1. ■ Wisconsin economic summits Wisconsin Economic Summits ■ 08.26.2010 Wisconsin’s economy and the state of state finances Confronting reality

2. ■ Wisconsin economic summits ■ WISTAX: teaching, informing... angering ■ State economy & competitive position ■ State finances: past, present, future ■ Elephants in the room: #1 and #2 Overview

3. ■ Wisconsin economic summits State, local, national The state of Wisconsin’s economy

4. ■ Wisconsin economic summits Creating, losing jobs US vs. WI nonfarm jobs (SA), Jan 00 = 100 (Mo’ly)

5. ■ Wisconsin economic summits Avg. Earnings/Worker & GDP/Worker ( WI % US) Productivity & wages Productivity: GDP/Worker Avg. Earnings/Job

6. ■ Wisconsin economic summits Pct. Change in No’s of Private Establishments Third Quarter of Ea. Yr. Shown (BLS) Gaining, losing employers > v

7. ■ Wisconsin economic summits Big picture: “Product Wisconsin” Wis. % of US GDP

8. ■ Wisconsin economic summits Strategic view: Wis. as ‘product’ GDP % chg GDP pc

9. ■ Wisconsin economic summits Competitive position? Energy costs

10. ■ Wisconsin economic summits... Entrepreneurial activity: VC/worker

11. ■ Wisconsin economic summits... Entrepreneurial activity: patents Per one million population WI341 US 303 IL278 IA215 MI358 MN550

12. ■ Wisconsin economic summits How Wisconsin Taxes Compare Nationally Revenues as Pct. of Pers’l Income; FY 08: US Census Competitive position? Taxes Future years ?

13. ■ Wisconsin economic summits State, local, national The state of state finances

14. ■ Wisconsin economic summits State finances vs. others (NASBO) ■ Surpluses % spdg.20082009 ▪ Wisc vs. avg.1.0% vs. 8.60.7% vs. 4.7 ▪ States > WI4941 ▪ Memo: MN, IA in 2008 ~ 11.0% ■ Spending % inc.20102011 ▪ Wisc. (pre-lapse)+5.3%+5.2 ▪ 50-state avg.-6.8%+3.8% 43 cut22 < +2% ■ 2010-11 tax increases ▪ Only five states > in raw amt. (inc. CA, NY) ▪ Income tax hikes: 1 of 12 in ’10 (6 cut), 1 of 3 in ’11 (7 cut) ▪ Tobacco: 1 of 17 in ’10, 1 of 7 in ’11 ▪ 6 states incr. corp. income tax ‘10 (12 cut); 3 in ’11 (9 cut)

15. ■ Wisconsin economic summits Wis. Fin. Stmts ($b), GAAP Outsider’s view of results, ‘09 (GAAP) $2.71 billion Other states?

16. ■ Wisconsin economic summits State finances: Current budget 2009-11

17. ■ Wisconsin economic summits State fiscal future: Structural issue 1,232 2,511 11 rev (+ 12)

18. ■ Wisconsin economic summits Future ‘recovery’ dividend? (Delusion?) “ … the pace of the recovery is expected to slow and will not return to pre-recession levels until 2013...” − DOR, 8.20.10 Projected growth in personal income CYWI-MayWI-AugUS-Aug ’10 3.0%2.5%3.2% ’11 4.64.44.7 ’12 4.44.34.8 ’13 4.44.14.8 Why this matters.

19. ■ Wisconsin economic summits Structural deficits + slow growth = ■ GPR tax revenues (2010-11) $12.88 billion ■ Pers. income growth ’11 (4.4%) ’12 (4.3%) ■ 12.88 x 5% = $644 million [?!] ■ Structural ‘deficit’ ~ $1.23 billion

20. ■ Wisconsin economic summits ■ One-time money and tricks? Transportation? Injured patients comp? Stimulus? Recycling, utility public benefits? Tax credits?! ■ Spending cuts? Big five: corrections? UW/techs? School aids? Shared revenues? Medicaid (see slide)?! ■ Revenue increases? Rhetorical vs. real changes ■ Debt? ■ Unmentioned, scary stuff? Options overview

21. ■ Wisconsin economic summits Medicaid: ’98: 1/13 ’08: 1/5 MA deficits, fed help? Autopilot driving budget

22. ■ Wisconsin economic summits ■ Enacted in February $1.14 billion (‘09-‘10-‘11) ■ Added taxes: $1.9 billion (‘09-’11 ) ■ Added fees: $240 million ■ Totals: Three-years: $3.0+ billion Revenue increases?

