The Wisconsin Boom

State economy soars after collective bargaining fight

May 10, 2012

Wisconsin has pulled back from the brink of fiscal insolvency after Governor Scott Walker's collective bargaining and budget reforms, despite doomsday warnings of fiscal disaster.

Neighboring Illinois, whose Democratic governor opted for tax hikes, has not fared as well.

Wisconsin voters appear happy with Republican Gov. Scott Walker and Wisconsin’s economic resurgence. Gov. Walker got 626,538 votes in his May 8 uncontested recall primary, more than the two main Democratic candidates combined.

That total is also more than all the GOP candidates combined in the contested 2010 GOP primary, as well as the highest voter turnout for a gubernatorial primary in 60 years.

Unemployment has dropped from 7.7 percent to 6.8 percent since Walker took office. Unemployment in neighboring Illinois, however, only dropped below 9 percent in March—the first time it has done so in two years.

Wisconsin property taxes have fallen for the first time in 12 years. The state's adult debt per capita is roughly $687. Illinois’ is about $853.

The two states took divergent paths in 2010 in dealing with looming fiscal insolvency. While Walker pushed spending cuts and public sector reforms, Illinois Gov. Pat Quinn and the state legislature floated $7 billion in new taxes, including a 67 percent individual income tax increase and a 46 percent corporate tax increase.

"Quinn's reasoning was that was going to turn Illinois around, pay its bills, and become fiscally solvent again," Ted Dabrowski of the Illinois Policy Institute told the Free Beacon. "A year later, we have $9 billion in unpaid bills. We have the worst credit rating in the nation, downgraded below California. We have $2 billion in unpaid Medicaid bills, and our pension obligations are eating up funds that should be going to public safety and schools."

More than $5 billion of the $7 billion raised by new taxes went to paying down pension obligations, said Christian Schneider, a senior fellow at the Wisconsin Policy Research Institute.

"All that new revenue, and almost none of it goes to hiring new teachers or helping the poor or the sick," Schneider said. "It has no benefit to the state whatsoever."

There has been some good news for the Prairie State. Job-growth in Illinois has spiked in recent months. The state gained 32,000 jobs in the 12 months ending in February, the U.S. Bureau of Labor Statistics reported. Wisconsin lost 16,900.

Dabrowski said the job-growth numbers were encouraging but that it was likely what economists call a "dead cat bounce"—a brief rise after a severe decline.

Illinois also has a much larger economy than Wisconsin, which lacks an industrial center such as Chicago.

"Democrats are out there beating Walker up, saying the state has lost jobs," Schneider said. "But Democrats just voted against a mine in northern Wisconsin that would have created jobs. They’re rooting for things to be as bad as possible."

Meanwhile, Wisconsin managed to eliminate its deficit while not decimating public schools, contrary to the predictions of many opposing Walker.

"You’ve gotten some positive results, but more importantly, the sky didn’t fall," American Enterprise Institute scholar Andrew Biggs said in an interview with the Free Beacon. "The schools opened, the teachers didn’t get laid off, the kids kept learning."

The Wisconsin State Journal recently surveyed Dane County's 16 main school districts on preliminary non-renewal notices and found that only two full-time and seven part-time employees had been laid off.

School districts have saved $211 per student from competitive bidding, according to Schneider, adding up to nearly $200 million in savings statewide.

"The only schools that are losing jobs are those that chose not to implement the changes," Schneider said.

For example, the Kenosha School District requested an extra three months to negotiate with its teachers union before Walker's reforms went into effect. The window was granted, but the teachers union rejected the proposal.

The district now faces a $28 million budget deficit and the possible elimination of 300 jobs, a Kenosha spokesman told the Milwaukee Journal Sentinel.

"They ran back to the negotiating table before the changes went into effect, and now they’re hemorrhaging jobs," Schneider said.

The recall elections will cost Wisconsin approximately $16 million dollars, according to the state Government Accountability Board.