Budget shortfall, lagging job growth in Wisconsin complicate Walker's presidential pitch

Economic Indicators Associated Press

Gov. Scott Walker has transformed Wisconsin politics, winning three elections in four years and signing laws that weaken unions, crippling a key ally of the Democratic Party.

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But the likely Republican presidential contender has had less success changing Wisconsin's economy and budget. The state lags in job growth and its budget faces a shortfall. It's a record that complicates Walker's path in early primary states as he sells himself as a reformer.

"Most of his activity was more politically focused than economically, job-creation focused," said John Torinus, a Milwaukee businessman and venture capitalist who nevertheless praises some of Walker's moves. "He was going to concentrate on job creation with a laser-like focus and he got distracted."

Wisconsin has added private-sector jobs at a lower rate than the national average since July 2011 — six months after Walker took office. Walker promised in the 2010 campaign that if elected his policies would create 250,000 private sector jobs. But only about 145,000 such jobs were created over his first four years.

Wisconsin ranked 40th in private sector job growth for the 12 months ending in September, said the U.S. Bureau of Labor Statistics. Walker has called hiring in his state the "gold standard" for measuring his performance.

Still, there are positive economic signs Walker relies on to defend his record. Wisconsin's unemployment rate has dropped from 8.1 percent to 5 percent over his time in office. The state has seen a higher rate of new businesses starting than the rest of the country and income growth for Wisconsin residents has exceeded the national average.

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Per capita income growth in Wisconsin exceeded per capita American income growth.

Walker "wasn't afraid to set big, bold goals to get Wisconsin back on track," said AshLee Strong, spokeswoman for Walker's political group, Our American Revival. "The governor is now taking his reform ideas that led to this economic success in Wisconsin and sharing them nationally."

Heavily reliant on manufacturing, Wisconsin has perennially lagged the nation in job creation and often used fiscal tricks to paper over budget deficits. Walker vowed to change that when he ran in 2010. His most renowned move, just six weeks into his first term in 2011, was to curtail public unions' collective bargaining power while also forcing them to pay more for pension and health care benefits.

Following weeks of protests, and the fleeing of Democratic state senators for three weeks to try to block a vote, Walker got his way. That drama, along with Walker's 2012 recall victory and other laws he's signed legalizing concealed weapons, requiring photo ID at the polls and last month's right-to-work law, are central in his stump speech as he presents himself as a man of action with a record of conservative accomplishments.

M. Kevin McGee, an economist at the University of Wisconsin-Oshkosh, said Wisconsin's job performance kept pace with its Midwestern peers until Walker took office. Then it fell behind. His theory: Walker's public sector union moves, and subsequent benefit cuts, shocked those workers into cutting consumer spending.

"What happened here changed the behavior of enough people in the state that it affected economic growth," McGee said.

Other analysts question that, noting that Walker's union changes did save taxpayers $3 billion in health and pension costs, translating into more money in people's wallets. On the trail, Walker emphasizes those savings and about $2 billion in personal and corporate income tax cuts he also signed into law.

Still, the state isn't on firm financial ground.

Last year, facing forecasts of a nearly $1 billion increase in tax revenue, Walker and Republicans who control the Legislature passed an $800 million tax-cut package. The state is on pace to collect only about half of the tax revenue previously projected, exacerbating the latest budget problem.

"We dug our own hole," said former state Sen Mike Ellis, a Republican, adding that he still thinks the fiscal picture is better than when Walker took office.

Heading into this year the state faced an $800 million shortfall just to continue spending at the current level and $2.2 billion when state agency requests were taken into consideration. His plan calls for cutting education money and borrowing more than $1 billion to pay for roads. The proposal has run into widespread opposition, including from Republicans.

Todd Berry, president of the Wisconsin Taxpayers Alliance, said Walker's initial budgets were responsible, but the more recent ones resemble those of his Democratic precedessor, Jim Doyle.

Berry said the state's lackluster jobs record shows Walker overpromised in the campaign. Governors, he noted, rarely have a significant impact on job creation. "This slow rate of job growth is nothing new," Berry said.

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Riccardi reported from Denver.

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