Budget surplus giveaway laid foundation for deficits

Thirty-six years ago state government had a projected general fund surplus approaching hundreds of millions of dollars - a situation much like the current Wisconsin budget projections. The projected surplus numbers had grown as quickly as spring dandelions.

It became the key factor in the 1978 gubernatorial election. The Republican nominee promised to give the money back to taxpayers, and he easily defeated Democrat Martin Schreiber who had become acting governor after Gov. Pat Lucey was appointed U.S. ambassador to Mexico.

Republican Lee S. Dreyfus provided a dramatic give-back to taxpayers. Personal income-tax withholding was suspended for some two months. Taxpayers had a holiday. The Dreyfus approach left little wiggle room for spending. Dreyfus said the Legislature would have a hard time resisting spending the money.

There was scant attention paid to putting significant tax revenues into a “rainy day” fund. There was little buffer against any economic downturn.

The economic downturn developed at the start of the 1980s. By 1982 Wisconsin had experienced 13 straight months of double-digit unemployment. It was the worst economic downturn since the 1930s. State spending was repeatedly overhauled as Wisconsin tried to match lower tax revenues with on-going programs.

It was a national downturn but other states had set aside tax revenues to help soften the blow. By 1982, the Democraticcontrolled state Legislature and the Republican governor adopted a “temporary” increase in the state sales tax from four to five percent. Dreyfus did not seek re-election.

The “temporary” tag was win- dow dressing. After the next election it became a permanent feature of Wisconsin taxation. Wisconsin also had turned to gimmicks to provide “balanced’ state budgets. State-aid programs were approved but the budget impact shifted to the following fiscal year.

Todd Berry, head of the Wisconsin Taxpayers Alliance, is suggesting that some of the current surplus projections be used to undo the budget gimmicks of earlier years. That may be good government but it isn’t politically sexy in an election year.

But there clearly is a window of opportunity for Republicans who have created legislative districts that seem likely to guarantee the GOP will control the Legislature for a decade. That gerrymandering means the governor’s race is where the action will be this fall.

The budget surplus should help Republican Scott Walker’s bid for a second four-year term as governor. His conservative backers will spend hundreds of thousands of dollars in ads emphasizing whatever tax changes occur.

Perhaps more importantly the extra money will offer the opportunity for improved job-training efforts, boosting technical-college efforts to reduce the waiting lists of persons seeking to get into education programs or upgrade their skills.

In 2010, gubernatorial candidate Walker vowed to add 250,000 private-sector jobs in four years. The new job totals are lagging with federal figures showing Wisconsin is 37th in job creation. The numbers suggest the 2010 campaign promise won’t be met. More money for vocational education could mitigate the job issue for Walker.

The last 2013 polling by Marquette University showed Walker with a 47-45 margin over Mary Burke, the expected Democrat nominee for governor. It will take some time for voters to react to the impact of the budget surplus.

State Sen. Kathleen Vinehout, D-Alma, seen as a more liberal candidate for Democrats, did not choose to run after being injured in a car accident.

Wisconsin is not alone in surplus projections. The National Association of State Budget Officers is projecting that almost all states will see “fairly decent surpluses” in their 2014 budgets. More than a half-century ago John Kennedy noted that “a rising tide lifts all boats.” That seems to apply to budgeting by the 50 states as the U.S. economy continues its recovery.


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