Here & Now

Tax Expert Breaks Down First Evers Budget

Zac Schultz:
In our first look tonight, we’ll talk about Governor Tony Evers’ budget proposal. His plan includes $6 billion in new spending to pay for an extra $1.4 billion for public education, a 10% tax credit targeted at Wisconsin’s middle class, an extra $600 million in transportation funding, an expansion of Wisconsin’s Medicaid program and it also legalizes medical marijuana and decriminalizes smoking and selling small amounts of marijuana. Governor Evers says there is strong public support for his ideas, even if there is limited political support in the Republican-controlled legislature.

Tony Evers:
More than one million Wisconsinites have raised their own property taxes to support their local schools in their communities. This is simply not sustainable. I’ve said all along that what’s best for our kids is best for our states. Investing in our kids will yield dividends for our future. So we’re going to start with K thru 12 education, providing historic investments and returning to two-thirds funding at the state level.

[cheers and applause]

Zac Schultz:
For analysis of the Evers budget, we welcome back Todd Berry, now a fellow at the Wisconsin Academy of Sciences, Arts and Letters. Thanks for being here today.

Todd Berry:
And teaching on the campus by the way.

Zac Schultz:
Good for you. Tony Evers says this is the people’s budget and he referenced a lot of polling support in his speech for some of his positions. But Republicans are saying this is the most extreme liberal agenda they’ve ever seen. Where do you fall in all this?

Todd Berry:
Well, I don’t — I try to avoid the punditry here and go to the underlining structural mechanics of the budget: the numbers. And so I look at what’s called the General Fund Condition Statement. The long and the short of it is by the time we get to fiscal 2021, the surplus’s opening balance is over $900 million. When we end that year, the net balance is $20 million. In other words, we’ve really spent one-time money and I couldn’t figure out seeing all these things going on in the press about all these things he was proposing, we only had $1.8 billion in new money coming supposedly, how was he paying for all this? The answer was in part surplus and then there’s a billion plus in tax increases. Now, there’s some tax cuts, too, but — and that, you know, the one thing that will unite Republicans is taxes. And so that’s why you’re getting the shout back from them.

Zac Schultz:
So, now Republicans criticized the governor last night for not consulting with them before releasing the budget. Is it realistic for that to happen?

Todd Berry:
No. No.

Zac Schultz:
Or should this be like his ideals?

Todd Berry:
No. Governors don’t consult with — it’s the executive budget. Governors prepare the budget. Then the legislature disposes, so to speak. I mean this is the normal process. So that’s just rhetorical. Now, there may be some reasons, valid reasons they don’t like the budget, but this isn’t one of them.

Zac Schultz:
So how does education get paid for in here?

Todd Berry:
Yeah. Well, again, it’s striking that historically — we’re really talking K-12 because there’s not a lot for the university or tech colleges. Historically school aids were about 35% of the general fund budget. He’s putting almost 60% of the new money in school aids. So one way he’s paying for it is hardly anything else is growing except Medicaid and that he’s doing with federal money. So put other things on hold, draw down this surplus and then fill in with tax increases.

Zac Schultz:
So — and this might be a loaded question, but is this fiscally responsible?

Todd Berry:
Well, Ill put it my old Wisconsin Taxpayers Alliance hat, and we tried to hold governors and legislators of both parties’ feet to the fire on this for years. And when we saw second-year budgets where they were spending a lot more than they were bringing in in revenue, which this does, you create this big problem going into the next budget. So you have like an $800 million plus problem. The other thing we looked at is what were the implications for the state’s financial statements, which nobody talks about. The so-called gap deficit. And this budget at least as it stands now would increase that by a billion dollars. So it starts to move it back up. Walker had gotten it down a little bit and then had let it drift up again and then it came down a little bit. Now it’s going to go up.

Zac Schultz:
We know that Republicans are going to completely rewrite this. They’ve talked about possibly introducing their own budget or working off the old base budget. In the end, how much does it matter which version they work from? What matters is what they deliver to his desk.

Todd Berry:
Yeah. You know, I know they’ll get attacked for putting his budget in the nearest receptacle. Although Governor Evers is probably used to that because as DPI, he would always propose budgets and Governor Walker would always ignore them. So I think that there may be so much going on in this budget. There are just so many proposals for his base in a sense that they may just say we don’t want to have to sit and think about every one of these and vote yes or no. Maybe we should just start over. Process-wise it might be easier.

Zac Schultz:
Now, does this account for any possible downturn in the national economy? What would happen if we did approach —

Todd Berry:
Well, this is the other thing I always worry when I was doing this full-time is, does the budget sustain itself if anything goes wrong. And the ending balance net is $20 million. I mean, $20 million, as I always said, on Doyle budgets and Walker budgets, because they were all like this, too, is a spit in Lake Mendota. You know, that’s a day of income tax collection. And if you look at the underlying Fiscal Bureau revenue estimates, what it was showing was that the revenue growth was only about 3% per year and yet this budget is growing spending at 5, 6% a year. I mean I think most economists are saying we’re nervous about 2021.

Zac Schultz:
So in the end, will this come down to a battle between the budget writers for the Republicans versus Governor Evers’ veto pen?

Todd Berry:
Well, it would be hopeful if it would be a battle between the budget writers on the Finance Committee and the core budget decision-makers in the Evers’ administration, that while the Republicans were doing the partisan thing up front, that if they could be working on some accommodations behind-the-scenes so we don’t go back to the old Chvala-Jensen days when we had budgets passed in October. Although we had one under Walker too when it was all Republican.

Zac Schultz:
All right. Todd Berry, thanks for your analysis.

Todd Berry:
My pleasure.