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MEMO: Scott Walker's Mess

To: Interested Parties
From: Brad Woodhouse, President, American Bridge 21st Century
Date: Tuesday, January 13, 2015

Scott Walker is set to give his State of the State address tonight, and the truth is, he doesn’t have much good news to report. Walker rode into Madison in 2010 dead-set on giving the state a massive Tea Party makeover. And he did.

Walker’s vision for economic growth in Wisconsin consisted largely of massive tax cuts for the wealthy and the privatization of state’s economic development program. To pull off his tax overhaul, Walker, implemented the largest education cuts in state history. But even that wasn’t enough — now the state faces an astonishing $2.2 billion budget shortfall. And just in case you questioned his ideological rigidity, Walker insists that slashing property taxes remains his number one priority this year. So what programs will he cut next to try to solve his colossal budget problem? That remains a mystery.

As for his privatized economic development agency, well that hasn’t gone much better. WEDC has been wrought with controversy, giving Wisconsin taxpayer dollars to companies that ship jobs overseas, and tearing through executives. Moreover, Walker didn’t even come close to delivering on his promise to create 250,000 jobs in his first term, and Wisconsin continues to lag behind other states in the midwest and across the country when it comes to employment growth.

On top of everything else, Walker remains embroiled in his John Doe scandal, with taxpayers having picked up a nearly $1 million tab for his legal defense.

There seems to be a lot of chatter these days about whether Walker will run for president. Maybe he should clean up the mess he’s created in Wisconsin first.

Check out the research below:

UNDER WALKER, WISCONSIN’S FINANCES ARE IN TROUBLE

Walker Recklessly Cut Taxes Even As Wisconsin Faced A $2.2 Billion Shortfall For Requested Programs And A $1 Billion Shortfall With Spending Just To Maintain Services

State Revenue Was Expected To Be $2.2 Billion Less Than Agency Requests

Walker Administration Announced That State Revenue Over Next Two Years Was Expected To Be $2.2 Billion Less Than Spending Requests From State Agencies.  According to the Milwaukee Journal Sentinel, “Expected state revenue over the next two years will fall $2.2 billion short of what state agencies want to spend over that period, Gov. Scott Walker’s administration reported Thursday.” [Milwaukee Journal Sentinel, 11/20/14]

  • Report May Have Overstated Shortfall As Spending Was Based On Requests, But Report Also Did Not Account For Promised Property Tax Cut. According to the Milwaukee Journal Sentinel, “In one sense, the report may have overstated the size of the potential shortfall over the next two years because agencies will not receive everything they’re requesting to spend between July 2015 and June 2017. But at the same time, it revealed the challenge for Walker and Republican lawmakers because the numbers don’t account for the property tax cut they have promised.” [Milwaukee Journal Sentinel, 11/20/14]
  • Report Also Showed $132 Million Deficit, Administration Claimed It Could Manage Spending To Eliminate Deficit. According to the Milwaukee Journal Sentinel, “The figures from the administration also showed the state is on track to finish the current budget in June with a $132 million deficit. But Administration Secretary Mike Huebsch said the state would be able to manage its spending over the next seven months to prevent that shortfall.” [Milwaukee Journal Sentinel, 11/20/14]

Shortfall Was Expected To Be $1.44 Billion Even At Current Service Levels For Programs 

Legislative Fiscal Bureau: State Faced $1.44 Billion Shortfall With Current Services And Expected Tax Collection.  According to the Milwaukee Journal Sentinel, “Over the next two years, the state’s costs to keep up its current services will outstrip its expected tax collections by more than $1 billion, according to the Legislature’s nonpartisan budget office. The brief analysis by the Legislative Fiscal Bureau provides the sharpest picture yet of the challenge that Gov. Scott Walker and lawmakers face as they try to keep the state’s main account balanced while weighing competing concerns such as schools, health care and the pocketbooks of taxpayers. It projects a shortfall of $619 million in the first year of the budget. If addressed right away through permanent spending cuts or tax increases, the problem would be largely solved. But if not, it would grow to $824 million in the second year for a two-year total of $1.44 billion, or 4.4% of the state’s total spending.” [Milwaukee Journal Sentinel, 12/18/14]

Walker Planned To Forge Ahead With Tax Cuts Even With A Projected Budget Shortfall 

