Tuesday, June 27, 2006

Scott McCallum - Visionary (Seriously)

Daniel Suhr from the GOP3.com blog today makes a good attempt to identify state government programs to cut to help out with the $2.5 billion budget deficit.

Unfortunately, the programs he identifies don’t even amount to a drop in the bucket to help fix the deficit. He mentions a couple of Governor’s councils and the Department of Regulation and Licensing, which is funded primarily through licensing fees to professions they oversee. Eliminating the department wouldn’t save real taxpayers any money at all.

Very few people in the state really have an accurate picture of what the state budget looks like. Generally, people think that we can make up the budget deficit by not giving elected officials raises, or cutting down on their travel, or eliminating the Department of Natural Resources, or whatever.

For those of you interested in what the state general purpose budget look like, here’s a great document from the Legislative Fiscal Bureau that breaks everything out into categories for you. The general purpose budget programs are the most interesting, because they are the programs paid for through sales and income taxes that everyone pays. You’ll notice that the DNR, for example, is funded almost primarily through user fees like hunting and fishing licenses, whereas school aids are paid for exclusively through taxes everyone pays.

As you can see, 56.7% of the GPR budget for the next two years is made up of aids to local governments. This is a major problem with the framework of Wisconsin government – if the Legislature were to cut any of that aid, it would be made up by local governments (cities, towns, school districts), in the form of higher property taxes. So by showing some fiscal restraint, the state would in effect be raising the most hated tax in the state. In this sense, almost 60% of the GPR budget is off the table when cuts need to be made, since state lawmakers don’t want to be stuck with the stigma of raising property taxes.

Another 19.7% of the GPR budget goes to aids to individuals, with Medical Assistance (11.8%) making up the lion’s share of that appropriation. While it is certainly possible to cut money from these programs, it hasn’t proven to be politically popular to do so. Threatening Grandma’s Medicaid isn’t exactly a recipe for electoral success.

That leaves 23.6% of the budget remaining to make real cuts. Amid this category are things like the UW System (7.3%) and the Department of Corrections (6%). The UW has been cut over the last two budgets, and cutting Corrections could mean more criminals on the streets. This really leaves a sliver of state government that it would really be possible to cut without consequences at the ballot box, as elected officials haven’t shown the fortitude to go in and make fundamental changes in other areas.

Conservatives will always complain that their elected officials don’t want to make the tough choices to keep taxes and spending down. They may be forgetting ex-Governor Scott McCallum.

When McCallum took over in 2001, he was handed an enormous budget shortfall. In his proposed budget adjustment bill in early 2002, he made up for some of that shortfall by using tobacco settlement funds to plug the hole. However, McCallum actually did exactly what conservatives are looking for – he stuck his neck out and proposed ending a large state program.

In his budget adjustment bill, McCallum proposed phasing out the shared revenue program, which sends state taxpayer money back to local governments (7.3% of the current GPR budget). Recognizing that local elected officials would simply raise taxes to make up for the lost aid, he also proposed a freeze on property tax levies. With this budget proposal, McCallum showed he was willing to take on the spending lobby and shake up the business as usual in the Capitol.

In the 2002 election, McCallum was hammered by local officials for proposing to cut off their aid. Many local officials who leaned Republican couldn’t stomach voting for McCallum because of his bold initiative. Aided by Libertarian Ed Thompson’s entrance into the race, Jim Doyle beat the unpopular McCallum.

McCallum may have been a bad candidate. He made a tragic mistake by taking some of the money he saved by eliminating shared revenue and putting it towards public schools, thinking that the teachers’ union would look more favorably on his candidacy (they did not). But for all the negatives associated with his brief tenure as governor, he deserves credit for doing something that nobody has the guts to do now – he made a real proposal to cut a $1 billion annual state program, which would have fundamentally changed the framework of state government.

Unfortunately, because of this bold initiative, McCallum alienated a lot of local officials that went back to their constituents to complain of cuts to police and fire service. In the end, doing the right thing certainly contributed to him losing his job - and the Legislature noticed.

The way the state funds local governments is a complex, confusing mess. When a property taxpayer wants to complain about their taxes, they don't know who to blame. The local officials say they're not getting enough money from the state. The state says the locals are spending too much, and the locals are the ones that ultimately set the property tax levies. The two levels of government are constantly pointing to each other, and there's no accountability.

The government that raises the tax should be the government that spends the tax. That way, governments are more directly accountable for their decisions. Wisconsin needs to pick up on McCallum's lead and wean local governments off of state tax money. If that means giving the locals more options to raise local revenue, then so be it. At least people would be able to walk into their alderman's office or show up at a school board meeting to protest their tax level, rather than having to navigate a complex bureaucracy to figure out exactly why their taxes are so high.