...while one state builds a budget surplus

It's the kind of sudden rags-to-riches turnaround that could leave some taxpayers a bit befuddled. Just one year ago freshly elected Wisconsin Gov. -Anthony Earl made the rounds of major newspaper editorial boards in the state to explain the bind he was in by inheriting a $300 million-plus deficit from former Gov. Lee S. Dreyfus. Tax hikes and spending cuts, said Governor Earl, were mandatory.

A few weeks ago the new governor made the rounds again. This time he explained that the deficit was blossoming into a huge surplus - projected at $ 553 million by mid-1985. He doesn't want to pare down that cache with new spending programs, tax changes, or refunds.

Many other states, from California to Minnesota, have been riding this same down-again, up-again fiscal roller coaster. They, too, have recently found their treasuries unexpectedly well stocked. Earl says this is one area in which states have outperformed the federal government.

''We have surely shown a leadership role in how to deal with fiscal difficulties,'' he says. ''If the federal government had done in any measure what most of the states had had to do in terms of expenditures and taxes, we wouldn't have had this terrible deficit policy.''

All around, these new state surpluses are the result of the economic recovery and of in-state belt tightening and tax increases. In Wisconsin, for instance, where personal income shot up 35 percent beyond the national average last year, spending cuts were made, salaries were frozen, and a temporary 10 percent surcharge was put on corporate and personal income taxes.

Accordingly, here in ''America's Dairyland,'' as this state's yellow auto license plates still dub it, one of the hottest topics of debate these days - both in the Legislature and at family dinner tables - is what, if anything, to do with the newfound surplus.

Former Governor Dreyfus, a Republican who inherited a huge surplus when he took office in 1979 and promptly sent out taxpayer refunds, has argued that having a ''cookie jar'' only tempts lawmakers to spend it.

''That's absolute baloney,'' retorts Earl, a Democrat, during an interview in his Capitol office. ''It's only true if you make it a self-fulfilling prophecy.''

In the past, he explains, state surpluses have been spent to roll off other, ''more onerous'' taxes. He hopes to do the same - and perhaps to make Wisconsin's personal income tax, long one of the nation's highest, more ''progressive.''

But he says he won't tackle that or any major new spending programs until he is very sure that the surplus is real (''It's not yet money in the bank.'') and that the fiscal crisis is past. He wants to make no changes until the next biennial session of the Legislature, in 1985.

He says he is well aware that many members of the Legislature, controlled by a Democratic majority these days, have pet spending and tax-reform ideas of their own. But he brands many of these as ''too ambitious to be credible.'' And he adds that ''the Republican minority has a great grab bag that would choke a horse.''

He says he and most legislators agree that the time is ripe to roll back the temporary tax surcharge. And he says he thinks his view on holding the surplus intact will also prevail ''without its coming to a test of wills.''

''Everywhere I go, people say, 'For the love of Pete, don't give it all back - don't go through another scheme where we get another check in the mail.'

''I think the last experience is close enough in most people's minds that they remember the amount was relatively modest and they've paid for it ever since.''

Describing himself as a ''liberal without being a spendthrift'' in the tradition of the late United States Sen. Paul Douglas (D)of Illinois, Earl insists, ''Fiscal prudence is good politics in 1984.''

Voters in this politically competitive state, which has one US senator from each party and a 5 to 4 edge for the Democrats in its US House delegation, gave President Reagan 48 percent of the vote (compared with 43 percent for Jimmy Carter) in the 1980 election. But Earl says he thinks Democratic presidential candidate Walter Mondale, whom he expects to endorse formally sometime this month, can win in Wisconsin.

President Reagan's standing has weakened here, he says, because of the size of the federal deficit, which is hitting state export efforts particularly hard, and high continuing unemployment (above 9 percent).

Wisconsin is the home base of several major companies, from Johnson's Wax to the Kimberly-Clark Corporation. But, like most neighboring states, it has recently been winning a few and losing more in the effort to keep and recruit business.

Recently the Kohler Company, which makes industrial equipment and plumbing fixtures, cited state tax structure and high union wages as key factors in its decision to buy a faucet company in the South rather than buy or build in Wisconsin.

The governor, who flew to meet with Kohler executives well before the decision was made, says, ''I'm always told publicly that the reason is taxes but privately that it isn't. When all is said and done, the reasons are every bit as subjective as objective.

''I'm convinced there is no one formula the state could adopt which would work in most cases. It requires individual efforts. Sometimes they work and sometimes they don't.''

A lawyer and former secretary of the state's Department of Natural Resources, Earl faced some criticism for his lack of business experience.

''I think he's really leaned over backwards, though, in an effort to learn by making himself available to business leaders and going to see them,'' says Paul Hassett, president of the Wisconsin Association of Manufactures and Commerce.

He credits Earl with holding the line on spending and working to pass an unemployment compensation ''reform'' that cut $450 million in potential annual benefits to workers, angering mayors and unions alike. He alienated a lot of his good followers. For a Democrat, I'd give him an A-minus.''

Earl argues that Midwestern states have much to gain by a closer alliance and much to lose by viewing one another as threats in the race for economic development: ''Our competition is overseas, and for us to try to improve ourselves to the detriment of a neighboring state is ultimately self-defeating.''

And what is the top lesson of his year in office that he would pass along to a successor?

''People want to be led. I don't think they want those in public life to sidestep difficult problems. I think a large part of Ronald Reagan's success is that he appears to be a strong leader - he says all the macho things - but I think people have confused decisiveness there with leadership. . . .

''Jimmy Carter might have been right that there was a malaise of spirit in the country, but you don't wring your hands about it. You get your act together.''

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