This post is an addition to the ten-part series evaluating 2011 State of the State (SOTS) speeches in states with the ten worst projected relative budget deficits for FY 2012. This last-minute addition was made due to the recent events in Wisconsin, and the substantive nature of Wisconsin Governor Scott Walker’s SOTS address. Budget data is primarily from the Center on Budget and Policy Priorities’ (CBPP) recent budget report, and SOTS speech text is from Stateline.
Wisconsin is one of a few states to use biennial fiscal year budgeting and Figure 1 (below) demonstrates the state’s budgetary timeline.
Figure 1: Wisconsin Biennial Fiscal Year Budget Timeline
The Wisconsin Legislative Fiscal Bureau reported that the state faced a nearly $6 billion budget deficit during the FY 2009-11 period. According to the Wisconsin Budget Project, the following steps were taken to balance the FY 2009-11 budget:
- “More than $3 billion in reductions in agency budget requests;
- About $3.45 billion in federal revenue from the economic stimulus package (used in both the biennial budget and the budget repair bill), with $2.2 billion of that amount used to replace General Purpose Revenue funds (also known as the General Fund in many states);
- About $2 billion from new taxes and fees or enhanced tax collection; and
- A number of short-term measures, such as restructuring state debt, one-time lapses of revenue, and [delayed payments].”
CBPP projects that Wisconsin faces a $3.5 billion deficit during the upcoming budget period (from FY 2011-13). On February 1, 2011 Gov. Walker delivered his SOTS speech (full text available here), which contains valuable insight into his approach to budget deficit.
- Economic Development: Gov. Walker defines “success for this administration by (its) ability to share an environment where 250,000 jobs are createdâ€¦ [And that] every action of (his) administration should be looked at through the lens of job creation.” Towards that end, he touted recently signed bills to enact small business tax relief, expand relocation and economic development tax credits and eliminate taxes on Health Savings Accounts.
- Government Reform: Gov. Walker discusses passing a bill to reduce government rules, mandates and taxes and improve Wisconsin’s regulatory environment (at the time of his SOTS address this bill was being negotiated in the legislature).
- Spending Cuts: He acknowledges the state’s Medicaid shortfall, which is currently $150 million but will exceed $1.8 billion over the next biennium. Without going into specifics, he implies that Medicaid may face spending cuts to “balance the budget in a way that creates a permanent, structurally sound state budget.” He goes on to identify rising healthcare costs and pension costs, describing them as a “benefit system that is simply unsustainable,” with taxpayers contributing “more than $190 million each for on state employees’ behalf.” He partially foreshadows the current situation in Madison by explicitly saying in his SOTS address that he wants public employees to contribute pension payments around 5%, and healthcare premium payments of 12% (which is roughly half the national average); however, he did not specifically identify public employee collective bargaining in his speech.
- Tax Increases: Gov. Walker does not propose any tax increases in his speech, but he does repeatedly chide Illinois policymakers for passing dramatic tax increases earlier this year.
Overall Governor Walker’s SOTS address contains meaningful policy proposals, accurately depicts his administration’s goals and is clear about the fiscal challenges facing Wisconsin.
For additional policy solutions, Wisconsin policymakers should explore the American Legislative Exchange Council’s State Budget Reform Toolkit and Reason Foundation’s Annual Privatization Report 2010: State Government Privatization section. Each of these documents contains a wide range of methods to balance budgets and maintain high quality public service delivery.