Facing a deficit going into the two-year budget cycle that begins in July, Gov. Scott Walker has proposed slashing funding for the University of Wisconsin System, public K-12 education and other vital programs.
But Walker doesn’t have to make massive cuts or raise taxes to balance his budget if he changes his priorities, according to researchers at the Wisconsin Budget Project, an initiative of the Wisconsin Council on Children and Families.
Walker, for example, can free up $782 million through the following actions: take the federal funds to fully expand BadgerCare under the Affordable Care Act ($345 million), halt the expansion of a tax credit for manufacturers and agricultural producers that’s ballooned beyond its original estimates ($226 million), and reallocate a regressive property tax credit ($211 million).
The money saved could stave off the $300 million cut for the UW System, fill the $126 million cut to K-12 schools, shore up the state’s reserves with a $50 million investment, undo Walker’s hits to the Earned Income Tax Credit and the Homestead Tax Credit for low-income residents, and remove other health care cuts Walker wants to make to SeniorCare and FamilyCare.
Even with those investments, the Wisconsin Budget Project’s alternate budget would have $162 million to spare to reinvest in state programs.
The High Cost of Walker’s Agenda
Wisconsin Council on Children and Families’ Jon Peacock, a very highly regarded expert on Wisconsin state budgets for the past 30 years and a co-author of the Wisconsin Budget Project’s plan, said in this political climate in Wisconsin it’s almost impossible for Republicans, who have a lock on power, to raise taxes. But that doesn’t mean that cutting programs is their only solution.
“As we thought about the politics and looked at the options we decided that there was a great deal of money that could simply be reallocated within existing tax revenues,” Peacock said.
The biggest target for spare money was the pot of federal funds for expanding Medicaid programs under Obamacare. Walker famously refused the federal money—which would have paid for 100% of the expansion for the first three years, then gradually decrease to 90% by 2020—to create his own version of health care reform. But Walker’s plan is expensive for state taxpayers. His reform cost state taxpayers $200 million in the previous budget and will likely cost $345 million in the pending budget.
The Wisconsin Budget Project urges Walker to take the federal money, which would provide coverage to an additional 81,000 Wisconsin adults and free up $345 million of state taxpayer funding. What’s more, Wisconsin would be able to recoup tax dollars it sends to Washington to finance Obamacare instead of forgoing it.
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The alternate budget plan also calls for capping a manufacturing and agricultural producer tax credit that was added to the 2011 budget as a last-minute amendment with no public debate. The tax credit doesn’t require these companies to create jobs and is available to just about any profitable manufacturer or agricultural producer in the state. When it’s fully phased in during 2017, many of the affected businesses will pay no income taxes at all. Although the tax credit seemed costly at first, it’s ballooned beyond its original estimates to $285 million in 2017. The Wisconsin Budget Project calls for capping it at its 2014 level and reallocating $226 million of the freed-up revenue for other purposes.
The plan also targets a $211 million school levy credit to reduce property taxes. Peacock pointed to research from UW-Madison economist Andrew Reschovsky showing that almost half of the property tax break goes to owners of commercial and industrial properties as well as those who own a second or vacation home in Wisconsin.
The average Wisconsin homeowner would see only an $8 dip in their property taxes thanks to the school levy credit, but the credit as a whole would cover the $126 million in cuts Walker wants to make to K-12 education, put more money into public schools and add funding to the Homestead Credit for low-income renters.
Image by Peter Stevens via Flickr and a CC license
