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7/3/2009
Rep. Huebsch: Payments on this budget for decades to come
When the budget was enacted on Monday, Governor Doyle took a victory lap for simply signing on the dotted line. The governor and Democrat lawmakers have taken turns patting each other on the back for finalizing the budget before the state fiscal year ended on June 30. They have hinted that this fact alone makes the 2009 budget better than Wisconsin’s last 15 spending plans.
It's true that Wisconsin governors have signed every state budget late since 1977 – an interesting, but overstated, bit of trivia since the timing is unrelated to the quality of the plan. It's also worth noting that half of those budgets did gain legislative approval before the new biennium began on July 1, but were not signed by the governor for several weeks. That was the case during Governor Doyle's first term when the legislature sent the 2003 and 2005 budgets to his desk on time.
The Democrats’ current two-year $65 billion spending plan covers dozens of state agencies, hundreds of state and local programs and affects 5 million Wisconsinites. It will make or break efforts to pull our state out of a recession, stem job losses and keep hometown businesses in Wisconsin.
And, yet, the Democrats’ number one selling point for their plan is: “it’s done.”
In their dash to the finish line, they’ve forgotten about what really matters. More taxes, more spending and more borrowing mean Wisconsin families will be paying the price for this destructive budget for years to come.
Governor Doyle and Democrats who run the legislature raised state and local taxes and fees a record-setting $4.9 billion, increased borrowing by $3.5 billion, increased state spending 6.8 percent and left the 2011 budget with a $2.2 billion hole.
They’ve said the new taxes won’t affect middle class families, but they will. They’ve said the federal stimulus dollars account for the increased spending, but they don’t. They’ve said the new borrowing is sustainable once the economy picks up, but it isn’t.
At the end of 2008, the state reported an outstanding principle balance of $5.939 billion for general obligations bonds. With interest, the repayment amount climbs to $7.6 billion. Wisconsin taxpayers are scheduled make the last installment on this debt 29 years from now in 2038.
At the same time, the state is carrying another $2.786 billion of principle for outstanding revenue bonds and $650 million in outstanding commercial paper. At the time of borrowing, the state dedicates a specific revenue stream for repayment of revenue bonds such as user fees, license fees, or a specific tax. Commercial paper notes are an alternative to long-term borrowing which is designed to take advantage of lower interest rates by maturing in 270 days or less.
After five years with Governor Doyle at the helm, Wisconsin’s outstanding debt per capita in 2007 was the 15th highest in the nation at $3,841 according to the Washington, D.C. based Tax Foundation. Our neighbors in Iowa and Minnesota fair much better, ranking 36th and 42nd respectively.
And yet, Governor Doyle and the Democrats increased general obligation borrowing another $2.901 billion and revenue bonding $681 million during the next two years.
Principle and interest payments on general obligation bonds made with income, sales and excise tax revenues are steadily climbing according to the non-partisan Legislative Fiscal Bureau (LFB): $449.6 million this year, $468.89 million next year and $484.45 million in 2011. From there, the Doyle Administration has reportedly projected a whopping 34 percent increase in 2012 when state taxpayers will pay an unprecedented $650 million in principle and interest. That’s nearly equal to the amount of state tax dollars we will spend on the Department of Commerce, the Department of Natural Resources, the Department of Justice and financial aid programs combined over the next two years.
In Wisconsin, nearly all state tax dollars are spent on Shared Revenue payments to local governments, the Department of Corrections, the UW-System, the Department of Health Services and K-12 education. Shared Revenue payments are the smallest of the “Big Five” at approximately $1.5 billion during the two-year budget cycle while K-12 support is the largest at about $10.5 billion. If 2013 and later debt service payments continue at the 2012 levels, it won’t be long before they replace Shared Revenue as one of the state’s Big Five appropriations.
Between January 1970 when the legislature began the bonding program and December 2008, the state has authorized $21,061,425,088 ($21 billion) in borrowing. Principle and interest payments during that time have totaled $11.5 billion. Interest paid in just the last 10 years totals $2.072 billion.
That amount nearly matches what the state will spend over the next two years on the Department of Children and Families, the Arts Board, county circuit courts, the Department of Commerce, financial aid programs, the Historical Society, the Department of Justice, the Department of Military Affairs, the Department of Natural Resources, the State Supreme Court, the Department of Tourism, the Department of Veterans Affairs, the Wisconsin Technical College System, and the Department of Workforce Development.
That $2.072 billion could pay for state healthcare programs for seniors and low-income families for a year, fund the University of Wisconsin System or the Department of Corrections for nearly all of the current two-year budget cycle, or support two years worth of Shared Revenue payments to local governments with $400 million to spare.
Democrats have said massive increases in borrowing (and taxes) were necessary to address slowing sales and income tax collections. They’ve said it is a one-time event that won’t continue in future budgets – a claim that is just plain insulting. With their budget votes, Wisconsin Democrats have committed our families to making payments on this debt for decades to come.
According to LFB, debt service payments have historically accounted for 3.5 to 4 percent of expenditures from income, sales and excise tax dollars. Doyle Administration officials say their action will take that percentage to 4.5 or more. Todd Berry, president of the non-partisan Wisconsin Taxpayers Alliance, recently told the Wisconsin State Journal that "if you cross that (4 percent) threshold, that's a new development... pushing the borrowing and debt envelope because we haven't been coming to grips with our budget problems."
Maintaining these principle and interest payments in the coming years will mean sacrificing funding for other programs, or taxing families, small businesses owners and employers even more than the $4.9 billion signed into law by Governor Doyle this week.
Every family that has played by the unwritten rules - kept debt at responsible levels, prioritized savings, forgone major purchases and vacations, helped your kids through college, and cared for aging parents - is now on the hook for the irresponsible and destructive policies backed by Democrats in Madison. All of your early mornings, late nights and sacrifices led to this: bailing out government with the fruits of your labor.
Mike Huebsch is a Republican and represents the residents of the 94th Assembly District,
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