Miscellaneous musings from the perspective of a lefty (both senses) atheist with a warped sense of humor.

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Location: Madison, WI, United States

I am a geek, but I do have some redeeming social skills. I love other people's dogs, cats, and kids. Snow sucks, but I'm willing to put up with it just to live in Madison.

Monday, February 28, 2011

Wisconsin Tragedies

Wisconsin Tragedies
by Richard S. Russell

Here’s the countdown of the top half-dozen tragedies in Wisconsin history, 1 of which has a bullet:

 (6) Super Bowl 32, 1998 Jan. 25
 (5) Kohler Company strike, 1954–1965
•(4) Gov. Scott Walker, 2011–?
 (3) Black Hawk massacre, 1832 Aug. 1–2
 (2) Sen. Joe McCarthy, 1947–1957
 (1) Great Peshtigo fire, 1871 Oct. 8

= = = = = =
If there is hope, wrote Winston, it lies in the proles.

-- George Orwell, 1984, Part 1 Chapter 7

Saturday, February 26, 2011

Let's Add Salt!

Let’s Add Salt!
by Richard S. Russell

Both salary and benefits are part of a worker's total compensation package. But there's a significant difference between them: Salary is taxable, benefits are not.

As an example, suppose a state worker currently makes $60,000 in salary, and the state pays an additional $6,000 (10%) on the worker's behalf in the form of pension deposits and insurance premiums. So the worker gets $66,000 in total compensation, right?

Well, yes, if you stop analyzing there. But let's go the next step and understand that, between payroll tax (FICA), state income tax, and federal income tax, about 1/3 of the worker's SALARY goes to taxes. That would be $20,000, leaving the worker with $46,000 in USABLE compensation.

Suppose the state decides to take away $6,000 from the worker. The sensible thing to do would be to deduct it directly from salary (which is taxable), leaving the worker with $54,000 in salary (of which he or she keeps 2/3, or $36,000 after taxes) and $6,000 in benefits, for a total USABLE compensation of $42,000 — a $4,000 hit from where he or she started.

But no, not content with merely applying the blade, Gov. Walker also wants to rub in some salt. Instead of taking the $6,000 out of the worker's TAXABLE salary, he proposes to take it away from UNTAXED benefits. So the worker ends up with $60,000 in salary ($40,000 after taxes) and NO benefits, for a total USABLE compensation of $40,000 — a $6,000 hit from where he or she started.

It's one thing to be a jerk, but this verges on malicious cruelty for the sheer sake of being cruel.

= = = = = =
Unions: the people who brought you the weekend

Tuesday, February 22, 2011

Divide and Conquer

Divide and Conquer
by Richard S. Russell

Recently a friend sent me the following parody cartoon under the heading “This pretty much nails it!”:

Actually, far from “nailing it”, the cartoon cuts off abruptly just as it’s getting to the interesting part, the ANSWER to “What do we need jobs for?”. You need a job if you want …
• better food than a guaranteed MINIMUM place in line at a soup kitchen.
• better clothing than a guaranteed MINIMUM set of someone else’s castoffs.
• better medical care than a guaranteed MINIMUM box of Band-Aids and bottle of aspirin.
• better housing than a guaranteed MINIMUM of a cot in a basement.

Most people I know would rather live in a house with 1 or 2 livable stories above that basement, which is why they work to improve their lot in life. But, for our fellow citizens who may be elderly, orphaned, sick, injured, beset by war-induced PTSD, working their way thru college, or just plain unable to find a job in a banker-looted economy, isn’t it nice to know that the wealthiest country on Earth can afford to provide them with some MINIMUM level of what we think of as a civilized existence? I mean, if it weren’t for that cot in the basement, what’s the alternative? The street? The jungle?

I find it curious that the lower middle class (LMC), in particular, has been brainwashed into (a) resenting the upper middle class for having already achieved what the LMC aspires to, as well as (b) hating the poor for NOT having achieved what the LMC has already got. Wouldn’t you think that the LMC would recognize that the poor and the upper middle class are their natural allies in trying to build a better life for ALL ordinary citizens?

