Rachel Maddow says Wisconsin is on track to have a budget surplus this year

It has taken hold with conviction: the idea that Wisconsin Gov. Scott Walker ginned up a phony budget crisis to justify his bold bid to strip state employees of most bargaining rights and cut their benefits.

A volley of e-mails, blog posts and inquiries to reporters followed a  Madison Capital Times editorial on Feb. 16, 2011, that said no state budget deficit exists for 2010-’11 -- or if it does, it’s the fault of Walker and the Republicans in the Legislature.

Liberal MSNBC talk show host Rachel Maddow joined in Feb. 17, accusing Walker of manipulating the situation for political gain.

"Despite what you may have heard about Wisconsin’s finances, Wisconsin is on track to have a budget surplus this year," she said. "I am not kidding."

She added a kicker that is also making the rounds: Walker and fellow Republicans in the Legislature this year gave away $140 million in business tax breaks -- so if there is a deficit projected of $137 million, they created it.

Maddow and others making the claim all cite the same source for their information --  a Jan. 31, 2011 memo prepared by Robert Lang, the director of the nonpartisan Legislative Fiscal Bureau.

It includes this line: "Our analysis indicates a general fund gross balance of $121.4 million and a net balance of $56.4 million."

We were curious about claims of a surplus based on the fiscal bureau memo.

In writing it when it was released, reporters from the Journal Sentinel and Associated Press had put the shortfall at between $78 million and  $340 million. That’s the projection for the end of the fiscal year, June 30, 2011.

Walker himself has settled on $137 million as the deficit figure, a number reporters have adopted as shorthand.

We re-read the fiscal bureau memo, talked to Lang, consulted reporter Jason Stein of the Journal Sentinel’s Madison Bureau, read various news accounts and examined the issue in detail.

Our conclusion: Maddow and the others are wrong.

There is, indeed, a projected deficit that required attention, and Walker and GOP lawmakers did not create it.

More on that second point in a bit.

The confusion, it appears, stems from a section in Lang’s memo that -- read on its own -- does project a $121 million surplus in the state’s general fund as of June 30, 2011.

But the remainder of the routine memo -- consider it the fine print -- outlines $258 million in unpaid bills or expected shortfalls in programs such as Medicaid services for the needy ($174 million alone), the public defender’s office and corrections. Additionally, the state owes Minnesota $58.7 million under a discontinued tax reciprocity deal.

The result, by our math and Lang’s, is the $137 million shortfall.

It would be closer to the $340 million figure if the figure included the $200 million owed to the state’s patient compensation fund, a debt courts have declared resulted from an illegal raid on the fund under former Gov. Jim Doyle.

A court ruling is pending in that matter, so the money might not have to be transferred until next budget year.

To be sure, the projected shortfall is a modest one by the standards of the last decade, which saw a $600 million repair bill one year as the economy and national tax collections slumped.

But ignoring it would have meant turning away eligible Medicaid clients, which was not an option, Lang said.

This same situation has happened in the past, including during the tenure of Doyle, a Democrat. In January 2005, a fiscal bureau memo showed a similar surplus, but lawmakers approved a major fix of a Medicaid shortfall that would have eaten up that projected surplus.

Reporters who cover the Capitol are used to doing the math to come up with the bottom-line surplus or deficit, but average readers are not. (The Journal Sentinel’s Stein addressed these and other budget questions in a follow-up story.)

So why does Lang write his biennial memo in a way that invites confusion?

Lang, a veteran and respected civil servant working in a nonpartisan job, told us he does not want to presume what legislative or other action will be taken to address the potential shortfalls he lists.

Admittedly, the approach this time created the opportunity for a snappy -- and powerful -- political attack.

But it is an inaccurate one.

Meanwhile, what about Maddow’s claim -- also repeated across the liberal blogosphere -- that Walker’s tax-cut bills approved in January are responsible for the $137 million deficit?

Lang’s fiscal bureau report and news accounts addressed that issue as well.

The tax cuts will cost the state a projected $140 million in tax revenue -- but not until the next two-year budget, from July 2011 to June 2013. The cuts are not even in effect yet, so they cannot be part of the current problem.

Here’s the bottom line:

There is fierce debate over the approach Walker took to address the short-term budget deficit. But there should be no debate on whether or not there is a shortfall. While not historically large, the shortfall in the current budget needed to be addressed in some fashion. Walker’s tax cuts will boost the size of the projected deficit in the next budget, but they’re not part of this problem and did not create it.

We rate Maddow’s take False.

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