 10 Cabinet departments with more than $600 billion for federal benefit programs such as Medicare and Medicaid.

The borrow and spend method of governance (if you can call it that) cannot go on forever. When the end comes though, will it be because the citizenry demands it or because total ruin is upon us and there is simply no alternative.

I'd still like to think that it is not too late to change our ways, but lately I'm not so sure.

***Updated - Senatus reports cloture invoked. Be sure to click through and read the "additional provisions" of the bill.***

Brown County Approves Budget

By a 23-3 vote the Brown County Board approved the 2010 budget.  The Press Gazette reports:

The Brown County tax levy will increase by about $2.026 million for 2010 under a budget approved Monday by the Brown County Board.

The budget is about $589,086 lower than county Executive Tom Hinz's proposed budget and would increase the county's portion of the property tax about $6 on every $100,000 of property value.

The new tax levy, if signed by Hinz, will be $84,152,149 — about $2.026 million, or 2.5 percent — more than 2009. The tax rate would be 4.5801, up from 4.5444 this year.

Both the supervisors themselves and the non-union county employees get a pay cut under the approved budget.  There would also be furlough days for all employees with the details yet to be worked out.

The next step belongs to County Executive Tom Hinz:

Hinz has until the Dec. 16 County Board meeting to sign the budget or submit his vetoes.

"I'm going to sit back and look at it but not make any rash decisions," Hinz said following the 23-3 vote, with supervisors Adam Warpinski, Andy Nicholson and Dave Kaster voting against it. "The furloughs are something that has to be fine-tuned."

California Thievin'

It appears the citizens of California have decided to go in to the short term money-lending game. Their only customer will be the State of California itself.

Did I say decided? I meant it was decided for them. McArdle:

California has come up with a novel way to close this year's budget gaps: it's increasing withholding from the paychecks of its citizens. No, the government didn't actually increase taxes; it just raised the withholding.

The only reason this is not literally a violation of criminal law is that the government is the perpetrator. As such, the citizens have almost no immediate way to respond.

Don Boudreaux of George Mason University had this to say about the enhanced withholding:

It’s fashionable today to accuse private businesses of being greedy, duplicitous, and larcenous. But no business could get away with such audacious seizures of other people’s property – seizures that governments, such as California’s, are escalating to a dreadful new level.

Resorting to such a scheme to paper over the continuing fiscal disaster that is the California budget is sad and frightening.

Ryan on Deficits

Representatives Paul Ryan and Jeb Hensarling discuss our budget situation in the Washington Times, and it's not pretty:

More troubling is the long-term budget outlook, as the nation begins to see the front edge of an entitlement crisis. In the long run, current federal policies are likely to produce $62 trillion in unfunded liabilities, according to estimates by the Government Accountability Office. These long-term problems threaten both the beneficiaries dependent on federal programs and the entire U.S. economy.

They argue that reforming the process is critical to putting our fiscal house back in order.  To that end they propose a number of reforms including giving the budget the force of law and creating and enforcing limits on spending and deficits.

The spending that has characterized the Obama administration has many thinking twice about deficits and the future.  While 2010 may still be near enough to the financial crisis to make deficits seem like the lesser evil.  As we move to 2012 and beyond it is possible that our recent experience will make talk of deficits and a willingness to take a firm stand against runaway spending a much more prominent part of our political discourse.

Stimulus Helps States Avoid the Tough Choices

At least that's how I see it. Liberal blogger Matthew Yglesias had a somewhat different take when he noted recently that, "that stimulus funds are sharply reducing states’ needs for tax hikes or budget cuts."

He goes on to say that since conservatives argue against raising taxes during a downturn, they shouldn't argue for budget cuts either since, in his words, budget cuts:

[H]ave the same pro-cyclical impact. I’ve heard people say that the problem with stimulus is that it ignores the need for the economy to make structural adjustments. But huge state budget cuts don’t make structural adjustments easier, they simply increase the quantity of structural adjustments that are needed.

Doesn't increasing the quantity of structural adjustments make these adjustments tougher in the future?

Federal stimulus money allowed states to continue spending beyond their means and left all of the tough choices for the future, like a time capsule filled with nothing but trips to the dentist you put off and all the vegetables you refused to eat as a child. Even here in Wisconsin, the budget in no way prepared us to face an uncertain economic future.

When it comes to state budgets, why should we put off structural adjustments? If the new equilibrium is simply less arts education in our public schools because property tax revenues have fallen sharply and are not likely to rebound any time soon, aren't we better off getting the art teachers out of the classroom now? They could start training for all of those healthcare IT jobs that are always being touted as sources of future employment and (!) ways to reduce healthcare costs. Maybe we could even pay for the training with that soda pop tax Yglesias is always pushing.