governor’s cabinet ▪ 03.10.2014 wasda ▪ 09.24.2014 state finances in an year the wisconsin...

Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014

State finances in an year

K-12 ContextsK-12 ContextsShort- and long- term perspectives and trends

WASDA ▪ 09.24.2014


OverviewOverview

About WISTAX

Perspective 1: State & reg’l economies

Perspective 2: State finances

Perspective 3: K-12 finances

Perspective 4: Demographic inevitability


Slow-growth, cyclical economySlow-growth, cyclical economy


99.0

92.4

94.3

96.7

101.398.9

103.8101.3

102.3

96.9

99.2

104.4

98.6

101.6

90

95

100

105

01 02 03 04 05 06 07 08 09 10 11 12

US

WI

MKE

WI rem

More than one state economyMore than one state economy


1994-2011: Dig a hole, file a hole, trick! trick! The ‘grease’ rule: No reserves, no reform

2011-13: Recession delayed, deficit inherited Stimulus gone, $1 bill. for Medicaid, others cut

Mid-2013 (11-13 ends): +$759 mill. surplus

2013-15 budget: Medicaid, K-12, tax cuts . . .

State finances . . . Past & presentState finances . . . Past & present


$946.4

3.2 15.1 4.0

$410.8

$850.8

-$308.1

-$3.3-$2.5-$1.3

-6.4

-0.1-0.1-0.1

-400

0

400

800

Tot. Health DPI Corr'ns UW Sh. Rev. Rem.

$ mill. >

% Chg. >

Gen. fund two-year spendingincrease ($ millions)

State spending patterns concentratedState spending patterns concentrated


Overestimate revenues (00-10) in recessions Underestimate revenues (2011-14) in recoveries

State revenues . . . forecasting is toughState revenues . . . forecasting is tough

Surpluses: Economically driven?

Or, simply forecasting error?


2009-11: Recession, $1b tax increases May 2011: $600m surprise, targeted corporate

tax cut, phased in through 2017 March/May 2013: Income tax cuts

▪ Proposals: Gov. $320m, legislature $650m▪ Approach? Winner-loser rhetoric

October 2013: School tax “buydown, $100m Jan-Mar 2014:

▪ Inc. tax cut: bottom rate, $100m▪ Inc. tax over-withholding end▪ Tech. college ‘buy-down’: +400m

State finances: Taxes as ‘other shoe’State finances: Taxes as ‘other shoe’


Budget pulled surplus down: $760m to $165m

Déjà vu: Similarity to 2008?

Waived “rainy day” deposit

Recent tax collections lagging Now ending FY 15balance: -$100m to -

$400mNew spending commitments to maintain

Extra $100m school aid hikeDitto $400m tech college aid hikeMedicaid request ($700m+)

State finances: Near futureState finances: Near future


Transportation funding with past raids, borrowing, gen’l fund subsidies, and ‘sick’ rev’s Medicaid: Costs/partic. expand, fed. money?Taxes: Property tax freeze, tech-tax “window”School aids and rev. limits: esp. in rural areas

Still property tax relief priority, but MA!Others forgotten? e.g., shared rev’s, road aids, UWAll with reduced reserves, slowing collections, pending commitments, and uncertain economy

Yet: Fiscal imbalance, but not $x billion deficit

Coming state issues, 2015 -Coming state issues, 2015 -


State aid to schools

% c

hang

e

Tot

al a

id, $

bil

lion

s

K-12 finances reflect state financesK-12 finances reflect state finances


K-12 cuts common, but Wis. lateK-12 cuts common, but Wis. late

+ 411 + 434

40 states cut in ’10; Wis. up then, but down 8%+ in ‘12


Different perspective on sameDifferent perspective on same

4.0% 3.7%

2.6%

3.6%

-6.2%

3.4%

-6.5%

-4.5%

-2.5%

-0.5%

1.5%

3.5%

2007-08 2008-09 2009-10 2010-11 2011-12 2008-12

Wis. per student spending: One, big delayed hitPct. Annual and . . . five-year changes


■ Revenue limit cuts -- lts. down $451 million

■ Benefit costs down $452 million (most from retirement, but some due to staff reduction)

■ So . . . Benefit savings from Act 10 “tools” covered 83% of rev. lim. cuts

■ Districts with most savings had fewest layoffs

1. No savings; 3.2% staff reduction

2. Savings > rev limit cut; 0.9% staff reduction

Act 10 relief helps?Act 10 relief helps?


