When A Big Spender Meets A Big Surplus

In Governor Evers’ State of the Speech earlier this week, he gave a preview of what his budget – which is only a few weeks from introduction – will look like.

In a word, it’ll be big.  He laid out at nearly $1.3 billion in new spending in this speech, and he hasn’t even introduced, or likely even finalized, his budget yet.

His speech highlighted areas where he intends to build on spending increases in his previous budgets, continue temporary programs funded by one-time pandemic aid and create new programs. But he assured us that increasing spending and creating new programs aren’t making government bigger, just making it better. Did you catch that? Bigger government isn’t bigger, it’s just better.

Please, nobody hold your breath waiting for PolitiFact to rate this nonsensical claim, they’re tied up PolitiFacting burning questions about differences between strip shows and drag shows, so they don’t have the bandwidth for being an honesty check on…well, anything the current governor says.

A government which spends more on a larger number of programs is, by definition, bigger and Evers says bigger is exactly what Wisconsinites want. It’s fair to wonder whether if that squares with the fact that Wisconsinites elected larger conservative majorities in the legislature, who campaigned on limited government, and who will write the state spending plan. But Evers knows the biggest increases in state budget spending in the past two decades have come under republican legislatures with democrat governors.

With the largest surplus in state history, partisan composition that historically means big spending, and a lobby corps that’s spent the past year coming up with ways to spend that surplus and going to campaign events…there is cause for concern.

Here, we’ll break down the major areas we expect to see grow under the Evers budget he will propose and provide some historical perspective.

The Top 5 Biggest Taxpayer Worries for the coming budget:

  1. Evers seems poised to win the battle of the surplus, with only a fraction being used for tax relief, and too much of the $7 billion surplus going to grow an already mammoth government.
  2. Evers’ plan gives DPI healthcare responsibilities and makes teachers into healthcare providers – how long before they claim HIPAA means they can legally withhold health information from parents?
  3. Local governments, fresh off spending a deluge of federal covid cash want to keep that spigot on. Evers and some legislators seem united to do just that.
  4. Evers is committed to more money for schools, not better education for kids. His veto pen will make it difficult for legislators to use the purse strings to prioritize academics over indoctrination.
  5. One-time pandemic aid was used to create ongoing programs, and the one-time surplus has folks giddy. These factors are setting the stage for a potentially massive spending hike. $100 billion dollar state budget?

 

Education

While Evers began his political career as a candidate for DPI Superintendent who said he would not cover up or cheerlead poor performance, who would demand results and seek innovative ways to improve learning. Then he lost. So, the political chameleon remade himself into a big-spending cheerleader of poor performance who would cling to the status quo and fudge numbers regardless of how many schoolchildren are cheated of a quality education.

That politician was in full display on Tuesday. Evers said he was reinvesting in schools after a decade of disinvestment. The claim of disinvestment is demonstrably, factually inaccurate.  More than that, the increasing investments have come while the number of children being educated are dropping along with the quality of the education being provided.

Beyond the state’s continued spending increases netting decreased performance, the last 2 years have seen huge influxes of covid cash meant to prevent and mitigate “learning loss,” a problem so unimportant to Wisconsin educators that the term didn’t even make an appearance in DPI Superintendent Underly’s State of Education speech.  Governor Evers failed to mention learning loss in this State of the State address as well. Meanwhile, schools are claiming to be at the edge of a fiscal cliff because rather than spend the pandemic aid to prevent learning loss as intended, they abandoned the mission of education and spent the funds on other, ongoing expenses they now can’t continue to finance.

These decisions underpin the importance of school board composition in communities.  Last spring, we saw a large number of competitive school board races, in large part due to what the pandemic revealed to them about their schools. Getting a closer look at their children’s schools raised concerns about curriculum, and parental exclusion from their children’s learning and health. It also provided some clarity in why academic achievement has been falling.

