Senior Director of State Fiscal Research
Wisconsin Governor Scott Walker credits his victory in yesterday’s recall election to his “tough decisions” that helped turn a big budget shortfall into a modest surplus, and his victory may encourage some policymakers in other states still feeling the recession’s impact to push a similar policy agenda. But the real measure of state policymakers in recent years is not whether they closed their shortfalls — after all, every state but Vermont is required to balance its budget — but how they did it, and here Governor Walker falls far short.
The recession opened up large shortfalls in nearly every state in recent years by seriously weakening revenues and raising the need for public services. Combined, states have closed over $530 billion worth of shortfalls over the last four years.
The best approach for a state facing a large shortfall during a recession is a balanced one that includes thoughtful budget cuts and some new revenue, along with the use of reserves and emergency federal aid (when available). This approach, which states like Maryland have adopted, limits the economic damage of laying off teachers and other public workers, cutting contracts with companies and non-profits that service the government, and imposing other spending cuts that reverberate through the economy.
A balanced approach can also support a state’s long-term economic potential by limiting the damage of budget cuts to the education and health of its children.
Under Governor Walker, though, Wisconsin has rejected a balanced approach in favor of spending cuts and more spending cuts. In the current two-year budget cycle, he and his allies in the legislature imposed cuts in state funding for schools that were among the deepest in any state, cut $250 million from the state university system (adding to the pressure for more tuition increases), and cut funding for health services for low-income families, among other cuts.
Governor Walker even made his state’s shortfall worse last year by pushing through over $90 million in new tax cuts for corporations and the wealthy. Together with other Walker-supported tax cuts enacted last year, the total revenue loss to the state will be about $200 million over the current budget cycle.
These revenue losses led to more budget cuts and, at Governor Walker’s urging, a tax increase on low-income working families through a cut in the state’s Earned Income Tax Credit.
Those aren’t “tough decisions,” they’re the wrong ones — and not ones that other states should repeat.