Wisconsin’s Budget Woes Are Very Real

Opinion makers on the left have alleged that there is no need for dramatic fiscal consolidation in Wisconsin. Really?

As Governor Scott Walker of Wisconsin remains defiant in the face of mass union protests against his austerity plans, some on the left have alleged that the state’s fiscal woes are far from serious.

The state of Wisconsin is coping with a $137 million shortfall this year. MSNBC’s Rachel Maddow and The New York Times‘ Paul Krugman have both pointed out that Governor Walker has lowered corporate tax rates and therefore revenue by almost the same amount. They argue that state workers should not have to suffer the consequences of that decision.

The governor on the other hand has argued that Wisconsin needs to attract businesses and encourage entrepreneurship if it is to grow out of recession. He told Fox News Sunday this weekend that asking state employees to contribute a greater part of their income to pension and health-care costs is not unreasonable. Workers in the private sector are “paying much more than the 5.8 percent for pension and 12.6 percent for health care I’m asking for,” he said; “in fact, in many cases, two or three times that amount.”

Wisconsin’s fiscal challenges are rather more complicated than state worker benefits versus tax revenue however. As Fox Business Network contributor Elizabeth MacDonald pointed out today, the state’s budget spells out at least $315.7 million in unpaid bills.

Wisconsin owes neighboring Minnesota $58.7 million under a discontinued state income tax reciprocity deal. It owes $200 million to the state’s Injured Patients and Families Compensation Fund and an additional $25.2 million to the public defender’s office and the state’s department of corrections.

Finally, the tax breaks for private business that Walker has enacted haven’t taken effect yet while the revenue of corporate income and franchise taxes is estimated to actually increase by some $100 million this fiscal year.

Critics of the governor’s policy also typically neglect to consider the far bigger crisis that is looming in Wisconsin. The state’s deficit is projected to reach a staggering $3.6 billion for the upcoming two fiscal years. The need to cut spending is thus very real indeed.