In response to concerns raises across the state, the legislature passed a number of bills perhaps most notably one providing parents the right to be have access to basic information about what their kids are learning in schools and a common-sense plan to increase literacy.

They were vetoed by Evers.

 

Money as a Proxy for Quality

The education establishment is lockstep in opposition to focusing on student achievement, and entirely invested in the narrative that schools have been starved of funds. With the discussion at the state and local levels dominated by only talk of money, achievement and learning take a back seat. Instead of talking about how to get kids to be able to read and do math, discussions are about how to get more money in the door.

Those who should be most concerned with the pervasive loss of learning and low achievement scores have other priorities.

Too often even well-intentioned school board members fall into this trap and simply go along with the narrative of desperate poverty fed them by administrators and then turn around and use supposedly scarce tax dollars to hire costly political consultants to run high-priced campaigns to convince taxpayers they’re desperate for cash.

And if the debacle in Adams-Friendship is an example, school administration and board clerks are playing fast and loose with school board election law, disadvantaging would-be challengers.

 

Schools in Charge of Mental Health 

One of the other profound problems caused by the extended shutdowns of schools and the forced isolation of remote learning is the loss of mental health in students. Mental health concerns have been a legislative focus in terms of legislation and funding in recent years; the legislature provided nearly $140 million to fund mental health initiatives in the 2019-21 budget. Extended school closures pushed by Evers and his administration, even when the American Academy of Pediatrics was recommending children stay in school, caused a predictable, predicted, spike in mental health problems.

Evers used the speech to declare 2023 the year of Mental Health, revealing plans for new funding for new programs. There’s no doubt that mental health is a concern, but there is something deeply distasteful about the cynicism it takes for a politician to pose for holy pictures next to a huge pot of money he suggests will solve a problem and a wrong he helped inflict on people who are now suffering.

There has never been an admission from Evers that the harm caused – especially to children’s mental health – by his policies was largely unnecessary. Nor has there been an accounting of whether and how much – or why not – the billions of pandemic dollars designated for pandemic recovery were used to address this issue.

One of the most troubling things in Evers speech is the plan to give schools -which are failing at their most basic mission and are increasingly rejecting parental involvement in children’s lives – a new role (and new money) as healthcare providers. Coordination to assure better access to actual health professionals is one thing. Putting DPI in charge of health care “best practices” and paying school staff to providing mental health services to students should have alarm bells ringing for every parent in the state.  Teachers who are already saying “I’m your mom now” will soon be saying “I’m your doctor now” further eroding the role of parents.

And really, if schools can’t effectively teach core subject matter, should we really start paying them to provide healthcare?

 

Spending

The governor ran for reelection promising to spend more, and the legislature is poised to do the same, although (hopefully) to a lesser extent.

We question the need for spending increases at all. State spending has grown faster than household income for decades. The massive federal aid dumped into the economy spurred generationally high inflation, meaning families have suffered a decline in their standard of living.  They can buy less with their income. The $6.6 billion state surplus represents over-collection of taxes; Wisconsin collected over $1,000 per person more than needed to run the already-bloated state government. Not only does that money belong to the taxpayers who are hard-hit by inflation, but for the government to use it as a slush fund to create even bigger state government means taxpayers generations from now will be on the hook.

While families – even elected officials in their family budgets – are forced to make difficult budget decisions, prioritize, cut the fat and waste, elected officials don’t distinguish between needs and wants when they have their hands on plentiful excess tax dollars. Spending increases, programs are added and because every program and every dollar has a constituency with an advocacy group wheedling and pressuring, even the most abject failures of programs are never jettisoned.

Even policies meant to slow the growth of spending are cast as austerity measures. When property taxes were increasing an average of 9% per year for over a decade, revenue and spending limits put in place were, and are, called draconian.  Over time that’s been repeated enough that legislators start to believe it.

