Surplus another ‘golden opportunity’ Republicans are determined to miss

The announcement Tuesday that Wisconsin’s projected surplus is $2.9 billion higher than the already “unprecedented” June surplus projection was hailed by Republicans and Democrats alike.

The state Democratic party credited Democratic Gov. Tony Evers, tying the news about the surplus to a record-breaking unemployment rate of 2.8% — the lowest the state has ever seen, and claiming that both pieces of news prove “Evers’ efforts to invest in our economy and our workforce are working.”

Republican politicians also hurried to take credit for Wisconsin’s rosy revenue picture. “For  over 10 years, Republicans have held the line on spending and reduced taxes for Wisconsinites,” said Rep. Mark Born (R-Beaver Dam). “Today, we continue to see the results of quality conservative budgeting with a strong financial picture.”

In a way, Republicans are right. They did help create the surplus — by sitting on all the federal pandemic relief money they have refused to disburse to local communities and schools.

“The surplus news reflects the unwillingness of the Legislature to invest the money as the federal government intended,” explains University of Wisconsin economist Laura Dresser, associate director of COWS. “It exists because we didn’t invest what we should have, especially for schools. It’s so overdue and desperately needed.”

By withholding money from local governments and especially local public school districts — which received an unprecedented zero increase in the current, two-year budget, the Republicans have let billions of dollars pile up in state coffers, unspent, while continuing to enforce completely unnecessary austerity measures.

Given the latest even-better-than-expected revenue news, they are preparing to do more of the same.

Sitting on the surplus

Republican Senate Majority Leader Devin LeMahieu released a statement Tuesday calling the surplus “fantastic news for the state of Wisconsin.” “This is the best fiscal position our state has ever been in,” LeMahieu declared. “However, much of this is the result of a one-time influx of federal money into our state. We will not be foolish with these tax dollars by spending them into the future. Rather we will focus on further tax relief …”

In other words: More tax cuts, not a penny more for kids.

“The federal influx is intended to be invested in communities, not tax cuts,” says Dresser. “We know kids need more. This money is a chance to honor all the pain our kids have carried. And for local government, it’s for the people exposed every day in their jobs. Those resources are intended by the federal government to help carry people through.”

The governor, not the Legislature is in charge of handing out emergency federal funds (although the Legislature has been trying to wrest that power away). But the Legislature has gotten around that by making draconian cuts in state funding to schools, so they must to use federal pandemic relief funds to cover day-to-day expenses.

Of course, when it comes to the budget surplus, Republicans want credit for job growth and growing the economy, not just for being stingy. But their claims to have boosted employment by being tight-fisted with spending, which includes opposing the extension of unemployment insurance and other supports, is undermined by the latest economic news.

There are a number of reasons economists cite for the uptick in revenue and Wisconsin’s surprisingly low unemployment. These include pent up demand from consumers who started spending again after sheltering in place for the first six months of COVID-19, and the massive investment by the Biden administration in rescuing the entire U.S. economy through support to state and local government, some which Gov. Evers was able to disburse without the Legislature’s approval, to their everlasting ire.

And then there’s the unexpectedly strong bargaining position workers found themselves in when they didn’t have to choose between staying in their jobs and getting COVID-19 or going home to starve. The child tax credit, rental relief, and the unemployment insurance expansion all helped make workers’ lives better.

As a result, Dresser points out, Wisconsin now has 100,000 fewer jobs than in Feb 2020 — but employment is up and more people are working. How can that be? Instead of hustling among several different low-wage gigs, people are just working in fewer, full-time jobs.

“It’s not the Great Resignation; it’s the Great Moving to a Better Job,” Dresser quips. “Labor force participation today is higher than before the pandemic.”

That puts the lie to Republicans’ claims that unemployment insurance  made people lazy and hurt their motivation to work. “Especially moms are doing heroic amounts of juggling,” Dresser points out. Wisconsin has higher female labor force participation than most states, despite a daunting child care shortage.

Years of tax-cutting take a toll

In a recent report, the Wisconsin Policy Forum concluded that “a continued focus on lowering Wisconsin’s tax burden may bring with it diminished public services, particularly at the local level. Already, for example, the state has seen its per-pupil spending on K-12 education fall from the top 10 nationally to below average.”

In 2002, the School Administrators Alliance reports, Wisconsin’s per-pupil spending ranked 12th highest in the nation and  11% above national average. In 2019, Wisconsin’s per-pupil spending had dropped to 25th among the states — 4.5% below national average.

