In 2001, then-Gov. Tommy Thompson was picked by the Bush administration to run the Department of Health and Human Services. Wisconsin governors are elected on presidential off-years, which meant that Lt. Gov. Scott McCallum would serve the rest of Thompson's term. This did not go well. It was a period marked mostly by short-sightedness and poor decision-making, which included this:
In July 2002, then-Gov. Scott McCallum signed a budget-repair bill into law that used $825 million in settlement money from the big tobacco companies to balance a gaping hole in the state budget. That was on top of another $450 million in tobacco money used for the same purpose the summer before.
McCallum and the Legislature balanced the budget all right -- for a few months -- but at a high cost to good government.
"Dumb and dumber," we wrote at the time. "Think about winning the lottery and spending every nickel in the first year."
McCallum and Republicans argued that this was actually a responsible use of the money, which was originally to be paid out over a number of years. Tobacco companies might go out of business, they argued, and we'd only get a fraction of the payout. So they found investors to buy the payments -- for a fraction of the payout. A lot of people, including myself, found this a brainless argument. After all, if there really was any danger of the payments evaporating, you wouldn't be able to find anyone to buy them. They obviously weren't concerned about the tap shutting off, they were concerned about getting enough money right that instant, in order to cover their butts and solve a problem caused by their own lousy accounting.
Further, the money wasn't meant to plug up holes in the budget caused by blue-skying tax revenues. It was meant to help limit costs to the state caused by tobacco use. Anti-smoking efforts, treatment of illnesses, etc. McCallum and the legislature were using the people's money to paper over their own mess. Scott McCallum was a governor for a whopping two years, the voters rejecting him the first chance they got.
Which brings us to today -- we've ridden this train before and we know where it stops.
A decision last week by Gov. Scott Walker and Attorney General J.B. Van Hollen to use $25.6 million of Wisconsin's share of another legal settlement -- this time with the big banks over foreclosure fraud -- to plug another budget hole has a familiar ring to it.
The state will receive about $141 million in money pried loose from the banks to help cities and people who fell victim to fraud and sketchy underwriting. Of that $141 million, the state gets control of $31.6 million. And of that $31.6 million, Walker and Van Hollen are proposing to use most of it as a one-time budget fix.
"Just like communities and individuals have been affected, the foreclosure crisis has had an effect on the state of Wisconsin, in terms of unemployment," Walker said. "This will offset that damage done to the state of Wisconsin."
Not a boondoggle on the scale of McCallum's tobacco settlement fiasco, but it's not hard to see the similarities here. Scott Walker, Hero of the Budget Battle, hasn't balanced the budget at all. Instead, he used the lousy "cut taxes and increase revenue" math to project tax revenues. Needless to say, this is hopelessly unrealistic and the budget is now where anyone who actually believes in math would expect it to be.
But if Walker's money grab is less substantial than McCallum's, it may be more consequential. Wisconsin under Walker has some of the worst job creation numbers in the country -- anemic in a good month, negative in bad ones. Mortgage relief would create jobs. It's absolutely unquestionable. When consumers have money, people get hired. And it would also take the burden off cities. Milwaukee alone has "4,800 vacant and abandoned properties that would cost about $48 million to tear down." Keep in mind, even razing vacant homes creates jobs, while bringing property values higher.
Meanwhile, how many jobs will be created by plugging a budget hole caused by Reaganaut, blue-sky economic optimism? Probably somewhere in the neighborhood of none -- although Walker and Republicans obviously hope it'll help them keep theirs. Here's hoping that, after all is said and done, there's one more similarity between McCallum and Walker -- that neither served a full term.
-Wisco
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