The gross property tax levy, the amount of property taxes charged to taxpayers, has gone up 44% since 2005, even with revenue limits.  And in that time, things previously funded by property tax bills have been shifted off the property tax and funded by the general fund – in other words what property taxpayers used to finance is now financed by income tax payers and sales tax payers. Nevermind whether the public understands these tax “cuts” were really tax shifts; many legislators don’t fully grasp they didn’t “cut” anything, just shifted the burden to different taxpayers.

If something is repeated enough in Madison it becomes true within the confines of the capitol, across party lines. And that is the very reason tax shifts – along with tax hikes – should be off the table. Because they’re misrepresented, they open the door to increased spending and the continued growth of government in the future.

Similarly, Act 10, which provided local governments more flexibility to control costs and spending, requiring all government employees to make a small contribution toward their health care and pension benefits, was lambasted by many local governments. Act 10’s savings stayed with the local units of government, allowing them to spend more money in the classroom and on services. Nearly 12 years and $6 billion in savings later, there are still complaints from schools.

Most people will tell you that in spite of the substantive income tax cuts and tax shifts of recent years they don’t feel like they’re paying less. That’s not because they aren’t paying attention, it’s because they aren’t paying less. State and local tax collections have increased more than household income has. Taxpayers make do with less at home, so politicians have more to fund ever-growing wish lists.

 

 

In spite of historically high state spending, and $19 billion government-only covid cash (which for perspective is equivalent to the entirety of the past two years of income tax collections) Evers is talking about the need to increase spending billions more.

One area where he seems poised for an assist from legislative republicans is more money for local governments.  They’ve chafed at limits on their spending and taxing powers since the limits were enacted. And they’ve clamored about shared revenue (state aid directly to locals) having been frozen for a number of years.  They’ve gained traction, despite the lay of the land.

And though many have adopted their own sales taxes, wheel taxes and massive fee hikes that have increased their budgets, and despite the covid cash that was, in far too many cases squandered on things like artificial turf and skate parks and hiring new government workers whose job is to find permanent replacement money for the one-time covid money.

Evers proposed 20% of sales tax collections go to local governments; 1-cent of our 5-cent state sales tax. In 2021 that 20% would have been $1.2 billion. In 2022, collections jumped 9.5% so 20% would have been $1.4 billion. This proposal would create a massive local government spending increase, while also diverting money from the existing programs the sales tax revenues fund. If the one-time surplus is used to fund those ongoing programs, we create a deficit and because there is no will to make cuts, an ongoing burden for taxpayers, and their children after them.

Evers has proposed huge tax increases every budget, and he made clear he plans to introduce them again. If he plans his budget around spending a $6.6 billion surplus and spending another $1.7 billion (likely much more) tax increases, he is proposing growing government spending by over 9%, pushing us right to the edge of a $100 billion state budget.

Twenty years ago, our state budget was just over $50 billion; this one will likely come close to doubling that figure. The 2023-25 budget will be the 11th in that period; 4 of the 11 have had a republican governor, 7 a democrat.  Our legislature – the most powerful in the nation in terms of budgetary authority – was in republican hands 9 of the 11 budgets, and they shared control in one, leaving only one budget in the last 10 years entirely in the hands of democrats.

While our governor has a powerful veto pen, he can’t veto numbers up – so spending control is in the hands of the republican legislature. We hope they look at the huge and ultimately unsustainable spending increases of the past, and consider how much federal money flowed into the state and decide that this is the time to spend less so that taxpayers – always better stewards of their own money – have more.

 

Taxes

Any talk of spending has to be followed by talk of taxes.

While lobbyists for local governments are falsely claiming the surplus is ongoing funding, it is not.  The surplus dollars at the center of the feeding frenzy are one-time money, tax collections in excess of what was needed to cover the state budget expenses.

The governor has said he will use a small fraction of the surplus amount for a tax cut, but also pledged to raise other taxes. His budget will be built around those tax increases.