There’s also an interesting answer to THAT question. Just ask yourself:
  (1) Whose interests are served by breeding that kind of resentment and hatred?
  (2) Who owns most of the newspapers, magazines, radio and TV stations, and multi-million-dollar political campaigns?

Here’s Hint #1:

Here’s Hint #2:

So, with respect to jobs, I see these 3 groups in the workplace:
 • GS: Those who are Getting Screwed.
 • PFS: Those who have organized themselves and used their collective power to set up shields that provide some level of Protection From Screwing.
 • DTS: Those owners, bosses, bankers, lawyers, and lobbyists who are Doing The Screwing.

Here’s an approximation of relative well-offness:
600 GSes = 300 PFSes = 1 DTS

The DTSes already have 97.5% of the wealth in this country, but they aren’t satisfied with that; they want it ALL. And the way to do it, they seem to think, is to use the old divide-and-conquer tactic of turning the GSes against the PFSes. You can see this in action by scoping out the 2,000 pathetic GSes they paid to ride their busses to counter-demonstrate against the 90,000 PFSes who voluntarily turned out on Capitol Square in Madison last weekend.

So, to those of you in the GS camp, why is it that you resent the PFSes who worked hard to get up to twice what you’re worth, while giving a complete free pass to the DTSes who have 600 times what you’re worth, built on the backs of OTHER people’s labor? Do you really, seriously think that it’s in your own best interests to make common cause with the richies on the theory that some day you’ll be one of them? (If so, you probably also think that some day Sarah Palin is going to have sex with you.)

Wake up! Look at who your natural allies are! If the richies succeed in breaking the unions, do you really think you WON’T be the next targets in their race to the bottom?

Monday, February 21, 2011

Wisconsin State Budget Primer

A Primer on the Wisconsin State Budget Process
by Richard S. Russell (retired budget analyst)

While lots of sources have pointed out that the “shortfall” in the current Wisconsin state budget is just a tad less than the giveaways Gov. Scott Walker doled out to his campaign supporters during his 1st week in office, thereby creating the “crisis” he’s using to justify his every whim, hardly any attention has been paid to his contention that the state faces a $3-4 billion deficit in the coming biennium.

Since I spent many years as a budget analyst at one of Wisconsin’s state agencies, I figure I’m in a position to shed a little light and insight on what’s behind those numbers.

First off, there’s the concept of the “biennium”. Most people budget annually (1 year at a time), often from January 1 to December 31. Not the State of Wisconsin. Since legislators are elected for a 2-year term, they operate under a biennial (2-year) budget, which runs from July 1 of each odd-numbered year to the 2nd following June 30.

When a newly elected governor walks thru the door of his office for the 1st time in January of an odd-numbered year, he finds a nice stack of booklets waiting for him, 1 from each of the state’s 70-80 departments, boards, commissions, etc. Each booklet is that agency’s budget request for the coming biennium. Each page in each booklet falls under 1 of 2 possible types: “cost to continue” or “initiatives”.

“Cost to continue” is just what it sounds like: We’re running this program, here’s what it cost LAST biennium, apply some standard growth factors for inflation, allow a little extra for volatile things like energy or health insurance, figure salaries at 95% of authorized staffing levels, and here’s what it’ll cost to do exactly the same thing in exactly the same way for the NEXT biennium. (Incidentally, the 95% staffing assumption is perfectly reasonable. There’s always turnover, and you don’t have to pay salaries or benefits for the vacant position while you’re trying to fill it. It averages out OK.)

When you add up all the “cost to continue” requests, you come up with X dollars.

Then there are the “initiatives”, things that the agency proposes to do differently. Some few of these are along the lines of “We don’t need to do this any more.”, “We don’t WANT to do this any more.”, or “We can do this cheaper.” Bottom line on these guys is “We need less money.” Doesn’t happen a lot, mind you, but neither are these like unicorns, existing only in the imagination, and we should acknowledge as much.

