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Money makes the world . . .

Money makes the world. Wisconsin’s fiscal challenge. About a lot more than budgets. | 10.04.10. Overview. ■ WISTAX: teaching, informing . . . angering ■ State economy drives all ■ State finances then and now ■ No help from the outside?. Budgets. Economy. Choices. Revenues.

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Money makes the world . . .

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  1. Money makes the world . . . Wisconsin’s fiscal challenge About a lot more than budgets. | 10.04.10

  2. Overview ■ WISTAX: teaching, informing . . . angering ■ State economy drives all ■ State finances then and now ■ No help from the outside?

  3. Budgets Economy Choices Revenues “It’s the economy, stupid..” - Campaign ‘92

  4. The economy drives all.

  5. Economy recapped in one slide Per Capita Personal Inc.: Wis. +/- US > US < US

  6. How did we manage in the 90s? % Women working

  7. Closer look at the economy . . . jobs Mfg. Jobs 6/07-6/10 WI -14.8% -75K US -16.1 -2,246K Tot. Nonfarm 6/07-6/10 WI - 6.0% - 173K US - 5.3 -7,236K

  8. . . . wages and productivity Avg. Earnings/Worker & GDP/Worker (WI % < > US) Avg. Earnings/Job Productivity: GDP/Worker

  9. Real wages growing, but slower US WI

  10. Where are our jobs? 1990-2009

  11. Where aren’t our jobs? 1990-2009 U.S.Wis.E/I

  12. How are employers doing? Pct. Change in No’s of Private Establishments Third Quarter of Ea. Yr. Shown (BLS) > v

  13. Are we creating new firms?

  14. New firms . . . where? 1994-2009 < >

  15. A marketing view . . . share Wis. % of US GDP

  16. Strategic view . . . market position GDP % chg GDP pc

  17. State finances, then and now

  18. State finances in context (GAAP) - $2.71 billion Other states? Wis. Fin. Stmts ($b), GAAP

  19. Prepared for recession? (NASBO) ■Surpluses % spdg. 20082009 ▪ Wisc vs. avg. 1.0% vs. 8.6 0.7% vs. 4.7 ▪ States > WI 49 41 ■Spending % inc.20102011 ▪ Wisc. (pre-lapse) +5.3% +5.2 ▪ 50-state avg. -6.8% +3.8% 43 cut 22 < +2% ■2010-11 tax increases ▪ Only five states > in raw amt. (inc. CA, NY)

  20. Budget decisions made, 2009-11 +11.1 2009-11 +1.5 < ?! >

  21. Budget decisions postponed 1,232+200 Long history of structural imbalances. 2,511+200 11 rev (+ 12)

  22. Recovery dividend? “ … the pace of the recovery is expected to slow and will not return to pre-recession levels until 2013 . . .” − DOR, 8.20.10 Projected growth in personal income CYWI-MayWI-AugUS-Aug ’10 3.0% 2.5% 3.2% ’11 4.6 4.4 4.7 ’12 4.4 4.3 4.8 ’13 4.4 4.1 4.8 Why this matters.

  23. Structural deficits + slow growth= ■GPR tax revenues (2010-11) $12.88 billion ■ Pers. income growth: 4.5% / yr. ■12.9 x 4.5% = $520 million 520 + (520 + 520) ■Structural ‘deficit’ ~ $1.23b + $200m = $1.4b

  24. Options narrowed? Medicaid: ’98: 1/13 ’08: 1/5 MA deficits, fed help?

  25. Low-hanging fruit picked? ■ Corporate income e.g. comb. reporting, throwback ■Individual income Top rate up, cap. gains news Credits, but small, odd ‘mix’ ■ Tobacco (but . . .) PS: $3.0 billion new taxes/fees 2008-09-10-11

  26. And, by the way . . . How Wisconsin Taxes Compare Nationally Revenues as Pct. of Pers’l Income; FY 08: US Census

  27. Political reality: (electorate and elected) ■Public mood ~70% state gov’t fair/poor job ~60% state priorities: jobs/econ. + tax/spend no others >~10% ■Political dysfunction: ▪10-15 years of fiscal denial (R and D) ▪careerism + power + special interest allies ▪protect status quo; major policy changes? ▪Wisconsin leader?

  28. Possibilities and implications ■Pendulum:3D to at least 1R, perhaps 2R?? ■Polls: governor; modeling: legislature ■Split governance: the good and the bad ■Issue approaches? ─K-12 education (kids/unions vs. tax relief) ─Medicaid ─Higher education ─Prisons

  29. Does legislative make-up matter?

  30. Now help from elsewhere

  31. There is no rich Uncle (CBO, 7.27.10) ■ “. . . US government debt held by the public has grown rapidly . . . it is now higher than it has ever been except during . . . World War II.” ■ “. . . deficits will cause debt to rise to unsupportable levels.” ▪ Crowding out of private savings/investment ▪ Rising interest costs forcing program cuts ▪ Higher marginal tax rates “would discourage work and saving and further reduce output”

  32. . . . And he’s in denial Federal Debt Held by the Public Under CBO’s Long-Term Budget Scenarios (Pct. GDP) US GDP CBO June 09 *The alternative fiscal scenario deviates from CBO’s baseline projections, beginning in 2010, by incorporating some changes in policy that are widely expected to occur and that policymakers have regularly made in the past

  33. Your turn The Wisconsin Taxpayers Alliance Our eighth decade of teaching and informing the press and public about how their government works, taxes, and spends. Thank you for making our nonpartisan research and citizen education possible. www.wistax.org

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