Average K-12 staff compensation ($000, 2008-12): WI vs. US

Bottom line: Staff compensationBottom line: Staff compensation

WI Rk: 15 14 12 10 12

+10.9% +12.0%


de·mog·ra·phy (n.)

1. The study of population changes2. Economic destiny

Destiny, esp. economic & fiscal.

And now for something completely And now for something completely differentdifferent


Digression: For the visual learnerDigression: For the visual learner


854,363871,091

860,142

734,710747,667

650,000

700,000

750,000

800,000

850,000

900,000

85 89 93 97 01 05 09 13

NB: With new 4K

5 + 17 =22

Wis. K-12 Public School Enrollment

No surprise to school folk!No surprise to school folk!


What’s ahead What’s ahead (State Pop. Proj. to 2040)(State Pop. Proj. to 2040)

Wis. Pop. Growth Slows, 1950 - 2040Millions (line), Avg. Ann. % Chg. (Bars)


0

500,000

1,000,000

1,500,000

2,000,000

60 70 80 90 00 10 20 30 40

18-44

< 18

65+

+ =

Ahead: Two stories Ahead: Two stories (Pop. Proj. to 2040)


2010 2020 2030 2040 % Chg.

0-24 1.89 1.88 1.95 1.95 3.0%

25-64 3.02 3.06 3.00 3.01 -0.3%

65 & over 0.78 1.06 1.42 1.54 97.5%

Total 5.69 6.01 6.38 6.49 14.1%

Working/ 1.13 1.04 0.89 0.87

Dependent

Making the obvious, more soMaking the obvious, more so


Behind the numbers: What’s new?Behind the numbers: What’s new?

1.75

1.16

Births Stagnate, Deaths Grow! (1980s-2030s)


The only alternativeThe only alternative

Migration Becomes More Important, But . . .

Implications?


Reg’l Ups, Downs: Labor Force Cohort 25-64

dn > 10

up <10

dn <10

up >10

Closer to homeCloser to home


Pop. growth as driver HH formation Consumer behavior: 28 vs. 78 Wage markets Workforce size/jobs Tax implications: Inc. vs. sales vs. prop.

Implications? EconomyImplications? Economy

Pop. Growth Means Econ. Growth% Chg. By State, 1980 - 2011


..Population change is

Economic destinyEconomic destiny

Job Number (Blue) Track Working-Age Pop (Red)


Declining enrollment: aid, rev. limits, dist. scope Composition of pop. and citizen attitudes Teacher/admin. availability: Comp. markets Employment opp’s:

For teacher spouses? For young grads? Community amenities: bandwidth, speed Alt. approaches: reg’l residential HS? home

distancelearning? traveling one-room schools?contracting with other dist’s, privates, higher

ed.,boarding schools? apprenticeships w/ work-based education?

Implications? Schools and educationImplications? Schools and education


Maximize HS graduation rates

Tolerate no underperforming schools

Think outputs, rather than inputs

End higher ed. retention, remediation issues

Flexible work policies for senior citizens

Earlier pipelines to teacher/admin. employment

Rethink immigration attitudes, policies

Recruit the best and brightest?

Action steps?Action steps?


www.wistax.org

Wisconsin Taxpayers Alliance82 years of nonpartisan policy research and citizen

education

Thank you! Questions? Critique?Thank you! Questions? Critique?

governor’s cabinet ▪ 03.10.2014 wasda ▪ 09.24.2014 state finances in an year the wisconsin...

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