New Budget Will Give Wisconsin $664 Mil. Structural Deficit

A new report by the legislature’s nonpartisan budget office shows Governor Scott Walker’s proposed budget would leave Wisconsin with a $664 million “structural deficit.”

The structural deficit is essentially a hole the governor and legislature would have to fill headed into the 2015 budget. In its simplest terms, it is the difference between what Wisconsin is obligated to pay and the amount of money it is expected to have in the bank.

Republicans were harshly critical of the structural deficits run up by former Democratic Governor Jim Doyle, but some GOP leaders have been quick to downplay this deficit. That is because the way these numbers get calculated, they assume no revenue growth in the next budget. Governor Walker says that growth will be there.

“Our estimates show that even if we were below the 10-year average, we would still more than have enough revenue growth coming in the next two years of the budget to more than make up for the projected structural.”

But these numbers also do not project any growth in spending. That means a spike in something like Medicaid costs could potentially eat up any new tax revenue.

And Dale Knapp with the Wisconsin Taxpayer’s Alliance says it is not necessarily safe to assume that the economy will keep growing. The way it cycles up and down, Knapp says, in two years we could be headed for an economic downturn.

“There’s so many risks out there, you know with Europe, et cetera, that I wouldn’t be surprised to see some sort of downturn here within the next couple of years.”

Republicans took the rare step of erasing the structural deficit in the current two-year budget, leaving the state with a surplus for the first time in many years. Knapp says Republicans spent a lot of political capital to do that, making it all the more unusual that they would now head in the other direction.