Wisconsin’s fiscal health problems are rooted in private economic woes

By Ray Mueller, Review Correspondent

SHEBOYGAN – There was a time when Wisconsin tended to be ahead of the national curve on downturns and upticks in the economy but those days appear to have passed, Wisconsin Taxpayers Alliance executive director Todd Berry told the Sheboygan County board of supervisors in a special presentation at their March meeting. The non-partisan, non-profit alliance has been providing analysis of Wisconsin’s government and economy since 1932.

Wisconsin’s per capita income lagged behind the national average in the 1930s, part of the 1980s, and again in 2008-09, but where the state has fallen short noticeably since 2006 is in the number of employers compared to both its neighboring states and the nation, Berry pointed out. “That number had been above the others until 2006.”

Although the economic outlook indicates that employment in Wisconsin will increase 2.2 percent by 2012 and personal income will be up by 5 percent, this will not translate into a robust gain in tax revenue for the state government, Berry remarked. He noted that this contrasts greatly with the first half of the 1990s “when Wisconsin was rolling in money.”

As a result of the ready availability of funds until the mid-1990s, the state government launched many new programs, approved tax rebates, reformed the welfare program, and began paying for prescription drugs, Berry explained. These then combined to throw the state’s budget out of balance, leading to annual structural deficits since 1997 and a $1 billion deficit in the wake of the recession in 2001, he noted.

This was the front end of “a decade of deterioration” in the state’s fiscal condition that governors and legislators have tried to patch with a series of gimmicks, accounting tricks, and fund raids – the most recent of which is the current use of more than $3.5 billion in federal stimulus monies to keep the state’s budget floating temporarily, Berry observed.

Not only do the latest calculations indicate that Wisconsin is mired with an $8.939 billion deficit in terms of “net unrestricted assets” but tax collections are running short of the estimates, Berry stated. He cited the new $2.52 tax per pack of cigarettes – a tax being avoided by many smokers through on-line purchases, by going across state lines to obtain their supplies, or by having relatives or friends buy and bring cigarettes from other states.

In addition, Wisconsin has 1.123 million residents (1 of every 5) enrolled in medical assistance programs that are at least partially state-funded Berry pointed out. Only a decade ago, those programs covered only 1 of every 13 residents in the state, he noted.

The new Wisconsin governor who will take office in just over nine months will inherit a budget deficit of at least $1.134 billion for 2011, but the new taxes and fees approved by the current Legislature will bring in only about $570 million in new revenue, Berry observed.

Wisconsin ranks in the top 15 among the states in its tax load as a percentage of per capita income because it receives a relatively small amount of federal dollars, does not have toll roads, charges fairly low college tuition, and has modest fees for licenses, registrations, and services, Berry explained. As a result, Wisconsin’s combination of income and property taxes, when compared to per capita income, are running about 25 percent above the national average, he said.

If Wisconsin’s numbers aren’t attention-getting enough, just look at the federal statistics, Berry suggested. In the past decade alone, the federal debt has jumped from 40 percent to the current 61 percent of gross domestic product, he noted.

At current trends, Berry concluded, the federal deficit will top the gross domestic product sometime between 2020 and 2040 due mainly to increased spending for Social Security, Medicare, and Medicaid.

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