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Liberals Are Wrong: Walker’s Tax Cuts Did Not Create Immediate Budget Shortfall

Did Scott Walker create the budget problem he’s now trying to fix by forcing union workers to contribute more to their pension funds and health-care plans?

That’s the accusation some on the left are making, including Washington Post blogger Ezra Klein. Klein quoted this passage from a letter from the state’s Legislative Fiscal Bureau dated January 31 as part of his argument:

More than half of the lower estimate ($117.2 million) is due to the impact of Special Session Senate Bill 2 (health savings accounts), Assembly Bill 3 (tax deductions/credits for relocated businesses), and Assembly Bill 7 (tax exclusion for new employees).

What Klein didn’t quote is the sentence right before, which reads:

Our analysis indicates that for the three-year period, aggregate, general fund tax collections will be $202.8 million lower than those reflected in the November/December reports. (Emphasis mine.)

In other words, Walker’s decisions did impact the budget — but not necessarily the budget for this current fiscal year, which is facing $137 million shortfall.

“The vast majority of the cost of those bills  … will be in the next  budget, the 2011-213 budget, which has not even been debated yet,” says Brett Healy, president of the MacIver Institute.

Instead, this current year’s deficit is mainly due to other factors: the nearly $60 million Wisconsin owes Minnesota, and deficits in various state departments, including the corrections department, the medical assistance program, and the public defenders’ office.

“This stuff [the Walker legislation] will add to the deficit of the upcoming budget, but it has no immediate impact,” says Healy. “Gov. Walker is trying to be responsible and actually do something to try to stop the bleeding. And for anyone to say that somehow he made the current situation worse is just plain wrong.”

The Weekly Standard’s John McCormack talked to Robert Lang, director of the Wisconsin Fiscal Bureau, about the numbers and got the same answer:

In a phone call this evening, Lang confirmed that “the fiscal effect” of Walker’s health savings accounts and business bills “is not reflected until the 2011-2013 budget.” The projected deficit for the 2011-2013 budget is $3.6 billion.So the state will eventually have to find a way to pay for Walker’s and the legislature’s recent measures, but the claim that he “ginned up” the current controversy by rewarding “cronies” with those bills is false.

Politifact also rated the claim “false,” concluding after a detailed analysis that “Walker’s tax cuts will boost the size of the projected deficit in the next budget, but they’re not part of this problem and did not create it.”

Tags: Wisconsin

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COMMENTS   2

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mfram
   02/18/11 21:38

Fact is, WI has been running a structural deficit for a long time. Scott McCallum, the man who stepped in after Tommy Thompson went to Washington DC to serve in the Bush Cabinet, tried to make cuts to reign in spending -- the cuts were focused on aid to local governments and that failed and Jim Doyle won the next election. Since then it has been one constant story of one segregated fund or the other, the tobacco lawsuit monies etc getting sucked into the general fund.

McCallum was serious about addressing the problem, he just did not have the necessary support and now we know Scott is very serious too.

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   02/18/11 23:46

I'm delighted that someone at NRO now notices that Ezra Klein is just another dissembling leftist propagandist.

This site used to bend over backwards to treat him as the ideal "liberal with whom we can have an honest debate" when this was never the case. I always suspected it had more to do with his willingness to spring for lunches or drinks on his expense account than an objective assessment. The guy created the Journ-o-list to manage and shape news coverage, for crying out loud!

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