Gov. Scott Walker (R-WI) has been claiming that his budget repair bill — which strips Wisconsin’s public employees of their collective bargaining rights, sparking weeks of protests — must be passed soon because it includes a debt restructuring provision that will save the state $165 million. Walker claims that the debt restructuring is necessary to avoid layoffs of state employees.
“If we want to avoid the layoffs that will eventually come at the state and local level, the only way to achieve that” is to pass the bill, Walker said last week. “This is not a threat, this is not a strategy, and this is not a negotiation. The bottom line is that if [the bill is not passed], there are dire consequences,” he added yesterday. He has even gone so far as to issue layoff warnings to some state employees.
However, according to both finance experts and Wisconsin’s own finance director, failure to refinance the state’s debt by Walker’s deadline “doesn’t mean the state is in any kind of immediate fiscal peril”:
The notion that the state needs to refinance the debt because it’s broke and can’t make its debt payments is “completely wrong,” said Mr. Hoadley, the state finance director. “This is about providing relief to the budget situation by rearranging the payments,” over a longer period, he said.
However, there are other ways to address Wisconsin’s current fiscal year budget deficit of $137 million other than refinancing the debt, said Joshua Zeitz, municipal finance analyst for MF Global.
This is one more piece of evidence showing that Walker’s assault on public sector unions has little to do with balancing the budget; instead, it’s an attempt to kneecap an ideological opponent. “There’s a good amount of political theater in what you’re seeing,” said municipal credit analyst Tom Kozlik. “With any state, I’d really question whether they are going to fall off a cliff over one budget cycle.”
Of course, if Walker were truly serious about balancing the budget, he would not be proposing a $36 million cut in the state’s capital gains tax or a $46 million corporate tax cut, on top of the millions of dollars in tax cuts he and the Republican legislature have already approved. As my colleague Zaid Jilani found, Walker could balance his current budget by ending a variety of special interest tax dodging that is occurring in his state.