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The Sky Didn't Fall

Economics, Local Issues, Politics

Now that most of the recall dust has settled and the Democrats got their two ounces of flesh, perhaps it is time to try to cut through all the apoplectic rhetoric and take an objective look at the whole mess. It all started with Governor Walker's widely scoffed-at campaign promise to get rid of the state's $3 billion structural deficit and balance the budget. Past governors had promised to do so and failed, balancing the budget as constitutionally required using accounting tricks in violation of generally accepted accounting practices (GAAP) and/or one-time transfers of funds, leaving a structural shortfall for future administrations to deal with.

Walker apparently had worked out a plan prior to the election which he promptly implemented upon taking office. This plan attacked the major expense of salaries and benefits, especially of teachers, by cutting benefits, requiring greater employee contributions and limiting the bargaining power of the public service unions, especially again the teachers. Despite hyperventilating screeches to the contrary, I don't believe his purpose was union busting, rather it was merely to clip their wings so they could not block salary and benefit limitations and reductions.

Some may disagree, but union-busting per se would seem to be of little benefit to Walker or the Republicans in general. Most public service unions have an unfair bargaining advantage in that their bargaining counterparts are political entities subject to lobbying and campaign contribution pressures. The police and fire unions may be an exception by virtue of the Police and Fire Commission which is not elected. (As a matter of fairness, I disagree with Governor Walker's excepting them from the budget reconciliation process.)

Aid to education has in the past been the 800 pound political sacred cow. Because of the amount of state school aids, any realistic major budget adjustment would of necessity involve goring this sacred cow. Since 75% of education cost is salaries and benefits, these would have to be addressed in any attempt to balance the state's budget. Hence the need to curtail the power of the teachers' unions who would have violently objected to, and blocked, any attempt at salary and benefit reductions and/or contribution increases.

Walker's budget cuts school aids $800 million, a major chunk out of the deficit. In order to avoid significant damage to educational areas, Walker came up with the budget reconciliation act, which established methods whereby school administrations could reduce payroll costs to compensate for the school aid reductions.

Of course, the sacred cow bellowed long and loud. The public service unions, teachers' especially, reacted violently with a ludicrous display of raucous and obstructive protests in Madison, and 14 brave Democrat Senators ran and hid in Illinois to block passage of this legislation. After some admittedly questionable legislative maneuvering, the budget reconciliation act was passed, as it must if Walker's budget-balancing effort were to succeed.

Predictions of doom were predictable and immediately forthcoming. Education was being "gutted" at the expense of "the children." State aid cuts to municipalities, especially Milwaukee, were "a catastrophe" that would require massive layoffs, park closings and service cuts. The sky was falling and there was no king to run and tell.

Very quietly and with little media coverage, nothing fell from the sky. School districts who had not been so foolish as to sign union contracts before the reconciliation act was in force actually came out pretty well. Many came out ahead on the deal. Unfortunately, MPS was not one of them, having signed prior contracts with their teachers' union. I find this mystifying as I cannot figure out the advantage of having done this. In fact, in several school districts, teachers are finding a closer and more cooperative atmosphere with their districts as a result of the union being out of the picture. Fancy that.

Even the City of Milwaukee's staunchly Democratic Mayor Barrett has discovered, much to his political consternation, that the city will come out $11 million to the good as a result of budget reconciliation savings. Hizzoner, when asked if Governor Walker deserved credit for this "windfall", replied that was a "false question." Anybody know what that means?

The net result of all this is the $3 billion structural budget deficit has been eliminated. Even the very conservative (small "c") Wisconsin Taxpayers Alliance is impressed with this accomplishment. The sacred cows are still bellowing, the unions are still fighting Walker with their dues money and the Democrats are still seething. However, the fact remains, the Wisconsin state budget is balanced without a structural deficit (costs put off until the next biennium), in accordance with GAAP and no increase in taxes. To be fair, there are some modest fee increases and tax "adjustments", but the average Wisconsin taxpayer will see no increase in his taxes. Walker has done what several previous governors failed to do. So far, he is getting no credit. But then, that's politics, Wisconsin style.

But the sky isn't falling.

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