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By Dave Umhoefer October 23, 2014

Scott Walker says budget shortfall prediction based on zero growth, which ‘just doesn’t happen’

Three summers ago, Gov. Scott Walker boasted to a national cable TV audience that his 2011-’13 state budget ended the practice of pushing fiscal problems into the future.

In an June 2011 appearance on CNBC, Walker said his first budget "wiped out" a big shortfall and put in changes to avoid them in the future.

Now, weeks before the Nov. 4, 2014 election, the governor is facing questions about his own shortfall projected for the 2015-’17 budget, caused in part by tax cuts he championed.

And Walker is arguing the method behind a projected $1.8 billion shortfall is suspect.

"That $1.8 billion number you’ve heard out there actually comes from an assumption based on zero growth," Walker said during the Oct. 17, 2014 debate, when challenged on the number by Democratic rival Mary Burke. "That just doesn’t happen."

We touched on this exchange when we rated False Walker’s claim that there’s actually a surplus, not a deficit, heading into 2015. We said that flies in the face of the official estimate that uses a long-established method used by members of both parties, and the governor’s budget office.

Now let’s examine Walker’s underlying critique -- that the $1.8 billion figure is based on zero growth, a scenario "that just doesn’t happen." It’s his basis for turning to a different, much rosier, set of numbers.

The nonpartisan Legislative Fiscal Bureau is the source of the estimated $1.8 billion shortfall.

As we have explained, this is an estimate of the challenge budget-makers will face based on past decisions that they will have to pay for in the two years ahead.

That number is informally referred to as the "structural deficit." But the figure does not reflect an actual "deficit" at the end of a budget year -- it’s just a benchmark or starting point of what officials will have to account for as they make spending and tax decisions.

Walker and lawmakers from both parties long have used the Fiscal Bureau methodology.

Let’s start where Walker did in his claim, saying the analysis is based on an assumption of "zero growth" in revenue. In Madison circles, it is well known that the Fiscal Bureau’s method in this exercise is to assume no loss or gain in revenue -- and no changes in spending.

In the real world, of course, state tax revenue rises and falls, and lawmakers adjust spending according to those revenues.

By sticking to this method, the bureau’s estimate is consistent, allowing budget makers to readily gauge how their actions will affect future budgets. Lawmakers often ask during budget debates how spending increases or tax cuts will affect the "structural deficit" in the next budget.

Growth history

Now to Walker’s stated problem with the zero-growth approach -- that such a scenario "just doesn’t happen."

When we asked for backup, the Walker campaign referred us to the history of state revenue growth.

To check that, we went back to the 2001-’03 budget period and examined state revenue growth annually and for each two-year budget since then.

We found that zero growth happens. And it’s even been worse than zero at times, owing usually to recessions and their effect on state tax revenue.

In the last 13 years, three individual fiscal years have dipped into negative territory.

2002: - 0.4 percent

2009:  - 7.1 percent

2014:   - 1 percent

In addition, the year 2010 saw essentially no growth -- a scant 0.15 percent bump up. (All years reflect state fiscal years ending in July.)

The two year budget (2007-’09) slammed by the Great Recession saw revenue plummet $505 million, mostly due to big fall-offs in income tax and sales tax payments.

Total revenue didn’t return to 2007 levels until four years later

In Walker’s time as governor, revenue growth topped 4 percent in each of his first two years.

But in 2013-’14, revenue fell by 1 percent, in part due to tax cuts he and Republican lawmakers enacted. The economic forecasts have not held up as planned either.

We won’t know until mid-2015 whether the two-year budget will end with a decline in revenue as did the 2007-’09 budget. Forecasts are for growth in 2014-’15. But no matter what, the next governor and lawmakers by law must ensure it is balanced, through spending cuts or other means as necessary.

Our rating

Walker said the projected $1.8 billion state budget shortfall for 2015-’17 "actually comes from an assumption based on zero growth. That just doesn’t happen."

The calculation is based on zero growth, so there’s an element of truth in Walker’s claim.

But his main point was to make the zero-growth assumption seem unrealistic, and on that he misfired. Recent history, including one year under Walker, shows that negative or flat growth is not uncommon.

We rate his statement Mostly False.

Our Sources

C-SPAN video of second Walker-Burke debate, Oct. 17, 2014

Interview with Bob Lang, director, Legislative Fiscal Bureau, Oct. 20, 2014

Email exchange with Alleigh Marre, Walker campaign spokeswoman, Oct. 20, 2014

Legislative Fiscal Bureau, General Fund Tax Collections, Informational Paper #1, January 2013

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Scott Walker says budget shortfall prediction based on zero growth, which ‘just doesn’t happen’

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