Despite the heady rhetoric about a possible presidential run in 2016, Scott Walker faces significant issues as he contemplates his inauguration and second term.
Walker’s major first-term problem was a $3.6B budget shortfall left to him by the departing Democratic administration. This was an unconstitutional problem, as Wisconsin law requires a balanced budget. He and the Republican-controlled legislature dealt with the problem brilliantly through an initiative known as Act 10, under which they found savings without harming vital services and greatly curtailed the collective bargaining rights of unionized government employees.
Walker was able to balance the budget, to reduce taxes, and to actually project a $900M surplus. Much of the projected surplus was returned to the taxpayers in the form of additional tax cuts.
One problem he now faces lies in that word “projected.”
Wisconsin has a biennial budget, and — especially in the second biennium of Walker’s first term — economic growth has been slower than hoped. This has implications for revenue (Mary Burke tried to make an issue of the Republicans’ alleged “imprudence” in cutting taxes so much during the recent election). There are numerous reasons why growth has been sluggish. Political and economic uncertainty was raised by the pitched battles in Madison, as enraged leftists did $11M in damage to the state capitol building and mounted repeated legal challenges. The recall effort in 2011-2012 did some damage. Democrats led a bitter fight against a major mining initiative in northwestern Wisconsin, an initiative which could stimulate growth and generate thousands of jobs. The general sluggishness of the national economy as a whole and the Midwestern region in particular also contributed to the state’s growth issues.
These problems may correct in the long run, but for now there is a projected shortfall.
Aside from this, three other major economic issues have been gathering steam and are about to come to a head.
1. The Menomonee Indians have made a deal with the Seminoles, who own the “Hard Rock” brand, to build a new casino in Kenosha County. Kenosha has, in recent decades, become largely a suburban bedroom community for people from the Chicago area. As such, there is not a great deal of business there. The I-94 corridor from Chicago to Milwaukee is ripe for development, and such a casino would fuel it and create jobs.
There are two problems, however. The previous governor signed a deal with the tribes that already have casinos (the richest of which are the Ho-Chunk in the Wisconsin Dells area and the Potawatomi in Milwaukee) for them to make fixed-percentage payments to the state in exchange for veto-power over any new casinos. The Potawatomi have been deliberately delaying a $20M payment to the state and daring the state to do something about it. They have also been running a major advertising blitz against the initiative.
The second problem: Walker is deeply religious, and is morally opposed to gambling and the evils which accompany it. He can’t do anything about the existing casinos, but he personally doesn’t want to see them expand or increase in number. However, Kenosha County and southern Racine County can use the jobs; both are fairly populous counties and the casino initiative is popular in both of them. So Walker is in a quandary. The issue was deliberately held over until after the election, but he must now make a decision.
2. The city of Milwaukee is an economic basketcase. Former owner of the Milwaukee Bucks and ex-Senator Herb Kohl has offered to put up $100M to build a new arena for the team, but the cost estimates for a modern, state-of-the-art arena are north of $350M. Inevitably, some people are agitating for public financing.
Former Republican Governor Tommy Thompson made a deal to finance the building of Miller Park in Milwaukee for the Brewers when then-owner Bud Selig threatened to move the team if a new stadium wasn’t built at public expense. The venture was financed by a .5% sales tax levied on Milwaukee County and four others surrounding it. (Thompson actually was able to push this through in the rest of the state with the slogan “Stick it to Milwaukee,” as heavily Democratic Milwaukee County is not very popular down-state.) The decisive vote was cast by Racine Senator George Petak, who was subsequently recalled by his irate constituents. The rancorous memory of this had an adverse effect on Thompson’s senatorial campaign in 2012.
There are persistent rumors that the present owners of the Bucks may pull the team without a new arena, and there is political pressure by the owners of Milwaukee bars and restaurants being brought to bear. Tax increases of any sort are not part of the Walker agenda. Hence, the quandary.
3. Former Governor Doyle left the legacy of a state highway fund which was repeatedly raided in order to shore up other parts of the badly sagging state budget. As a result, many infrastructure projects were postponed or slowed down. The extremely harsh winter of 2013-2014 and the ominous current November (the upper Mississippi, which forms Wisconsin’s western border, is already closed to shipping, the earliest such closure in the last 45 years) increase the urgency.
One consequence was a ballot initiative in the most recent election which passed overwhelmingly. It amended the state constitution so that revenues collected for the highway are sequestered and not used for any other purpose in hope of obviating any further raids à la Doyle. But that will not be enough: as in most states, highway maintenance is largely financed by the gasoline tax, and gasoline consumption is down, both because of the economy and because of the more fuel-efficient vehicles hitting the roads. Hence, a variety of unpalatable choices, most of them likely involving tax hikes or fees.
Walker has successfully navigated budget issues before with his adherence to conservative principles. But he practically needs to duplicate the feat to remain strong as a 2016 contender.
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