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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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
Slow-growth, cyclical economySlow-growth, cyclical economy
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
$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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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?
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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’
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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 -
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
■ 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?
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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%
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
Digression: For the visual learnerDigression: For the visual learner
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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!
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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)
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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)
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
Behind the numbers: What’s new?Behind the numbers: What’s new?
1.75
1.16
Births Stagnate, Deaths Grow! (1980s-2030s)
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
The only alternativeThe only alternative
Migration Becomes More Important, But . . .
Implications?
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
Reg’l Ups, Downs: Labor Force Cohort 25-64
dn > 10
up <10
dn <10
up >10
Closer to homeCloser to home
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
..Population change is
Economic destinyEconomic destiny
Job Number (Blue) Track Working-Age Pop (Red)
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
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?
Governor’s Cabinet ▪ 03.10.2014WASDA ▪ 09.24.2014
www.wistax.org
Wisconsin Taxpayers Alliance82 years of nonpartisan policy research and citizen
education
Thank you! Questions? Critique?Thank you! Questions? Critique?
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