Far more frequent are the initiatives to do more, bigger, better, faster, sooner, more widespread, more often, etc., all of which boil down to “We need more money.” I cannot emphasize strongly enuf that this is exactly what we SHOULD expect from these state agencies. They are charged with providing services to the citizens of Wisconsin in their assigned area of responsibility, and we WANT them to try to figure out ways to deliver those services. That’s why we regularly ask for their best thinking on what they should be doing.

The budget-request write-up for each initiative provides factual background on the issue, a few alternative ways of addressing it, a cost estimate for each, and a recommendation.

When you add up all the “initiative” requests, you come up with Y dollars.

X + Y constitute the outgo side of the ledger. On the opposite page are the income estimates. These come from 2 sources:
 • the Department of Revenue, which is a cabinet-level executive-branch agency that reports directly to the governor and CAN potentially be kind of partisan, tho it’s usually not; and
 • the Legislative Fiscal Bureau, which is the legislative-branch money minder, responsible to both Democrats and Republicans in both the Senate and Assembly, and thus staunchly and rigorously non-partisan. The LFB’s judgment is trusted better than that of Aaron Rodgers, which is saying something here in the Badger State.

Both the DoR and the LFB put together “revenue to continue” estimates, which are like “cost to continue” items in that they assume no changes in what we did LAST biennium but have some more or less reasonable assumptions about what the economy will be doing for the next couple of years. These estimates are, by long, wise tradition, on the conservative side. For example, if it looks like a given tax will generate between $800 and $850 million, it’s reported as $800 million. This is simple fiscal prudence. If in fact more than $800 million comes in, all well and good, but you’ve got a bit of a cushion if collections fall off unexpectedly.

When you add up all the “revenue to continue” estimates, you come up with Z dollars.

Now it should come as no great surprise to discover that X (cost to continue) and Z (revenue to continue) are pretty close together. After all, each of them represents some kind of incremental change from the previous biennium, when they balanced out (HAD to balance out, because it’s required by the state constitution). X is almost always larger than Z, because, you’ll recall, Z was based on conservative revenue estimates; but they’re usually within hollering distance of each other.

It’s a different story when you factor in the “initiatives”, tho. Now you have X + Y on the expense side vs. Z on the revenue side, and the gap can be pretty eye-opening, dependent almost entirely on the value of Y. This is the $3-4 billion “shortfall” that Walker is always going on about.

Let’s be clear about it, tho. This state of affairs has existed in January and February of every single odd-numbered year for the last century. We ALWAYS face this situation where the reach exceeds the grasp, where the eyes are bigger than the stomach, where we discover all over again that (to quote the Fundamental Rule of Economics) demand is infinite but supply is finite.

And what has every single governor for the last century DONE about it? Exactly what you’d expect. Exactly what we elected them to do. They sat down to do the drudgerous work of sifting and winnowing the various proposals. They didn’t have to do it all in person, of course; there are experts, analysts, and advisors to handle most of the details, but the governor gets the final call.

So here’s this huge stack of requests and the guv digs in. No. No. No. No. Yes. No. No. Maybe, have them get back to us with better reasoning. No. No. No. No. Hmm, good idea, but I prefer the less-expensive Option A instead of their recommended Option D. No. No. No. No. Yes. No. No. I like this idea from Agency P, but I’d rather have it run by Agency Q, so fix that up, will you? No. No. No. Yes. No. And so on.

And, of course, the governor throws in his own ideas as well, which, not surprisingly, get reviewed thusly: Yes. Yes. Yes. Yes. Yes. Yes. And so on.

It takes a couple of months, but after the culling and revising are done, the governor has a budget bill WHICH IS REQUIRED TO BE BALANCED. If X and what’s left of Y still exceed Z, then he’s got basically 3 things he can do to make up the difference:
  (1) cut some existing or proposed program,
  (2) dip into existing cash reserves (big HA! here), or
  (3) figure out how to raise more revenue.
That’s it! Santa doesn’t stop at the big house with the round ceiling.

Then the guv shoots the budget bill over to the Legislature, which fiddles and diddles with it for awhile and comes up with something that they can call their own but which, to be utterly realistic about it, is still 90-95% what the governor proposed, and WHICH IS STILL REQUIRED TO BE BALANCED. And they pass it. And the governor signs it. And we’ve got a new biennial budget, WHICH IS IN BALANCE!