Walker Planned To Push Ahead With Tax Cut Despite $2.2 Billion Budget Shortfall.  According to the Associated Press, “Gov. Scott Walker said in an interview Monday that he remains committed to lowering property taxes next year as he promised in his re-election campaign, even though the state faces a projected $2.2 billion state budget shortfall that will likely result in spending cuts and other money-saving moves.” [Associated Press, 12/29/14]

Walker’s Tax Cuts Failed To Raise As Much Money As He Anticipated

Walkers Tax Cuts Did Not Grow Revenue As Much As Expected, Forced Him To Delay Plans To Eliminate State Income Tax.  According to Politico, “Walker has drastically scaled back his tax-cutting rhetoric since earlier this year and, according to two Wisconsin GOP sources, is putting his hopes to eliminate the income tax on the back burner. ‘I don’t want to say the Laffer theory is disproven, but it’s a difficult time to advance that way in Wisconsin because our revenue numbers aren’t as robust as we need,’ said a senior Senate GOP leadership aide, adding that Republicans were disappointed that Walker tax cuts from earlier this year didn’t grow revenue as much as they predicted.” [Politico, 12/16/14]

Walker’s Tax Cuts Were Called Number One Tax Cuts In Nation By ALEC

ALEC ranked Wisconsin Number One In Tax Cuts For 2014. According to Wisconsin Reporter, “Wisconsin has been recognized by the American Legislative Exchange Council as the leader in tax cuts in the 2014 legislative session. Some say that achievement will be noticed by most property owners when they pay their tax bills this winter. Republican Gov. Scott Walker and the GOP-led Legislature helped Wisconsin beat out 13 other states that made “significant, broad-based tax cuts” this year by slashing nearly $800 million in taxes, Jonathan Williams, director of ALEC’s Center for State Fiscal Reform, told Wisconsin Reporter.” [Wisconsin Reporter, 12/24/14]

WISCONSIN’S UNEMPLOYMENT SYSTEM WAS IN TROUBLE UNDER WALKER

Unemployment System Overpaid $168 Million In Last Three Years 

Wisconsin Overpaid $168 Million In Unemployment During Last Three Years.  According to the Associated Press, “The Wisconsin Department of Workforce Development overpaid nearly $168 million in unemployment benefits during the last three years and the agency’s call centers couldn’t handle hundreds of thousands of calls initiating claims, according to a state report released Tuesday. The Legislative Audit Bureau’s findings showed the agency identified 681,400 overpayments totaling $167.9 million during the three years that ended June 30. The department attributed nearly 85 percent of the overpayments to individuals who unintentionally provided the agency with inaccurate information used to calculate their weekly payments, according the audit bureau’s report.” [Associated Press, 12/17/14]

State Did Not Answer 60 Percent Of Calls From People Looking To Initiate Claims In Year Ending June 30th

State Failed To Answer 1.7 Million Or 60 Percent Of Calls From People Looking To Initiate Claims. According to the Associated Press, “The audit bureau also found that department call centers were too busy to answer nearly 1.7 million calls from people looking to initiate claims in the year that ended June 30. That amounts to more than 60.2 percent of the calls the centers took during the year, auditors said. The problem was most apparent in December and January, when the centers couldn’t handle 80 percent of the 836,700 calls they received.” [Associated Press, 12/17/14]

WALKER’S WEDC WAS IN TROUBLE

WEDC Gave Incentives to Companies that Outsourced Jobs

Eaton And Plexus Corp. Received Incentives From WEDC; Later Outsourced Jobs. According to WKOW, “At least two companies that received financial awards from the Wisconsin Economic Development Corporation (WEDC) later outsourced jobs to foreign countries, with one of those companies receiving a second WEDC award after the fact.

