Scott Walker Takes Next Step: How Might He Govern as President?

On January 27, Governor Scott Walker (R-WI) announced the formation of a 527 committee called Our American Revival, unveiled a new website, and issued a statement which included the following:

To move this country forward we need new, fresh leadership from outside of Washington. We need leaders who are bold. That’s how we build a better future for our children and grandchildren. We’ve done it in Wisconsin and it can be done across this country with the right leadership.

Walker’s statement refers to his actions in balancing Wisconsin’s state budget, closing an unconstitutional deficit hole of $3.6B while actually cutting state taxes and capping local property taxes. He achieved this mostly by curtailing the hitherto virtually unrestrained power of public employee unions, to the intense dismay of the Wisconsin Left. Walker’s statement also comes on the heels of a major speech delivered over the weekend to Iowa conservatives, in which he urged policies that “go big and bold” in tackling such major public policy problems.

Now that it is obvious Walker is planning a presidential run, his intentions are being met with mixed reviews even among some of Wisconsin’s GOP stalwarts who are not used to seeing a governor’s attention split in this fashion. Walker would be the first Wisconsin governor in history to run for the presidency.

Three major recent Wisconsin events suggest what the Walker approach to federal domestic issues might be.

1. A decision was announced last Friday, just before Walker’s appearance in Iowa, not to go ahead with building a new Indian casino in Kenosha County. This is a big deal in Wisconsin. In 2005, then-Governor Jim Doyle, a Democrat, made binding pacts with the eleven recognized Indian tribes resident in Wisconsin. Indian reservations are effectively extra-territorial, virtually independent nations within United States territory. As such, whether or not the state’s laws permit legal gambling, the tribes are free to establish gambling casinos on tribal land if they wish. The problem has been that these reservations tend to be in rural, out-of-the-way locations, making the accessibility and therefore profitability of such enterprises problematic.

The Potawatomi tribe of Wisconsin sought a novel approach to the matter by getting an industrial park in Milwaukee’s Menomonee River valley declared tribal land, and built a large casino and entertainment complex there. It has been very successful. Doyle’s pact protects it from competition by giving the Potawatomi an absolute veto over any new casino within fifty miles of their present location in exchange for large, fixed-sum payments to the state treasury.

Enter the Menominee Indians of central Wisconsin. They looked at a failed dog-racing track in Kenosha County (due south of Milwaukee on the Illinois state line), which was located right along the I-94 corridor connecting Milwaukee and Chicago. They proposed building a large, state-of-the-art casino and entertainment center there, to be managed by the Hard Rock entertainment company owned by the Seminole Indians of Florida.

Though the Bureau of Indian Affairs approved the transfer of the park to Menominee ownership, the decision was ultimately up to the governor to risk breaching Doyle’s agreements. The Potawatomi put considerable pressure on the state government, running a massive media campaign against the casino and withholding a $25M payment to the state to emphasize their point. For their part, the Menominee responded with their own media campaign.

Walker insists that his decision had nothing to do with presidential politics or a well-publicized letter from social conservatives in Iowa vowing to oppose him if he approved the casino, and instead focuses on his fiduciary responsibility to the taxpayers of the state. Breaching the contract would have ended the Potawatomi obligation to make the payments Doyle had negotiated. The tax revenues generated by thousands of jobs in Kenosha County from the casino and ancillary businesses might have made up the shortfall. It is certain that approval would have been challenged by the Potawatomi in federal court, where anything might have happened, and the state would potentially have been out hundreds of millions of dollars in revenue (the worst-case scenario might have required repayment of all money paid in since 2005).

So Walker made what he felt was the only responsible decision he could, and has taken the heat generated by it.

2. The Milwaukee Bucks basketball team currently plays home games in an aging arena called the Bradley Center in downtown Milwaukee. Long-time owner and former Democratic Senator Herb Kohl recently sold the team to a consortium of New York investors, who have been pressing for a new facility. They have enlisted the NBA in their cause: the NBA has made it clear that if nothing is done, they will authorize moving the team elsewhere in 2017. This would mean the loss of dozens of supporting jobs both directly and in ancillary businesses in the rather depressed area of Milwaukee (listed as the ninth poorest city in the U.S.). It would also mean the loss of an estimated $10M a year in tax revenue to the state, $6.5M of which is generated by the “jock tax” paid by professional athletes who play in Wisconsin.

Herb Kohl has offered to put up $100M toward construction of a new facility, and the team owners have offered another $150M, but he wants to have a public component to the funding (total cost estimates have been running at $400 to $500M).

Enter the Walker proposal: The governor proposes a grant of $220M to be secured by a bond issue repayable over 25 years. What makes the proposal unique is that the bond issue will be backed by the future revenues generated by the “jock tax” over and above the $6.5M currently collected (which will be protected and untouched) over the 25 years as new player salary contracts and media contracts are negotiated. Walker’s people have provided very conservative numbers suggesting that this is a low-risk proposition.

So we have a proposed “public-private” enterprise in which roughly 60% of the cost will be covered by the private sector, and the rest by what is in effect a fee paid by those who use the facility, the basketball players.

3. Until Walker’s election, tuition costs at University of Wisconsin campuses had been rising an average of 5.5% per annum, far above the inflation rate, yet the regents and administrators had constantly demanded more state funding. This came to an end when a group of new legislators in Wisconsin, headed by Assemblyman Dale Kooyenga, a CPA, found that the university system had been squirreling away tens of millions of dollars in secret accounts while claiming they were broke.

As result, the Legislature has frozen tuition for the last few years and demanded that the universities use those monies to make up any shortfall. Walker is committed to keeping tuition frozen during his entire tenure as governor.

He has also proposed changing the state’s role in university financing and governance by taking a 13% cut (roughly $150M) from the state’s annual contribution to the university’s budget. This would be in exchange for giving the money as a block grant for the Board of Regents to manage like the governing board of any corporation anywhere else, independent of any other state interference in their affairs.

When asked if this opens the door to wild increases in tuition authorized by the newly independent board, Walker pointed out that increases had been happening under the current system when Doyle was governor. The regents are appointed by the governor and have to be approved by the state Senate, and Walker has vowed not to appoint anyone who will not keep the tuition freeze in place.

Again, he sees this move as providing large savings by permitting cutbacks in the state’s bureaucratic apparatus, over and above the 13% cut, and by forcing the university system to become more efficient and more accountable, a way to make the state do more with less and to enable further reductions in taxes.

Big and bold, Walker’s plans seem to be working. The federal government has just released numbers that indicate Wisconsin was first in the Midwest in job creation in November 2014 and fifth in the country overall.