Kathleen Falk says Gov. Scott Walker didn’t balance the budget and presided over a larger deficit

Mike Gousha, a veteran political journalist, asked the $3.6 billion question in an interview with Democrat Kathleen Falk, who is seeking to oust Gov. Scott Walker in a likely recall election.

At a Feb. 29, 2012 appearance by Falk at Marquette University’s "On the Issues" program, he queried: Democrats criticize how Walker eliminated that big budget shortfall, but how would they have done it?

Falk didn’t answer directly but eventually recounted how as Dane County executive she used innovation, technology, modest tax increases and negotiations with labor unions to find savings.

But this is the part that caught our attention:

"He didn’t balance the budget, as we know," Falk said. "We now have a larger state deficit ...14 months into Gov. Walker’s term than we did when he was elected."

The claim is one that will likely be tossed around a lot in the coming months, as Democrats try to counter Walker’s boast that he balanced the budget despite that $3.6 billion hole.

So let’s take a look.

There are two aspects to Falk’s claim.

First, was the budget balanced when passed in the summer of 2011?

It was, based on the revenue and spending projections at the time. The  state constitution requires a balanced budget, and it was measured by the Legislative Fiscal Bureau, the state’s nonpartisan fiscal scorekeeper, and other outside experts who agreed it was balanced.

Indeed, though Democrats argued fiercely about how Walker balanced the budget, no one claimed at the time it was not balanced.

At Marquette, Falk said Walker "didn’t balance the budget, as we know."

That’s clearly wrong in terms of when the budget was passed.

Falk couches her statement as if Walker’s budget never was balanced. It actually had a very small positive balance when passed.

That leads to the second aspect of the claim: Is the budget more in arrears now than when Walker took office?

Asked to back up the claim, Falk said she is referring to the $137 million budget deficit Walker had to clean up from the last six months of Democratic Gov. Jim Doyle’s final budget.

She’s comparing it to a new shortfall that has popped up only eight months into Walker’s two-year budget.

Indeed, a projected deficit of $350 million has cropped up in the two-year budget that started in July 2011, mainly because tax collection estimates are not coming in at the level the budget anticipated.

Both the $137 million and the $350 million figures are derived from a report by the fiscal bureau, which periodically measures how finances are faring during the time a budget is in place. For instance, in May 2011 the fiscal bureau reported improved tax collection estimates, infusing another $600 million into the current budget. That proved too optimistic.

While the current $350 million is clearly larger, both the Doyle deficit and the new Walker deficit are small -- 1 or 2 percent of the total budget.

In 2011, Walker called the Doyle deficit a "fiscal crisis" necessitating a budget-repair bill. That bill contained the controversial collective bargaining limits that helped fuel mass protests and now the recall against Walker.

Much of the new problem, in addition to lower-than-anticipated tax collections, is due to shortfalls in the Medicaid program, based on figures in the February 2012 report by the fiscal bureau.

But there is a difference:

Walker has much more time to fix the new gap than he did in dealing with Doyle’s deficit, which came toward the end of a two-year budget cycle. We’re not yet halfway into the current budget. So in making the comparison, Falk and others are mixing two different time frames.

Walker administration officials have said they may not even need formal legislation to adjust the budget, as they did in early  2011.

In recent years, mid-course budget corrections have become commonplace in Wisconsin politics, in part because the state keeps almost no rainy day fund. Economic ups and downs have also made predicting tax revenue tricky.

In those recent budgets, Wisconsin has also faced a challenge because of cost-of-living increases and past decisions to delay painful cuts and forward obligations on to the next budget. That led to the $3.6 billion shortfall Walker faced and a so-called structural deficit, something Walker’s two-year budget also eliminated, according to the fiscal bureau.

A final note: All of this is separate from the debate over a different measuring stick. Walker did not balance the budget under what is known as GAAP, generally accepted accounting principles. That’s more stringent than the cash-flow approach the state has long used.

Our conclusion

Falk criticized Walker for a deficit that has opened up in his first budget.

She is correct in saying it’s larger than the deficit Walker had to close in his predecessor’s last budget. But her statement that Walker "didn’t balance the budget as we know" is wrong.

We rate her statement Half True.

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