Fact Checker: Did Walker turn a $3.6 billion deficit into a surplus?

Introduction

'To eliminate a huge $3.6 billion deficit, he (Scott Walker) takes decisive action. The results: A billion dollar surplus. Two billion in tax relief. Unemployment cut nearly in half.”

Source of the claim: The Unintimidated PAC made the claims in a one-minute TV ad that recently started airing in Eastern Iowa on behalf of Wisconsin Gov. Scott Walker, a Republican presidential candidate.

Analysis

The Unintimidated PAC doesn't have contact information on its website or on its registration with the Federal Elections Commission. Its treasurer is listed as Keith Gilkes, Walker's former chief of staff, but since the group is a PAC, it's not officially connected to the Walker campaign. As such, we were unable to get sourcing information from the ad's sponsor.

But Walker has made similar claims in ads and speeches going back to 2012, when he won a recall election after limiting collective bargaining rights for state employees.

So let's get to the claims.

First, the PAC says Walker eliminated a $3.6 billion deficit.

'It's not a deficit, per se,” said Todd Berry, president of the Wisconsin Taxpayers Alliance, a non-profit research group based in Madison. 'It has been called that by both sides of the aisle when it's to their benefit.”

Wisconsin's constitution requires a balanced budget, so the state doesn't really have deficits like the federal government. The state can have projected imbalances based on requested budget items not being covered by expected tax revenue.

In 2011, when Walker first took office, Wisconsin was projected to have a shortfall at the end of the two-year budget cycle in June 2013. The exact size of the projected shortfall is debatable, but by generally accepted accounting principles that account for incoming revenue and outgoing debt, the imbalance would have been just under $3 billion, according to the state's Comprehensive Annual Financial Report in December 2011.

Walker implemented cuts to nearly every state agency and required public employees to contribute more to health insurance and retirement plans.

At the end of fiscal 2013, Wisconsin had a $759 million balance, according to the state's Legislative Fiscal Bureau, which researches fiscal issues for state agencies and lawmakers.

Now, $759 million is a big surplus, but it's not $1 billion as the Unintimidated PAC says in the TV ad.

The claim of $2 billion in tax relief comes from a 2014 report from the Legislative Fiscal Bureau. That report looked at the impact of tax law changes adopted since January 2011 and showed a $1.9 billion decrease in tax liabilities, or money coming into the state from taxes. The biggest impact came from cutting the income tax rate, resulting in a $648 million tax cut.

The report also notes many of the actions passed will have a delayed impact, with an annual $8 million revenue loss by 2015.

Lastly, the ad claims Wisconsin's unemployment was slashed by nearly half under Walker.

Indeed, the U.S. Bureau of Labor Statistics reports 142,217 Wisconsinites were unemployed in June, down 42 percent from 245,912 in January 2011.

Conclusion

The ad by the Unintimidated PAC claims Walker eliminated a $3.6 billion budget deficit. The term deficit is misleading, since the state constitution requires a balanced budget. The state had a projected shortfall of about $3 billion. That shortfall never came to pass because of Walker's cuts and better-than-expected tax revenue. He ended the 2011-2013 budget cycle with a $759 million surplus, short of the $1 billion claimed in the ad.

The pro-Walker group is right the Wisconsin governor's administration cut taxes by nearly $2 billion, primarily by reducing the income tax rate, and that unemployment fell substantially during the last four years.

The ad implies Walker righted Wisconsin's financial ship, but the state had a shortfall again at the end of fiscal 2014 with expenses and debt exceeding revenue by $1.38 billion, according to the state's 2014 Comprehensive Annual Financial Report.

But analyzing the first two years in question of the governor's administration, and including the assertion on cutting the unemployment rate, we give the ad an overall B for accuracy.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/office holder or a national candidate/office holder about Iowa, or in advertisements that appear in our market. Claims must be independently verifiable. We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@sourcemedia.net.

This Fact Checker was researched and written by Erin Jordan.