Gov. Scott Walker put a happy face on the state’s long-term budget outlook in his second debate with Democratic challenger Mary Burke.
"The most recent fiscal year just ended with a cash balance of some $517 million," Walker said. "And the next state budget will begin with a surplus of over half a billion dollars -- $535 million to be exact. That means we can invest in our priorities."
That first figure is undisputed and widely reported: The state ended the year from July 1, 2013 to June 30, 2014 in the black by $517 million.
But Burke challenged Walker’s second figure.
There’s a $1.8 billion shortfall heading into the 2015-’17 budget, she said, not a "surplus of over half a billion dollars."
That’s a huge difference.
To determine if Walker is right about the projected $535 million surplus, we turned to reports issued by the state’s nonpartisan budget scorekeeper, the Legislative Fiscal Bureau.
But first, we want to be crystal clear about what is being debated here.
It’s not a prediction of how the second year of the 2013-’15 budget will end up.
Rather, Walker is talking about projections on where the state’s finances will be as the next governor and Legislature put the 2015-’17 budget together in early 2015.
This is what is often referred to as the "structural deficit." The name is unfortunate. The figure does not reflect a "deficit" or -- if Walker is right -- a "surplus" at the end of a budget year.
Rather, it is a tally of past decisions -- both in spending and in tax collections -- that officials will have to account for in the next two-year budget. As such, it’s a benchmark for the size of the budget challenge.
The Fiscal Bureau does this exercise periodically, mostly during budget season. The bureau’s longstanding method is to assume no loss or gain in revenue and no changes in spending. Applying the same approach allows for a consistent picture over time. The bureau’s latest estimate came out Sept. 8, 2014.
The bottom line: a $1.76 billion deficit heading into the 2015-’17 budget.
Among the chief reasons for the gap: Tax cuts approved by Walker and the Republican-led Legislature, which contributed to a slowing of revenue.
The numbers cited by Walker
So what is Walker referring to with his $535 million surplus figure?
That figure is contained in a Sept. 18, 2014 Fiscal Bureau memo to a Republican state representative, John Nygren of Marinette.
In the wake of the $1.8 billion estimate, Nygren asked the bureau to look at it a different way.
He asked for an estimate of the budget challenge assuming that lawmakers would hold most spending at 2014-’15 levels for the two following years, and tax revenue would rise at the five-year average of 2.9 percent.
That yielded an estimate of a $535 million surplus.
The Fiscal Bureau also got a request from a Democrat, state Sen. Jennifer Shilling of La Crosse. It asked the Fiscal Bureau to run an estimate based on increases in school spending, granting state agencies their $1 billion spending requests and other changes. Budget requests came in Sept. 15, 2014.
That estimate was a $2.7 billion shortfall. Another scenario run for Shilling was a deficit of $4 billion.
You get the idea. Just weeks from the Nov. 4, 2014 election, both parties have come up with ways to manipulate the Fiscal Bureau’s $1.8 billion estimate using some scenarios that range from spending freezes to giving agencies everything on their wish lists.
We’re not buying it.
Walker’s own budgets report the "structural deficit" number using the method the Fiscal Bureau used to come up with $1.8 billion.
And lawmakers of both parties have done the same for years.
Indeed, Walker has used the "structural deficit" estimates to his advantage in the past and even has made it the centerpiece of his re-election campaign.
Every time you hear the governor say he inherited a $3.6 billion "deficit" from Gov. Jim Doyle, it’s a reflection in part of the $2.5 billion "structural deficit" the Fiscal Bureau estimated in 2011 as Walker prepared his first budget.
And Walker, again using the Fiscal Bureau’s traditional methodology, has touted the fact that his tight budgeting actually eliminated -- however temporarily -- the structural deficit heading into his second budget.
Walker’s campaign argues that the Fiscal Bureau memo is based on some outdated figures and that it’s zero-growth assumption is unrealistic.
But the governor is seeking to have it both ways, trumpeting the bureau’s method when it suits him and rejecting it when it does not.
The numbers will change again when the Fiscal Bureau updates its report in early 2015.
Walker told debate viewers: "The next state budget will begin with a surplus of over half a billion dollars -- $535 million to be exact."
That rosy number flies in the face of the official estimate that uses a long-established method used by members of both parties, and the governor’s budget office.