'Rosy' outlook keeps revenue cuts at bay
In mid-October of 2001, Assembly Majority Leader Steve Foti told senior Capitol reporters to expect a special session of the Legislature to deal with the budget crisis in the aftermath of Sept. 11.
Foti, R-Oconomowoc, expected Gov. Scott McCallum to call lawmakers back in November.
That never happened. McCallum opted to wait for the new year, and his budget repair bill called for cutting shared revenue payments to county and municipal governments for two years and then eliminating the more than $1 billion program in 2004. Municipal leaders assailed the idea, noting they already has established their budgets for 2002.
The concept of cutting shared revenues died a lingering death in the Legislature. Throughout the budget conference committee, Republican legislators pressed for some shared revenue reductions. In the end, the Republicans got a promise for minor changes in 2004.
But that was merely face-saving offered by Democrats. The changes in 2004 will have to be a part of the 2003-2005 state budget. The people elected next month will be those who decide that budget.
Senate Majority Leader Chuck Chvala, D-Madison, has suggested the gubernatorial election could decide the issue.
If elected, McCallum would have a mandate, Chvala suggests.
That would surprise many municipal leaders who thought they won the shared revenue war in July. But the recent televised debate between Doyle and McCallum may have them worrying.
"Do you still want to do that?" McCallum was asked during the first televised debate..
"What I truly believe we need to do is change the system itself, reform the system, so that it responds to working people and taxpayers, not putting more and more money into the same tired old way we have done things," the governor replied.
Most importantly, he did NOT say he won't pursue reductions or elimination of shared revenue payments.
His Democratic opponent, Jim Doyle, said "shared revenue is at the heart of what we do in government." He said the program, which is 89 years old, was a crucial part of providing police and fire protection across the state.
It's not surprising McCallum doesn't talk much about shared revenue. Trailing in the polls, McCallum doesn't need to inflame the leaders of towns, villages and cities as Election Day nears. Perhaps municipal leaders will forget the issue.
McCallum avoids the issue by dancing across Wisconsin with Rosy Scenario. The governor predicts the state's economic picture will brighten and tax revenues will increase by 5 percent annually.
That would produce $1.8 billion for the next biennium, leaving only $1 billion of the projected general fund deficit.
Last week Revenue Secretary Richard Chandler said tax collections continue to lag but he predicts a significant economic upturn in the second quarter (October-December) of the current fiscal year.
Not everyone shares the McCallum administration's optimism. Republican pollsters report there is a near "Depression mentality" in parts of the state. That's an indication that McCallum's sweetheart, Rosy, doesn't look so beautiful .
Several things work against a boom in state tax collections. Employers are putting much of their compensation dollars into health insurance premiums rather than wage increases. Health insurance dollars aren't taxable. War clouds are on the horizon. Wisconsin has few defense industries. It didn't enjoy economic benefits in previous defense buildups.
Perhaps most important is that Wisconsin law limits how much a taxpayer can deduct from any year's tax for capital gain losses. But taxpayers may carry those losses into future years, offsetting capital gains.
The stock market has been down for three years so Wisconsin taxpayers have plenty of losses stored up to offset investment gains when they return.
Part of McCallum's dance with Rosy Scenario is his prediction that the federal government will provide an additional $600 million to Wisconsin to help balance its budget. The governor says he has close ties with the Bush administration, but he has had difficulty getting federal help for the Chronic Wasting Disease situation.
Then there is Iraq. The governor bristles when reporters suggest the federal government may focus its money on Mr. Bush's war rather than on Rosy Scenario.
If McCallum's policy romance with Rosy evaporates, he may again flirt with shared revenue cuts.
© 2002 The Capital Times Co. Reprinted with permission.