In This Issue:
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1. Budgeting for
Dummies
2. Steering the Budget
Into a Ditch
3. Coal in Our Stocking
4. Under the Wire
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Keeping Free Marketers Current on Issues
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Budgeting for Dummies
 Last week Governor Jim Doyle held a press conference to announce that Wisconsin’s budget deficit had ballooned to $5 billion for the next two years. Doyle attempted to elicit sympathy, throwing his hands up and blaming the bad economy for the deficit.
Nice try. Actually, documents released by the state’s Legislative Fiscal Bureau show that the state had a $2.4 billion deficit the moment Doyle signed the budget “adjustment” bill last May. The use of budgeting gimmicks and tricks “adjusted” the state’s budget alright – it made the deficit much worse.
On Sunday, the Wisconsin State Journal cited several state budget experts who agreed that the state was mostly to blame for its current financial woes.
If Gov. Jim Doyle and both Republican and Democratic lawmakers now find themselves in a $5 billion budget hole, it's because they've all done part of the shoveling, budget experts said.
At least $1.6 billion of the state's massive budget shortfall stems from a spend-now, pay-later attitude pervasive in both political parties in the state Capitol, these analysts said.
Gov. Jim Doyle and other state leaders have blamed the two-year projected budget shortfall, which threatens everyone from taxpayers to students and the poor, on the souring economy across the country.
But commentator Christian Schneider, who predicted in January that a mild recession would lead to a $4.2 billion state budget shortfall, said the state also is paying for its failure to live within its means and to set money aside for the crisis that he and others warned could be coming.
"We learned nothing from the 2001 downturn so now we're going to have to go through another painful process with this downturn," said Schneider, a fellow at the conservative Wisconsin Policy Research Institute. "There's nobody who's without blame in this situation."
While the Governor and Legislature can’t be blamed for the national economy going south, which contributed to the remaining $2-plus billion deficit, they are at fault for not preparing the state for such a downturn. Wisconsin has a virtually non-existent rainy day fund, which makes economic downturns all the more painful when they occur. Most other states keep between 5% and 10% of their general fund expenditures in reserve, to smooth out the rough patches when the economy goes bad. Wisconsin has less than 1% in reserve, which means taxpayers will be facing large tax increases at the very time they can least afford it. Subprime lenders and auto companies have nothing on our state government when it comes to bad budgeting.
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Steering the Budget Into the Ditch
The newly elected Wisconsin Assembly which has its first Democratic majority in 14 years chose Representative Mike Sheridan of Janesville as Speaker. Sheridan who was elected to the Assembly in 2004, served as the local United Auto Workers (UAW) President prior to running for office.
It will be interesting to see how Sheridan responds to the demands of Wisconsin public employee unions, given the state's $5 billion deficit and a weakening economy. General Motors and the other big automobile manufacturers are facing bankruptcy largely because of their huge concessions to the auto workers union. Today executives from GM, Ford and Chrysler traveled to Washington DC looking for a $50 billion taxpayer bailout. Former Massachusetts Governor Mitt Romney thinks the companies, swimming in red ink, should be forced to file bankruptcy instead.
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
Meanwhile we can expect Sheridan and the Assembly to approve the "oil company franchise fee,” a widely-discredited attempt to tax oil companies without passing the cost onto consumers. In reality the tax will increase the cost of gas by an estimated 5 to 7 cents per gallon and result in an expensive constitutional challenge which the state will eventually lose. And, of course, when gas prices are high, it hurts – you guessed it – auto manufacturers. So when the Assembly votes to make gas more expensive, Sheridan’s friends at the Janesville plant should thank him for costing them their jobs.
Maybe we should take Governor Romney's advice and force the state to restructure, instead of passing massive new tax increases that allow runaway spending to continue unchecked. After all, working people don't have the luxury of charging their employers more money whenever they spend beyond their means.
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Coal in Our Stocking
Last week, the state Public Service Commission denied Alliant Energy’s $1.3 billion bid to build a new coal-fired energy plant in Cassville. As a result, consumers may be forced to pay higher utility bills in the near future, as Alliant will have to seek out other, more costly alternatives to coal, such as natural gas.
Furthermore, Alliant has been approved for a new plant in Iowa, which means much of the money and capital we could have seen in Wisconsin will now flow south of our border. With an economy headed downward and jobs leaving the state, the PSC has just exacerbated the problem by essentially ordering jobs out of Wisconsin.
The Wisconsin Farm Bureau Federation quickly ripped the decision, calling it “short sighted,” and “costly.” “Unfortunately this project was a target for environmentalist groups who misleadingly suggested the key to our state's energy problems is to expand the use of natural gas,” said Jeff Lyon, of the WFBF, adding, “In a year when record natural gas prices have sent the prices of commercial fertilizers soaring, their approach could not be more misguided. Simply put, a greater reliance on natural gas will result in a hidden tax on all Wisconsinites via higher food prices. I also find it troubling that one of the PSC Commissioners would chose to use this flimsy natural gas argument (that came straight from an environmental activist's talking points) to justify denial of this vitally important project.”
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Soglin and Butler Get In Just Under the Wire
This week, University of Wisconsin System President Kevin Reilly sent a memo to campuses asking them to tighten their hiring practices, in anticipation of state budget cuts coming down the road. In his memo, Reilly asked chancellors to fill positions "most essential to the university's mission at this time."
This must have come as a shock to the UW-Madison, which recently hired a former Supreme Court Justice with no teaching experience, to a six figure position without any official duties. A recent Club for Growth investigation revealed that former Chancellor John Wiley pushed for Louis Butler to get a job at the campus law school after Butler lost his seat on the court in April.. The only thing that made Butler’s position “essential” is that he’s a liberal in need of a job.
The report also shows that Wiley found a faculty slot for former Madison Mayor Paul Soglin who writes WMC Watch, a largely incoherent collection of liberal rants about Wisconsin’s evil corporations and their representatives in Madison.
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