23. ■ Wisconsin economic summits ■ Corporate income e.g. combined reporting, throwback ■ Individual income Top rate up, cap. gains news Credits, but small, odd ‘mix’ ■ Tobacco (but...) ■ Hospital, etc. taxes ■ Sales: ‘iPod’ Low-hanging fruit picked

24. ■ Wisconsin economic summits State finances and politics ■ 3D control to at least 1R, perhaps 2R?? ■ Split governance: the good and the bad ■ Issue approaches? ─ K-12 education (kids/unions vs. tax relief) ─ Medicaid ─ Local aids ─ Higher education ─ Prisons ─ Tax, budget policy

25. ■ Wisconsin economic summits Does legislative make-up matter?

26. ■ Wisconsin economic summits Harder choices? ■ Compensation: health, retirement, med-arb. ■ Schools: consolidations? e-learning? pay for performance? grad. testing? charters? ‘choice’? ■ UW System? enrollment proj’s, retention probs, job availability, & market need, wage dynamics? hi. tuition/aid? tenure? ■ Local governments: aid/revenue trades? consolidation/cooperat’n ? ■ Reorganize, reconnect? e.g., co. human services? tech. colleges? counties/towns?

27. ■ Wisconsin economic summits Nothing elsematters withan elephant inthe room.Or twoelephants.

28. ■ Wisconsin economic summits Elephant #1: Electorate and elected ■ Public mood and politics: ~70% state gov’t fair/poor job ~60% state priorities: jobs/econ. + tax/spend no others >~10% ■ Political dysfunction: ▪ 10-15 years of fiscal denial (R and D) ▪ political careerism + leadership power + special interest allies ▪ protect status quo; major policy changes since 2000? ▪ Wisconsin leader?

29. ■ Wisconsin economic summits Elephant #2: CBO 7.27.2010 ■ “... US government debt held by the public has grown rapidly— to the point that, compared with the total output of the economy, it is now higher than it has ever been except during... World War II.” ■ “... deficits will cause debt to rise to unsupportable levels.” ▪ crowding out of private savings/investment leading to “lower output and incomes” ▪ Rising interest costs forcing program cuts and inability “to respond to unexpected crises” ▪ Higher marginal tax rates “would discourage work and saving and further reduce output” ▪ “increase the probability of a sudden fiscal crisis... during which investors would lose confidence in the government’s ability to manage its budget...

30. ■ Wisconsin economic summits *The alternative fiscal scenario deviates from CBO’s baseline projections, beginning in 2010, by incorporating some changes in policy that are widely expected to occur and that policymakers have regularly made in the past Elephant #2: The big train wreck CBO June 09 US GDP Federal Debt Held by the Public Under CBO’s Long-Term Budget Scenarios (Pct. GDP)

31. ■ Wisconsin economic summits Questions, quibbles, prayers? The Wisconsin Taxpayers Alliance Our eighth decade of teaching and informing the press and public about how their government works, taxes, and spends. Thank you for making our nonpartisan research and citizen education possible. www.wistax.org

32. ■ Wisconsin economic summits Wisconsin attitudes (proprietary poll) ■ Wis. right/wrong track? (7.10) — Total: 34% vs. 58% (wrong); reg. voter (32-60) — R: 21% vs. 71% Ind: 31% vs. 62% D: 50% vs. 40% Union HH: 32% vs. 60% ■ Economy will get: 38% better, 40% same, 19% worse ■ Top priority of gov/legislature: Jobs/econ: 39%; taxes/spdg: 19%; health OR ed: 11% each ■ State gov’t doing fair/poor job: 68% tot, R 80%, I 73%, D 54%, union HH 73%