A year later they come back and ask “How are things going?”, and they tweak it, based on the most recent data, in what’s called a “budget repair” bill. But tweaking is ALL that goes on. The basic pattern has been set, and this is just a minor course correction to account for unanticipated crosswinds and undercurrents. It’s certainly NOT an opportunity to introduce major policy initiatives.

So it has been for the last century. Wisconsin has ALWAYS had a balanced budget, because the governor and Legislature did what was needed to produce one. Wisconsin will have a balanced budget for the 2011-2013 biennium as well, if the governor would just stop grandstanding, screaming about how the sky is falling, buckle down, and get to work like his 20 predecessors did. He keeps telling the protesting public employees “Go back to work!”, when he might more appropriately look in the mirror and sternly demand “OK, START to work!”. It’s not as if he couldn’t have seen this coming. This is the way it’s ALWAYS been. The only difference is that this guy is pretending to be so very, very surprised by it.

To summarize: Wisconsin doesn’t yet HAVE a 2011-2013 budget, because the governor hasn’t yet assembled one. Not having a budget means you can’t have either a surplus or a deficit. The $3-4 billion “deficit” you hear about is almost entirely accounted for by the COMPLETELY TENTATIVE AND UNAPPROVED initiatives (the Y factor) from the state agencies, most of which will quickly fall like overripe apples in November. And this state of affairs is COMPLETELY NORMAL for this time frame in an odd-numbered year.

Now, this is not to say that all is sweetness and light. It’s a good thing that the revenue estimates for the 2009-2011 biennium WERE fiscally conservative, because the economy stank up the place, income was at the bottom end of the anticipated range, and we barely squeaked thru by the skin of our teeth. We’re going into the coming biennium with NO leftover cushion from the current one.

Furthermore, we’re facing 3 horrible but widely accepted precedents that screw up the budget process:

(1) Accounting Tricks. Let’s say that the state has agreed to pay aid to school districts in 4 installments, the last of which is due in May of each year. But one year the money’s running short, so they push the payment back to July instead. This gives the state 2 more months to collect taxes, plus it gets 2 more months’ worth of interest on the money it’s holding on to. But, most importantly, it pushes the expense off into the FOLLOWING fiscal year, so it leaves the CURRENT fiscal year comfortably in the black. This is a gimmick. It’s legal, but it’s unethical, bordering on fraud. This hasn’t stopped both Democrats and Republicans from using it over and over again, creating what is called a “structural deficit”. We need to start behaving more responsibly and reduce this structural deficit, but unfortunately this is a terrible time to try to do it, because money is just too tight all over.

(2) Inter-Fund "Loans". The state’s biggest pot of money is called General Purpose Revenue (GPR), but it also has a bunch of other pots (called “funds”) which are supposed to be set aside and utterly, utterly protected for nothing but the purpose for which they were created. The biggest of these “segregated funds” is the Wisconsin Retirement System (WRS), containing money set aside to cover future pension costs of state and most local public employees. Also significant is the Transportation Fund, financed by vehicle-registration fees and the gasoline tax, to be used only for transportation projects. And there are others as well, like the Patients’ Compensation Fund, to help people for whom some medical procedure has gone horribly awry. Governors of both parties have gotten in the habit of “borrowing” from some of these segregated funds to help cover deficits in GPR. Each and every time they’ve tried to pull one of these raids, somebody has sued over it, and each and every time the state has flat out lost and been forced to pay back the money with interest. This is a fool’s game, but a succession of governors keep trying to play it.

(3) Tax Horror. Nobody wants to raise taxes — any kind of taxes, ever — even if that would be by far the most sensible thing to do. (Our pathetically low beer tax, for example, has gone unchanged for nearly half a century.) It’s become like some kind of shibboleth, a line that none dare cross, and it makes it virtually impossible to govern responsibly.

Which shouldn’t bother Scott Walker at all, since his track record as Milwaukee County executive and his fatuous pronouncements about the state budgeting process demonstrate with unmistakable clarity that he has absolutely no interest whatsoever in governing responsibly.