A 27 News investigation has uncovered that both the Eaton Corporation and Plexus Corporation received millions of dollars in financial awards from WEDC, only to later lay off workers whose jobs were taken by employees at the companies’ foreign facilities.” [WKOW, 1/9/14]

2014: Outsourcers Donated $68,500 To Walkers Campaign Over The First Six Months Of 2014. According to WKOW, “Gov. Scott Walker’s most recent campaign finance report shows he received money from at least 11 corporations that have outsourced jobs to other countries. A review of donations from corporate political action committees, or PACs, shows 11 corporations that have outsourced jobs donated a total of $68,500 to Gov. Walker over the last six months.” [WKOW, 7/22/14]

WEDC Lost Its Fourth CFO In Less Than Four Years, continued trend of WEDC staff Leaving Quickly

WEDC CFO Resigned  To Move Out Of State. According to the Associated Press, “The fourth chief financial officer in less than four years at the Wisconsin agency charged with job creation and economic development is leaving. Wisconsin Economic Development Corporation spokesman Mark Maley said Friday that CFO Stephanie Walker is resigning in mid-January to join her husband who took a job in the Washington, D.C. area. Walker, who is no relation to Gov. Scott Walker, has been CFO since June 2013.” [Associated Press, 12/19/14]

WEDC Had A History Of High Staff Turnover.  According to the Associated Press, “WEDC was created by the governor and Legislature in 2011 as a semi-private operation to retain and attract businesses to the state. It’s been beset with high turnover in top leadership positions.” [Associated Press, 12/19/14]

WEDC Failed To Track Taxpayer Money

For More Than A Year, The WEDC  Failed To Track Whether Businesses Were Repaying Taxpayer Backed Loans; Was Owed $8 Million Past Due By 99 Businesses. According to The Milwaukee Journal Sentinel, “For more than a year, the state’s flagship jobs agency failed to track whether businesses are repaying loans from state taxpayers – leaving the public in the dark about how much they are owed on a total of $8 million in past-due loans to 99 businesses. The blunder – only the latest in a whole series of problems at the Wisconsin Economic Development Corp. – began at nearly the same time as the quasi-public authority championed by Gov. Scott Walker took over for the state’s previous jobs agency.” [Milwaukee Journal Sentinel, 10/18/12]

  • The WEDC Failed To Systematically Track Its $56 Million Portfolio Of Outstanding Loans According to The Milwaukee Journal Sentinel, “Officials at the quasi-public jobs agency created by Republican Gov. Scott Walker and lawmakers last year said that in recent weeks they have made modest progress in collecting on the outstanding loan money after failing to systematically track an overall portfolio of $56 million for more than a year. New leaders at WEDC also have dropped the consulting firm charged with improving its financial reporting and hired the state bankers association instead.” [Milwaukee Journal Sentinel, 11/30/12]

WEDC’s Tracking Of Tens Of Millions Of Dollars In Taxpayer Loans To Businesses Lacked ‘Basic Internal Accounting Controls’ According to Milwaukee Journal-Sentinel, “WEDC’s tracking of tens of millions of dollars in taxpayer loans to businesses lacked ‘basic internal accounting controls’ in which loan balances would be tracked in individual accounts and also entered on the WEDC’s general books. As a result, it took ‘extensive effort’ to do the year-end statements and ‘adequate follow-up on delinquent loans did not always occur.’” [Milwaukee Journal-Sentinel, 12/17/12]

WALKER FAILED TO MEET JOB CREATION PROMISE

Walker Promised 250,000 New Jobs By End OF First Term; PolitiFact: “Promise Broken”

Walker Promised 250,000 Wisconsin Jobs By 2015. Walker promised to “get government out of the way of employers … who will then help Wisconsin create 250,000 jobs by 2015, and as we create those new jobs, we will be able to add 10,000 new businesses.” [PolitiFact Wisconsin, accessed

PolitiFact: “We’re Moving This Rating To Promise Broken.”  According to PolitiFact, “In May 2014, as it became evident that there has not been a massive surge in private sector hiring, we moved the 250,000 jobs promise from In the Works to Stalled. In the three months since that change, the number of private sector jobs has fallen by 900. We’re moving this rating to Promise Broken.” [PolitiFact, 9/18/14]

Under Walker Wisconsin Job Creation Lagged Behind Other States

September 2014: Wisconsin Private Sector Job Growth 33rd In Nation.  According to the Milwaukee Journal Sentinel, “Wisconsin gained 28,712 private-sector jobs in the 12-month period from March 2013 to March 2014, a 1.26% growth rate that ranks the state 33rd among the 50 states for the period, Thursday’s report showed.” [Milwaukee Journal Sentinel, 9/18/14]