In today's Milwaukee Journal-Sentinal, Governor Jim Doyle announced that the State would be facing a 5 BILLION dollar deficit by 2011 which would make it the largest deficit in State history. A short time ago Doyle announced that the deficit would be in the neighborhood of 3 billion dollars.
The State is faced with a few options here:
- Cutting state aid to municipalities: While this helps to close the State's gap it would mean that local property taxes would likely skyrocket.
- Making Big Cuts in the budget: It could happen, but you usually do not see governments make massive cuts in spending.
- Attracting More Business to Wisconsin: If we cut corporate rates it could be done, but the impact would not be felt in the short-term.
- Raise User Fees: As Doyle notes, raising tuition in the UW system is an option, but he does not want to price people out of it. Other user fees can be raised, but that would only make a small dent.
- Raid a restricted fund: The last two budgets have been balanced by raiding the transportation fund. It's possible to raid a new fund, but that only prolongs the problem.
- Raise taxes: This is what I expect them to do. I would expect Wisconsin to implement a more progressive income tax. Under current law Wisconsin essentially has a flat tax rate of 6.5%. I could see that rate be increased for taxpayers making over some arbitrary amount.
The real problem all governments are facing are the same ones the Big 3 automakers are facing. Until we change the way governmental employees are paid, legacy costs will be a huge issue as people live longer and therefore stay on the public dole longer. The pension system cannot sustain itself and it would be in governments interests to increase current pay as a tradeoff to eliminate some of the legacy costs.
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