February 28, 2011
Dispatches (VI): Where Do Those Budget Numbers Come From?
Wisconsin Governor Walker has been stating that if his "budget repair bill" is not passed, then the state will lose $165 million dollars. It is unclear what exactly would be "lost" if the bill is not passed. From the New York Times:
"One day left to save the state $165 million," said the governor’s office on Monday, announcing the latest deadline.
If Democrats do not return by Tuesday, taxpayers would lose an option to save that money through a "refinancing," the governor’s office said, citing the Wisconsin Legislative Fiscal Bureau, a nonpartisan agency that conducts budget analysis.
The bureau's director, Bob Lang, did not return a call. Nor did the governor’s office.
But the assertion that taxpayers are on the verge of losing $165 million appeared nowhere in the analysis of the bill.
The Tuesday deadline appeared to be based on another analysis by the bureau that suggested that for the restructuring to happen, the state would have to order it done at least two weeks before March 16.
But nowhere in either analysis does it suggest that taxpayers would otherwise lose $165 million -- just that the state would not be able to push back the repayment of that amount to a later date. The debt would still be owed, and taxpayers would still be on the hook.
The Wisconsin Legislative Fiscal Bureau's analysis of the debt restructuring (not of the bill) is here.
So, what is accomplished by this measure would be to push back the repayment of the debt, from May of this year to two years down the line. Obviously, the state government has a shortfall, so it's hard to pay off debt. Note, however, the three bills passed by the newly installed legislature and approved (or likely to be approved) by Governor Walker exacerbated the Wisconsin budget deficit by over $100 million, thereby making the debt rescheduling even more urgent. 
It still might be a good idea to reschedule the debt, regardless of how much recent fiscal measures (including the tax incentives for business) have increased the deficit in the next two fiscal years. Nonetheless, I have to say, the last time I was following a debt restructuring to save the economy, it didn't turn out so well (Argentina, debt restructuring of 2001...). In any event, the NY TImes article indicates that the rescheduling will mean that the total payment will be nearly $30 million larger.
So, when you read:
"Now they have one day to return to work before the state loses out on the chance to refinance debt, saving taxpayers $165 million this fiscal year," Walker spokesman Cullen Werwie said. "Failure to return to work and cast their votes will lead to more painful and aggressive spending cuts in the very near future."
You should know that this statement incorporates a very special definition of the word "saving".
Update, 11:33pm Pacific: For those readers who believe Wisconsin has a severe problem with underfunding liabilities, see this graph (of course, those who don't believe in the relevance of number should skip):
Source: NY Times
Posted by Menzie Chinn at February 28, 2011 08:50 PMdigg this | reddit
Some of the core responsibilities we have as a culture are to take care of sick and old people and help educate our children.
It is shameful that Walker and his supporters are trying to take away a decent living wage from teachers and health care workers.
Dr. Chinn, thank you for your posts on this issue.
Posted by: James Giese at March 1, 2011 05:00 AM
Thank goodness for Jeb Bush in Florida. Because of his fiscal integrity Florida has virtually no unfunded liability (most of it came from Gov. Charlie Crist's fiscal stupidity).
There are some states dealing with their fiscal problems and some kicking the can down the road. I think looking at the chart Menzie provided it is easy to see which is which.
I guess the question voters need to answer is do you want to deal with the problem now while it is small or wait until later when it is huge.
Posted by: Ricardo at March 1, 2011 05:16 AM
Menzie, did you convince Jim to go on strike or something?
Posted by: aaron at March 1, 2011 05:24 AM
Aaron: I've had a number of other pressing commitments the last few days but hope to have something up for tomorrow.
Posted by: JDH at March 1, 2011 05:30 AM
Oh, I thought Hamilton moonlighted as a Wisconsin teacher or something.
Posted by: Silas Barta at March 1, 2011 08:50 AM
Jeb bush for president! Even president for life.
He positioned Florida's housing market perfectly. No underwater debt owners, housing prices up up up, no forclosures - none. What a guy!
