Scott Walker’s Challenges: A Win, But Trouble Ahead in Wisconsin

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.