The Eskimos are said to have a hundred ways to say “snow.” Legislators have at least as many ways to say “freeze.” The latest trial balloon being floated is to freeze state spending for three years, to go along with freezing local and county tax levies at current levels. Special interest groups, of course, are lamenting the hardships their constituents would face under such freezing conditions. With still nearly four weeks to the deadline for budget agreement, the climate in Madison will be warming up considerably.
It is somewhat puzzling that a freeze would only balance the budget. As noted in this column in February, the Big Six of state budget expenditures for the year ending this month are health and family services ($5.6 billion); schools ($5.3 billion); the University of Wisconsin System ($3.4 billion); transportation ($2.2 billion); shared revenue ($1.9 billion); and prisons ($1.0 billion). These six groups together total $19.4 billion, or 81 percent of the total $23.6 billion the state will spend for the fiscal year ending June 30.
If we truly froze spending levels for those six areas in the 2003-2005 budget, we would save $4.5 billion from amounts being requested. Since the total shortfall is estimated to be $3.2 billion, a freeze for the six largest categories of spending would not only balance the budget, it would provide a $1.3 billion surplus.
Apparently, the legislators’ definition of freeze is not holding these six categories to their 2003 levels. A freeze would have meant no pay increases — common in the private sector — but wage increases were recently accommodated for state employees. How about the double-digit increases in health-insurance premiums? A freeze would mean that the increase in premiums would be paid for by the employees, reopening labor agreements if necessary. There is no indication that asking employees to pay for health-premium increases is even on the table. It should be.
Mercedes or Cadillac?
At a recent health-care forum, a professional researcher noted that in Wisconsin, public-sector fringe benefits (largely pensions and health insurance) are 50 percent higher than for comparable private-sector employees. This researcher noted that public-sector health-benefit choices are between a Mercedes and a Cadillac. Why should the public-sector employee get a health-care Mercedes when the private sector employee has a Chevy? And to make matters worse, the Chevy guy has to pay for the Mercedes, too. Furthermore, Wisconsin public-sector employees’ wage levels are higher than for comparable public sector employees in similar Midwest cities.
A first step in rebalancing public-sector fringe benefits with private-sector taxpayers would be freezing the dollar amount the public sector pays toward heath-insurance premiums.
Economist Bruce Bartlett said this week, the 25th anniversary of Proposition 13 in California, is “one of the most important political/economic events in American history.” Proposition 13 was in response to rapidly escalating real-estate values and corresponding property taxes. While rising home values were nice, the higher property taxes were beyond income-level increases. California homeowners were forced to sell their homes to pay their taxes. Proposiiton 13 froze the property tax rate at 1 percent. Valuations were also frozen until the property was sold. Further, to be sure other taxes were not raised to circumvent the freeze, a two-thirds majority in the Legislature was required to raise taxes.
A familiar ring
Interesting how the more things change the more they stay the same. The comments about Proposition 13 before its passage sound like comments we are hearing today here in Wisconsin. According to Bartlett, a former governor commented, “If I were a communist, I would vote for Proposition 13.” A mayor said Proposition 13 “will hit the city like a neutron bomb, leaving some city facilities virtually empty and human services devastated.” A head of the Los Angeles Chamber of Commerce added that it is “a fraud on the taxpayer that will cause fiscal chaos, massive unemployment and disruption of the economy.”
In fact, Proposition 13 passed by a 2-1 margin, and none of the dire predictions of doom and gloom occurred. Other states found the nerve to cut taxes; so did President Ronald Reagan, and California’s and the national economy rocketed forward to unprecedented growth.
The freezes being discussed this week probably do not go nearly far enough. A Proposition 13-type freeze at 1 percent of property value would, for many communities, be a 50 percent reduction in property taxes. But placing caps on what the localities and the state can spend is a start. Given that schools, the UW System and shared revenues are three of the state’s largest spending categories, it is most reasonable that the state insist on limits, or freezes. If localities, via referendum, approve a higher level of spending, fine. But such increased local spending should be paid for by the localities voting, not by the state.
These next few weeks will be a time for tough love. Yes, people enjoy public services, but we are reaching limits on how much to pay. The sooner public-sector spending is brought under control, the sooner the private sector can be free to grow. Our legislators are on the right track. Let them know it.
Donald Croysdale is executive director for the American Subcontractors Association of Greater Milwaukee. For more information on ASA, call the Greater Milwaukee Chapter at 414-276-1743 or visit the Web site.