By Jody Knauss and Mary Bottari

When grilled by Jonathan Karl on ABC's "This Week" about why he had failed to meet his 2010 pledge to create 250,000 new jobs by almost half, Wisconsin Governor Scott Walker changed the topic. "Look we fixed the budget from $3.6 billion in a hole to surpluses," he assured America. According to Walker, Wisconsin is in the black, unemployment is down, and all is well.

But talk to the folks struggling to address the state’s staggering budget deficit and you get a different story.

"Maybe if Governor Walker was actually in the state he was elected to represent, he would know that this budget and this state is a mess. Cutting UW System by $250 million, taking hundreds of millions of dollars from our public schools and auctioning our state parks off to the highest bidder does not equal a surplus," said State Rep. Chris Taylor (D-Madison), a member of the state’s Joint Finance Committee which has been meeting in marathon sessions for weeks attempting to dig the state out of the hole it is in.

The facts are these: Walker does not have a surplus. He has a $2.2 billion deficit and a big problem. With his budget committee now caught up in a hot debate over how to fund the Bucks’ new arena and bankroll new road-building, Joint Finance is stuck, with no new meetings scheduled. The standoff could delay Walker’s much-anticipated announcement as a candidate for president.

Walker Talks Fantasy Surplus While Proposing Massive Borrowing

That "surplus" Walker is touting on the campaign trail is phony math regarding the next budget, two years from now. It assumes the legislature will not only accept all of the proposed cuts in the Walker’s 2015-2017 budget, but agree to additional education cuts that Walker baked into the next budget to game the numbers.

That won't happen. The Republican-controlled legislature has already made major changes to the budget, including restoring some education funding. And the current deadlock is directly related to concerns over Walker’s willingness to borrow to keep the road-builders happy when the state’s transportation fund is broke. The proposed borrowing will dramatically increase debt repayment costs in future budgets.

Yes, Walker faced a $3.6 billion deficit in 2011 not of his own making. But the current $2.2 billion deficit is entirely a "self inflicted wound," say experts like Jon Peacock of the Wisconsin Budget Project. Due to massive tax giveaways ($275 million and counting) in Walker’s last two budgets and the state’s staggering economy (Wisconsin now ranks now 40th in net job creation and dead last in new business startups), incoming tax revenue is below expectations.

To balance the budget this year, Walker first proposed $300 million in cuts from the state's prized public university system, and millions more from K-12 education, outdoor recreation and conservation, on top of previous cuts. The budget committee has softened some of these, though the pain will still be felt.

But while the public sector gets the ax, Walker is willing to borrow and send the state deeper into the red for favored special interests, giving legislators on both sides of the aisle heartburn.

Slashing Education, Aiding Billionaires

One piece the legislature was having difficulty swallowing was Walker's proposal to issue $220 million in taxpayer-backed bonds to help fund a new arena for the Milwaukee Bucks, when the Bucks' new billionaire hedge-fund owners were only putting up $150 million.

This idea was panned even by his good friends at David Koch's Americans for Prosperity, so Walker recently brokered a new deal which caps the state's contribution at $80 million, but requires Milwaukee city, county, and the local convention authority to pony up nearly $200 million more. Even so, it isn't clear whether the legislature will go along.

Both Democrats and Republicans are already slamming the new plan.

"I am not a believer in government supporting sports arenas for millionaire players and billionaire owners," says state Rep. David Murphy (R-Greenville). State Sen. Fred Risser (D-Madison) said, "At a time when Walker and legislative Republicans are gutting the state’s public education system, and some of our most vulnerable citizens are having their support system pulled out from under them and having to choose between housing and food, it is offensive to propose using taxpayer funds to help build a new arena in Milwaukee for millionaire basketball players and their multi-millionaire owners."

Tied Up in Transit

But the biggest headache for the Joint Finance Committee is transportation funding. The transportation fund is broke. Not-yet presidential candidate Walker has ruled out any new taxes, even a small increase in the gas tax recommended by his own transportation secretary. But continuing several major freeway expansion projects, not to mention beginning to catch up on repairs to the state’s deteriorating highway network, is expensive, so Walker wants to borrow $1.3 billion to fund new road-building.

Even GOP Assembly Speaker Robin Vos is calling that scheme to load up on debt "irresponsible."

State political observer JR Ross notes, "If lawmakers sign off on Walker's plan, Wisconsin would spend 22 cents out of every dollar in its transportation fund just to pay off debt starting in 2016-17. That would be more than double what it was in 2009-10."

Walker also wants to delay scheduled debt repayment, costing the state millions in higher interest costs down the road.

Walker Rejects Free Bucks Stadium and Federal Dollars

In pitching the new arena funding deal, Walker argued that he was performing his "fiduciary responsibility to protect the financial interests of the people of this state" because, he claimed, it would actually cost the state more in lost revenue if the Bucks left Milwaukee than the state will spend to keep them here.

Yet earlier this year Walker rejected a Menominee Tribe casino proposal for Kenosha in which the tribe offered to pay the state's initial offer, a whopping $220 million, toward the Bucks’ new arena. Of course, Walker is famous for turning down $810 million in federal funding to upgrade the state's rail infrastructure and improving passenger rail service.

And Walker continues to refuse to consider Medicaid expansion, costing the state hundreds of millions of dollars. After missing out on at least $200 million in savings in the 2013-2015 budget cycle, newer estimates show state savings of at least $345 million over the coming two-year budget cycle, while also bringing $800 million in additional federal health care spending to the state. A new report from the Kaiser Commission on Medicaid and the Uninsured shows Wisconsin would save more than any other state from Medicaid expansion.

While Walker jets around the nation touting his surpluses and budget acumen, the only topic in Wisconsin's state capitol is the massive deficit, the budget deadlock, and the harsh cuts that will be falling on students and Wisconsin's most vulnerable citizens.