1. Sheboygan Co. Chamber ▪ 05.03.2013

2. Well, Toto? Oz- consin or Wis - consin? Where the heck are we? So, if this ain’t Kansas, Toto... Assessing Wisconsin’s fiscal condition & direction ?

3. Sheboygan Co. Chamber ▪ 05.03.2013 Overview : Where now, Wisconsin? Budgetary choices  Forward... or Back to Oz? 1 Backdrop: DC and state economy 2 Recap: State finances ‘til now 3 The new state budget 4 Budget sticking points 5 Hard questions with future consequences  WISTAX: 80+ years of research & education Overview: State finances at crossroads OZ? WI? IL?!

4. Sheboygan Co. Chamber ▪ 05.03.2013 “... a growing level of federal debt would also increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget... the abrupt rise in interest rates would reflect investors fears that the government would renege on the terms of its existing debt or... boost inflation.” ─ CBO 7.10 Background: DC — No help? Future hurt? 1

5. Sheboygan Co. Chamber ▪ 05.03.2013 State GDP per capita & chg. Background: State economy (= taxes)

6. Sheboygan Co. Chamber ▪ 05.03.2013 WI PCPI as % US WI Job Growth Tracks/Diverges From US 87 mo: 100% 124 mo: 35% 102 mo: 27% Wis > US ? Trend: Wis & US Wis > US: And jobs? The whole story

7. Sheboygan Co. Chamber ▪ 05.03.2013 ‘ Bipartisan’ rhetoric: Jobs! Silly, partisan job number games The (R) rhetoric: Credit and lure The (D) rhetoric: Programs create jobs Another (persuasive) view Startups and young companies dominate net job creation in the United States – and have done so for the last 30 years... Ewing Marion Kauffman Foundation (2010) Digression: Job rhetoric

8. Sheboygan Co. Chamber ▪ 05.03.2013 Cum. Population Growth: 2002 - 11 9.3 5.9  Young people: workforce, new families, cons. goods Underlying trends — changing population

9. Sheboygan Co. Chamber ▪ 05.03.2013 New firms in ‘ 96: WI US Alive in ’ 0644%34% Alive in ’ 1036%27% * Less new seasonal firms = 49th New as Pct. of All Lack of new firms – another key

10. Sheboygan Co. Chamber ▪ 05.03.2013 1990s-2010: Boom, splurge, crash, deny Delay, delay: Dig a hole, file a hole, dig... Tricks, transfers, gimmicks, borrowing 2011-13: Inherited deficit, big Medicaid hole; Cut everything, add $1b+ to Medicaid Now: No ‘deficit carryover’, surpluses 2013-15? Budget crossroads, return to Oz? 2 State finance recap: The ‘Oz’ decades ?

11. Sheboygan Co. Chamber ▪ 05.03.2013 Notes: 1.Tax cut carried over 2.New LFB rev. est’s 3 New budget: Revenue growth? (GPR)

12. Sheboygan Co. Chamber ▪ 05.03.2013 New budget: Spending growth (GPR)

13. Sheboygan Co. Chamber ▪ 05.03.2013 Programs w/ Largest Increases, One/Both Years Over ’ 13 Base ($m) for Tot. Biennium (14+15 vs. 13) Total = $731.7 m Big 2 = $717.6m ! Net incr.   All increases New spending in few places

14. Sheboygan Co. Chamber ▪ 05.03.2013 Budget bottom line: Surplus? Deficit?

15. Sheboygan Co. Chamber ▪ 05.03.2013 State Debt CAFR (through 6/12)$ Billions ’13-’15 proposed 2013-15 Gov. Proposals $1.03b in budget ($0.99b transpt’n) $1.15b in capital bud. = $2.15b total $16+ bill? Budget sticking points: Debt 4

16. Sheboygan Co. Chamber ▪ 05.03.2013 None +! ’15e $326e Return of the ‘structural deficit’? Budget sticking points: Ozian imbalance?

17. Sheboygan Co. Chamber ▪ 05.03.2013 $16 bill. ? -2.06 -2.36 -2.64 G.A.A.P? 13 14 15 Pending/ Proposed Sticking pointZ, Oz II: GAAP deficits?

18. Sheboygan Co. Chamber ▪ 05.03.2013 About $343m, two years How? Lowest marg’l rates Critique: Too small? Too large—reserves? Prop. tax? Top 7.75 rate? Missed opportunity? ▪ Cash as ‘political grease’ ▪ Tax law as regulation Broader base/cut rates Assembly CPA changes? Budget sticking points: Tax cut?

19. Sheboygan Co. Chamber ▪ 05.03.2013 About $343m, two years How? Lowest marg’l rates Critique: Not Doyle’s 7.75%? Too small? Prop. tax? Reserves? Missed opportunity? ▪ Cash as ‘political grease’ ▪ Tax law as regulation Broader base/cut rates CPA changes? (Kooyenga, Marklein, etc.) Budget sticking points: School finance Largest part of state budget, 35% - 45% of GPR Overall, largest source of revenue for K-12 Evolution: Big bucks, little bucks, fewer bucks Political geography ▪ 49 sch. dists. rev. now < ’03 ▪ 2/3rds in R sen dists.

20. Sheboygan Co. Chamber ▪ 05.03.2013 Decades of the fiscal revolving door Career politics = short-term thinking = GAAP deficits, low bond ratings = Painful cuts and tax increases, little or no strategic planning Coming questions and choices: ▪ Delayed vs. instant gratification (up spending, cut taxes?) ▪ Long-term fund integrity vs. addiction to transfers ▪ Pay-as-you-go vs. return to increased borrowing ▪ Fundamental reform vs. tinkering: Income tax, transportat’n, higher ed. finance 5 Choices: Wis- or Oz- consin?

21. Sheboygan Co. Chamber ▪ 05.03.2013 Wisconsin Taxpayers Alliance 80 years of nonpartisan policy research and citizen education Questions? Jokes? Critique? Are we gonna get a brain? www.wistax.org Z zz zzz z z z z