While the legislature has consistently rejected those increases and pledge to continue to do so, increased spending keeps taxes higher than necessary.

We at MacIver believe in smaller government and lower taxes. We’ve cheered the income tax cuts passed in recent years, and we believe a flat tax is the next step in a conservative move to protect taxpayers and rein in government. We already have an example of how a fair, flat tax works in the state. Our constitution requires uniformity in property taxes, so people are treated equally. A flat income tax would provide the same equal footing for every taxpayer in the state.

If the surplus dollars are used to move to a flat tax, they aren’t being spent on growing and creating new programs – programs that create ongoing spending obligations. Even in conservative hands, government continues to grow faster than the budgets of taxpayers who fund it.

If Evers’ proposal, which has a surprising level of traction in the legislature, to shift 20% of state sales tax revenue to local government coffers becomes reality, it alone would eat up nearly half of the one-time surplus. It puts a flat tax out of reach in the short term, while creating more spending obligations that make future tax cuts – of any kind – that much harder.

 

Crime

Evers spent no time discussing crime in this speech, and it’s nothing new. While increased violent crime has plagued communities across the state, and Milwaukee is among the murder capitals of the nation, Evers has consistently ignored the issue. No surprise, as he and his political base align in their deeply held beliefs that society has spent too long being too mean to criminals and we just need to get off their backs already.

We’ve reported extensively on not only the rise in violence, but on the Evers’ administrations leniency in revocations which endanger public safety, and excessive pardons and paroles.  We’ve looked at how low bail policies kill, and how lenient sentencing and rogue prosecutors protect criminals from consequences at the expense of neighborhood safety.

We’ve covered how Evers, like many uber-liberal crime-deniers, has moved the Department of Corrections to stop using words that hurt the feelings of the rapists, murderers and other felons we incarcerate, and instead find gentler words like “clients” so their fragile self-esteem doesn’t suffer.

It’s clear any movement on crime will have to come from the legislature. Evers’ team is savvy enough to know that he can take credit for ‘safety’ in communities by simply advocating for more local funding. Legislators who want to increase funding for law enforcement in the budget must be mindful of the veto pen. A comprehensive crime package outside and before the budget might be their best option.

 

Transportation

Evers led off talking about transportation and we’ll close there. He took credit for the miles of roads and bridges that have been fixed under the legislature’s last two budget plans which he signed and took a couple swipes at former Governor Walker for not increasing transportation spending enough. What he fails to acknowledge is consistent growth in transportation spending over the past 2 decades, spending that is 51% higher now than it was in the 2001-03 budget. He also fails to mention that Walker had to dig out from Governor Doyle’s raids of hundreds of millions from the Transportation Fund to finance other spending and balance his budgets. Walker repaid the money Doyle misappropriated, while managing to hike transportation spending 12%.

Evers also failed to put any numbers on the amount of transportation spending that has been covered by federal pandemic aid cash. Wisconsin units of governments have received an influx of federal funds that are more than twice the amount the state collected the past two years in income taxes, and some of the road repairs have been courtesy of covid cash, not his wise “investments.”

Evers highlights more planned mass transit spending, showing the urban bias that has marked his governorship.

Transportation spending was one source of discord between Walker and the republican legislature, so while it’s unlikely Evers will gain much traction on big increases in transit spending, he has a largely willing partner in the legislature on the broader issue of transportation spending. This concord will likely be heightened this year with both the executive and legislative branches looking for ways to send more money to local governments

MacIver remains hopeful that fiscal conservatives in the Capitol will fight for Wisconsin taxpayers and build fiscal sanity into the 2023-2025 state budget. While Gov. Evers and the special interests will repeat the lie that government in Wisconsin is starving and in desperate need of a large infusion of your tax dollars, an honest and comprehensive view of our fiscal situation shows that this could not be further from the truth.

Taxpayers deserve an honest debate and should be Madison’s first and only consideration.