The Policy Forum called last June’s revenue surplus projections–even before the latest windfall–a “golden opportunity” to reverse this downward trend. “For years, efforts to overhaul the state’s school funding formula have appeared out of reach given the amount of money needed to ensure most districts do not lose funding,” the report stated. “The potential state surplus makes it possible to rewrite the formula to account for factors such as student poverty and English Learner status. Such an update might help close achievement gaps and also could be used to cut school property taxes. Other priorities might include boosting students’ college and career readiness and the diversity of Wisconsin teachers.”

So here we are, watching another, even more golden opportunity slip away.

“I’m not exactly sure how they expect schools to stay staffed when they’re not giving them any increase at all,” says Blaise Paul, the business manager for the school district of South Milwaukee. After receiving a stern warning from the federal government that the state’s plan to put zero dollars into schools ran afoul of federal rules and jeopardized billions in federal money, the Legislature increased so-called equalization aid for school districts — but that money merely allowed districts to cut local property taxes. It didn’t increase money for schools.

“What’s odd to me is you have such a surplus, you could do both,” says Paul. The state can afford to cut taxes and increase funding for schools. But the Legislature won’t do it. And now a spike in inflation is making that zero increase school revenue look even meaner.

The current two-year budget was negotiated and signed before inflation began its recent, steep rise. Paul says his district is wrestling with the effects of a more than 7% jump in costs for the month of December. He took his concerns to his state legislator, Rep. Jessie Rodriguez (R-Oak Creek).

‘I’d argue this is a crisis’

“You just passed a state budget that gives no per-pupil increase and you have a pandemic raging — which is fine, I have one-time federal funds that can be used for the pandemic,” he told her. “But what I don’t have is a spendable increase to attract and retain staff.”

The problem is compounded, he added, because with inflation of about 7%, he can’t even offer employees a cost of living raise.

Paul suggested to Rodriguez that the Legislature take up a budget repair bill — a special maneuver that can be used in times of fiscal emergency. “She said it’s not gonna happen because now we are outside the budget process,” he says.

But during another fiscal emergency in the winter of 2011 the Legislature took up a budget repair bill and passed it outside of the regular budget process, giving Wisconsin Act 10.

“I’d argue this is a crisis,” says Paul. “Inflation at 7% when you have no increase at all for school for two years —I’d call that a crisis.”

South Milwaukee is projecting it will have to make about $1 million in cuts next year across the district’s six schools.

Other states, including Alabama, Georgia, Idaho, Kentucky and Mississippi, are investing in education, Politico reports in its weekly education newsletter.  “First things first,” declared Republican Gov. Tate Reeves in his proposed budget for the coming year. “Mississippi’s teachers deserve a raise,” Politico reports. Shortly afterward, the Mississippi Senate passed its own teacher pay bill, which would offer even bigger raises than Reeves proposed.

“Two things are clear: Bigger teacher salaries and one-time worker bonuses are now priorities,” according to the same Politico report. Thanks to federal pandemic aid, “states have plenty to spend on a range of local services, including education.”

Some of the examples cited:

In Alabama, Republican Gov. Kay Ivey said teachers should get what she called a “well-deserved” 4 percent pay increase.

In Georgia, Republican Gov. Brain Kemp has a plan to increase salaries for teachers and support staff across the board.

In Idaho, Republican Gov. Brad Little has called for a roughly $300 million budget boost for public schools

In Kentucky, Democratic Gov. Andy Beshear wants to add nearly $2 billion to the state’s education budget.

The list goes on.

But in Wisconsin, per-pupil spending has been on the decline for years — ever since 2009, when the Legislature did away with the requirement that it be indexed to inflation.

Since then, according to the Legislative Fiscal Bureau, schools have had less to spend per pupil than they would have had under the old rule every year. In the 2021-22 school year, we are spending $342.82 less per student than we would have spent had the inflationary index been in place. And that calculation came before inflation took a steep jump.

“Every state in an enviable position gets there by investing in things — especially schools,” says Dresser, “It’s about investing in our economic future. That’s the prudent thing to do.”

But Wisconsin’s Republican leadership in the Legislature continues to insist it won’t foolishly invest money in education; instead it will prudently make tax cuts so we can snatch austerity out of the jaws of a record surplus.

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