The Truth-O-Meter Says:
Vinehout

Because of Gov. Scott Walker’s budgeting, a greater percentage of general fund tax dollars is "going to pay off debt than ever before in our history."

Kathleen Vinehout on Saturday, August 24th, 2013 in a column

Gov. Scott Walker responsible for record debt payments, Democratic rival says

Could Gov. Scott Walker, preparing for a 2014 re-election campaign and a possible presidential bid, be credibly branded as a big-time debtor?

We know Walker helped balance his first state budget, for 2011-'13, by pushing off some payments on the state’s debt further into the future.

Now, state Sen. Kathleen Vinehout (D-Alma), who is considering her own run for governor, contends Walker’s move means this for the 2013-’15 budget:

General fund tax dollars -- money used for schools and colleges, BadgerCare, local governments, prisons and more -- are being used to make debt payments at the highest rate in state history.

Vinehout, who ran for the Democratic nomination to challenge Walker in the 2012 recall election, blasted the budgeting done by Walker and the Republican-controlled Legislature in an Aug. 24, 2013 opinion column in The Capital Times of Madison and in an earlier blog post.

In a section of the column about debt, Vinehout criticized the amount of borrowing and the restructuring of debt payments done by Walker.

"In the depths of the recession, Gov. Jim Doyle delayed debt payments to gain cash and keep government going. In the 2011-’13 legislative session, Gov. Scott Walker did not pay an even larger amount of debt payments coming due. Because debt payments were not made, more money goes to pay off debt in (the 2013-’15) budget than ever before," Vinehout wrote.

Walker’s 2013-’15 budget, she added, "pays that price in a greater percent of tax dollars going to pay off debt than ever before in our history."

Is Vinehout right that because Walker pushed principal payments on the state’s debt into future years, a higher percentage of general tax dollars is going to debt payments than ever before?

Walker’s first budget

The rationale for borrowing for capital projects is well understood. Costs can be spread out over years, so that future users of a new highway, for example, help pay the tab for building it. Borrowing, instead of paying cash for a major project, can also alleviate the need for a tax increase.

But as any borrower knows, repaying debt -- or bonds, as they’re known in the state’s case -- can take a bite out of your operating budget.

Like Vinehout, Milwaukee Mayor Tom Barrett, Walker’s Democratic opponent in the recall election, criticized the debt payment restructuring Walker did.

We rated Mostly True Barrett’s claim that Walker "pushed over $500 million in debt onto our children and grandchildren" to help balance the 2011-’13 state budget.

What the Republican governor did was issue new debt in order to make $558 million in debt payments that were due in 2011 and 2012.

That freed up more general fund money to help balance the 2011-’13 budget.

But pushing more principal payments some 20 years into the future also meant accumulating more interest costs.

The Legislative Fiscal Bureau -- cited by both political parties as the best neutral source on state financial matters -- estimates that Walker’s debt will add $156 million in interest costs.  

Vinehout’s evidence

As for Vinehout’s claim, there are essentially two parts. She says the percentage of general tax dollars -- as opposed to gas tax money, for example -- that are being used toward debt payments is the highest ever, and that Walker’s debt restructuring is largely responsible for it.

Vinehout provided us a June 2013 memo she requested from the Legislative Fiscal Bureau which estimates that for the current budget year -- 2013-’14 -- 5.26 percent of general fund revenues will be used to pay off bonds.

The fiscal bureau confirmed to us that 5.26 percent is the highest such figure on record, based on figures dating back to 1970.

Walker spokesman Tom Evenson didn’t dispute the figure, but pointed out that Vinehout voted for debt restructuring under Doyle.

The 5.26 percent translates into $738 million in general fund tax dollars that are being used in the 2013-’14 budget period on debt payments.

That exceeds the state’s historical target, which is to allocate no more than 4 percent of general fund revenues to debt payments.

So, the best available data support Vinehout’s statistical claim.

Debt restructuring

As for assigning responsibility, Vinehout conceded in her column that, like Walker, Doyle also stretched out debt payments in order to manage the state budget. But she suggested Walker's restructuring is what led to the record rate of general fund spending on debt payments.

Experts from the fiscal bureau, the nonprofit Wisconsin Budget Project and the nonprofit Wisconsin Taxpayers Alliance, however, told us that factors other than Walker's debt payment restructuring also play a role.

Doyle and Walker, and governors before them, have done long-term borrowing that is still being repaid. In other words, much of the debt, and debt payments, were inherited by Walker from previous governors -- something Vinehout acknowledged to us in an interview.

Another factor that occurred under both Doyle and Walker is an increase in bond issues that are repaid with general fund dollars, rather than simply gas taxes and related funds, to do major transportation projects.

Our rating

Vinehout said that because of Walker’s budgeting, a greater percentage of general tax dollars is "going to pay off debt than ever before in our history."

The 5.26 percent of general fund revenues being used for debt payments in the 2013-’14 budget period is the highest on record. It's reached that level partly because of the borrowing and debt restructuring under Walker, but also because of similar actions by previous governors.

For a partially accurate statement that leaves out important information, we rate Vinehout’s statement Half True.

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Published: Sunday, September 1st, 2013 at 8:00 p.m.

Subjects: Debt, State Budget, State Finances, Taxes, Transportation

Sources:

The Capital Times, "Myths abound on state budget," Aug. 24, 2013

PolitiFact Wisconsin, "Barrett says Walker used a ‘credit card’ approach to balance state budget, pushing borrowing costs into the future," May 31, 2012

Milwaukee Journal Sentinel, "Scott Walker’s budget borrows $1 billion, mostly for roads," March 14, 2013

Milwaukee Journal Sentinel, "Lawmakers balk at parts of Scott Walker’s budget," Feb. 21, 2013

Milwaukee Journal Sentinel, "Budget panel votes to reduce construction borrowing by $250 million," May 30, 2013

Milwaukee Journal Sentinel, "Scott Walker’s plan to borrow nearly $1 billion, hire 700 workers hits speed bumps," March 19, 2013

Wisconsin Taxpayers Alliance, news release, July 3, 2013

Wisconsin Legislative Fiscal Bureau, memo to Rep. Peter Barca, May 22, 2012

Wisconsin Legislative Fiscal Bureau, memo to state Sen. Kathleen Vinehout, June 25, 2013

Wisconsin Legislative Fiscal Bureau, memo to state Sen. Kathleen Vinehout, May 18, 2012

Wisconsin Legislative Fiscal Bureau, "State level debt issuance," January 2013

Email interview, state Sen. Kathleen Vinehout, Aug. 26, 2013

Interview, Wisconsin Legislative Fiscal Bureau analyst Al Runde, Aug. 27, 2013

Email interview, Gov. Scott Walker press secretary Tom Evenson, Aug. 28, 2013



 

Written by: Tom Kertscher
Researched by: Tom Kertscher
Edited by: Greg Borowski

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