Who, or should I say, which, bush comes next?
Posted by: dilbert dogbert at March 1, 2011 09:56 AM
Jim's pressing commitment has been standing outside a washroom in the WI state capitol to make sure it does not get too dirty and to keep Menzie posted on developments, :-).
And, Menzie, that WI is down there with SD, NE, and FL in having the lowest level of unfunded liabilities in the country certainly supports Gov. Walker's case, :-).
Posted by: Barkley Rosser at March 1, 2011 10:55 AM
Notice that Indiana looks pretty good too...provided you only look at the world through an accountant's green eyeshade. Indiana is even running a budget surplus. For some bizarre reason Mitch Daniels is running around the country bragging about his state's sound fiscal position, as though the purpose of governemnt is to run surpluses!!! What Mitch Daniels doesn't want to talk about is that his state is barely functioning...sure, no deficit, but nothing else either. Unemployment in his state is still at 9.5%...and only coming down because Hoosiers are dropping out of the labor force.
Posted by: 2slugbaits at March 1, 2011 02:44 PM
Great article. Re: "a very special definition of the word 'saving,'" and the point of this article in general: Why do so many dance around the fact that these guys are big fat f*cking liars? This article is great in the way that it lays out how misleading their statements are, but never plainly states this obvious conclusion. Are we so used to blatant lies and misleading fearmongering that this passes as acceptable political discourse? Peoples lives, occupations, and educations are at stake but all we can do is shrug our shoulders and say, "aw shucks, those incorrigible politicians and their creative wordplay. Here's some data demonstrating how misleading their statement is, and, in other news..."
All of this data is out there disproving the majority of the governor's and his representative's statements, yet you would never know it by watching the mainstream media. We need to stop standing by idly letting anyone with a mic paint an alternate reality.
Posted by: Tim at March 1, 2011 03:20 PM
First, how many of your commenters realize you live and work in Wisconsin and thus have an interest that goes beyond the purely economic?
Second, Indiana has been running budget deficits. They simply have been cutting, just like states with public unions. I looked into this when the NYT ran a laudatory article about how the lack of unions has allowed the governor to cut spending. CNN even said this was somehow a special power that enabled government to spend less than was budgeted - funny that every state has managed to do this but the magic power only comes about because Indiana eliminated public union bargaining.
Indiana has actually run a substantial deficit each year. They only have no deficit if you look after the fact because they have cut spending each year and have reduced their reserves. In 2010, for example, about $500M came from state reserves, meaning they raided the pantry and called that a reduction. At least they had the sense to reduce reserves; Texas, for example, is refusing to use reserves because that wouldn't be prudent. They prefer to hurt children.
According to the official information I found at Purdue, Indiana has a structural deficit that was $2B in FY2010 and is $1.4B for FY2011 (using 12/10 revenue projections). The FY2010 number is then adjusted by money received from the federal government - mostly for medicaid.
A better case for Indiana is they have a $500M projected deficit. In other words, look and you see they have cut and keep cutting.
The argument that no public unions creates fiscal health is nonsense; the recession killed tax receipts. The notion that somehow not having unions means the government can somehow balance the budget is belied by the fact that 41 states have them and they still manage to cut, etc. too.
Posted by: jonathan at March 1, 2011 08:53 PM
jonathan: First, how many of your commenters realize you live and work in Wisconsin?
Good question since he has cleverly concealed this fact by burying it at the top of the front page. Up on the right. No, your other right. There, that wasn't so hard, was it?
Posted by: Joseph at March 2, 2011 10:13 AM
JEB BUSH did NOTHING. He was govenor when Clinton gave us a SURPLUS ....then .ALL the states were UNDERFUNDED when the Georgie Bush tax relief was dedicated TWICE around 2003 to the wealthiest in our country.
Charlie Crist took over in the WORST of our times. Let's KEEP it HONEST HERE.
NO MORE BUSHES in the WHITE HOUSE PLEASE !!!
Posted by: janice at March 6, 2011 12:26 AM