1. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 State finances in an year The Wisconsin economy in an era of demographic flux. The Wisconsin economy in an era of demographic flux. People. People will need people. K-12 Contexts Short- and long- term perspectives and trends WASDA ▪ 09.24.2014

2. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Overview About WISTAX Perspective 1: State & reg’l economies Perspective 2: State finances Perspective 3: K-12 finances Perspective 4: Demographic inevitability

3. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Slow-growth, cyclical economy

4. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 More than one state economy

5. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 1994-2011: Dig a hole, file a hole, trick! trick! The ‘grease’ rule: No reserves, no reform 2011-13: Recession delayed, deficit inherited Stimulus gone, $1 bill. for Medicaid, others cut Mid-2013 (11-13 ends): +$759 mill. surplus 2013-15 budget: Medicaid, K-12, tax cuts... State finances... Past & present

6. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Gen. fund two-year spending increase ($ millions) State spending patterns concentrated

7. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Overestimate revenues (00-10) in recessions Underestimate revenues (2011-14) in recoveries State revenues... forecasting is tough Surpluses: Economically driven? Or, simply forecasting error?

8. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 2009-11: Recession, $1b tax increases May 2011: $600m surprise, targeted corporate tax cut, phased in through 2017 March/May 2013: Income tax cuts ▪ Proposals: Gov. $320m, legislature $650m ▪ Approach? Winner-loser rhetoric October 2013: School tax “buydown, $100m Jan-Mar 2014: ▪ Inc. tax cut: bottom rate, $100m ▪ Inc. tax over-withholding end ▪ Tech. college ‘buy-down’: +400m State finances: Taxes as ‘other shoe’

9. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014  Budget pulled surplus down: $760m to $165m Déjà vu: Similarity to 2008? Waived “rainy day” deposit  Recent tax collections lagging Now ending FY 15balance: -$100m to -$400m  New spending commitments to maintain Extra $100m school aid hike Ditto $400m tech college aid hike Medicaid request ($700m+) State finances: Near future

10. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014  Transportation funding with past raids, borrowing, gen’l fund subsidies, and ‘sick’ rev’s  Medicaid: Costs/partic. expand, fed. money?  Taxes: Property tax freeze, tech-tax “window”  School aids and rev. limits: esp. in rural areas Still property tax relief priority, but MA!  Others forgotten? e.g., shared rev’s, road aids, UW  All with reduced reserves, slowing collections, pending commitments, and uncertain economy Yet: Fiscal imbalance, but not $x billion deficit Coming state issues, 2015 -

11. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 State aid to schools % change Total aid, $ billions K-12 finances reflect state finances

12. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 K-12 cuts common, but Wis. late + 411+ 434 ■ Wisconsin state school aids up 3.5% in 2010 and 5.6% in 2011; down 8.4% in 2012 ■ 40 states cut state aid to schools in 2010; 21 cut in 2011; and 11 in 2012. ■ School aids here in 2012 were 8.3% lower than in 2008. Nationally, 3.7% lower. Only 10 states had bigger cuts. 40 states cut in ’10; Wis. up then, but down 8%+ in ‘12

13. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Different perspective on same Wis. per student spending: One, big delayed hit Pct. Annual and... five-year changes

14. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 ■ Revenue limit cuts -- lts. down $451 million ■ Benefit costs down $452 million (most from retirement, but some due to staff reduction) ■ So... Benefit savings from Act 10 “tools” covered 83% of rev. lim. cuts ■ Districts with most savings had fewest layoffs 1.No savings; 3.2% staff reduction 2.Savings > rev limit cut; 0.9% staff reduction Act 10 relief helps?

15. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Average K-12 staff compensation ($000, 2008-12): WI vs. US Bottom line: Staff compensation WI Rk: 15 14 12 10 12 +10.9% +12.0%

16. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 de·mog·ra·phy (n.) 1. The study of population changes 2. Economic destiny Destiny, esp. economic & fiscal. And now for something completely different

17. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Digression: For the visual learner

18. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Wis. K-12 Public School Enrollment No surprise to school folk!

19. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 What’s ahead (State Pop. Proj. to 2040) Pct. Chg. Pop. From Prior Wis. Pop. Growth Slows, 1950 - 2040 Millions (line), Avg. Ann. % Chg. (Bars)

20. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 + = Ahead: Two stories Ahead: Two stories (Pop. Proj. to 2040)

21. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Making the obvious, more so

22. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Behind the numbers: What’s new? 1.75 1.16 Births Stagnate, Deaths Grow! (1980s-2030s)

23. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 The only alternative Migration Becomes More Important, But... Implications?

24. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Reg’l Ups, Downs: Labor Force Cohort 25-64 dn > 10 up <10 dn <10 up >10 Closer to home

25. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Implications: Labor shortages? Wages bid up? HH formation?! Cons. behavior? Tax revenue? Intergen’l issues? Politics? Pop. growth as driver HH formation Consumer behavior: 28 vs. 78 Wage markets Workforce size/jobs Tax implications: Inc. vs. sales vs. prop. Implications? Economy Pop. Growth Means Econ. Growth % Chg. By State, 1980 - 2011

26. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 2. Economic destiny. Population change is Economic destiny Job Number (Blue) Track Working-Age Pop (Red)

27. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Declining enrollment: aid, rev. limits, dist. scope Composition of pop. and citizen attitudes Teacher/admin. availability: Comp. markets Employment opp’s: For teacher spouses? For young grads? Community amenities: bandwidth, speed Alt. approaches: reg’l residential HS? home distance learning? traveling one-room schools? contracting with other dist’s, privates, higher ed., boarding schools? apprenticeships w/ work- based education? Implications? Schools and education

28. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 Maximize HS graduation rates Tolerate no underperforming schools Think outputs, rather than inputs End higher ed. retention, remediation issues Flexible work policies for senior citizens Earlier pipelines to teacher/admin. employment Rethink immigration attitudes, policies Recruit the best and brightest? Action steps?

29. Governor’s Cabinet ▪ 03.10.2014 WASDA ▪ 09.24.2014 www.wistax.org Wisconsin Taxpayers Alliance 82 years of nonpartisan policy research and citizen education Thank you! Questions? Critique?