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Time to freeze?

Donald Croysdale

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.

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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.

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