Friday, May 11, 2012

Not All Sunny in Wisconsin

Some are celebrating the announcement on behalf of Wisconsin Governor Scott Walker, who is facing Democrat Tom Barrett in a recall election, that Wisconsin will post a budget surplus over the next two years of $154 million:
Gov. Scott Walker's administration released improved budget projections Thursday that would leave the state with a $154.5 million surplus a year from now.
Coming less than four weeks before Walker's June 5 recall election, the projections take the state from a previously estimated $143 million budget deficit in its main account through June 2013 to the surplus.
A large chunk of the surplus is realized by delaying payments that will ultimately cost taxpayers more in interest.
The budget numbers released Thursday do not account for a sizable shortfall in the state's health programs for the poor that Walker's administration says it will deal with through increased efficiencies and spending cuts.
 Compared to the deficits faced earlier, that number seems an improvement, despite all the caveats (of loan restructuring and the health-program shortfall).

However, if one looks at the details of Walker's budget projections, one might notice something troubling for FY2013.  Here are the relevant numbers:
Opening balance (in thousands): $229,718
Tax and other revenue (in thousands): $14,280,843
Expenditures (in thousands): $14,356,088

As these numbers show, Walker's team is projecting that Wisconsin will run a budget deficit in FY2013 of about $75 million; any surplus at the end of FY2013 would come from carrying over the surplus from the end of FY2012.  Indeed, this report shows the general fund surplus shrinking considerably from FY2012 to FY2013.

I'm not sure what the methodology is for the FY2013 budget projection; it may overestimate or underestimate revenue.

It would be far from the worst result for a state to toggle between budget deficits and surpluses every other year but always ends up in the black after a two-year cycle.

But one hopes that FY2013 is not a projection of further deficits to come for Wisconsin.  While the state doesn't have the worst unemployment rate (at 6.8%, it's below the national average), job growth was sluggish in 2011: Wisconsin added only 13,500 private-sector jobs that year, its 0.6% private-sector growth rate the 44th in the nation.  And the state lost a few thousand private-sector jobs in March, hinting perhaps at further economic vulnerability.

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