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Here’s a paradox: Gov. Scott Walker’s budget, which includes some of the toughest cuts ever seen in Wisconsin, increases spending by six percent. That was the surprising conclusion of a recent analysis by the Wisconsin Taxpayers Alliance, whose conclusions were echoed by the nonpartisan Legislative Fiscal Bureau. Yes, Walker is cutting education funding, but he’s also increasing health care funding for the poor and lowering the budget’s structural deficit.

On Monday, the Fiscal Bureau released its startling conclusion: The 2011-13 biennial budget increases Wisconsin’s spending of state and federal dollars by about $609.5 million, or 1 percent. Previously, the Walker administration had said its budget would cut spending by 6.3 percent. But that decline in spending, it turned out, included money transferred to two new public authorities created under the budget: the ones for UW-Madison and the Wisconsin Economic Development Corp., the private-public economic development organization that would replace the state Commerce Department. Take that spending into account, the Fiscal Bureau said, and total spending increases 1 percent.

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And earlier this month, an analysis by the Taxpayers Alliance, a non-profit tax watch group, found the Walker budget would increase spending in the state’s general fund – which is funded by state income, corporate and sales taxes – more than 6 percent in the 2011-13 biennium when compared to 2009-11. The group also found that if you disregard UW-Madison and the Commerce Department, spending in all other areas would grow 1.5 percent between the two budgets.

Walker’s budget not only makes major cuts to local government and school aid, it also figures in large savings from increased health plan and pension contributions by state employees. So why isn’t spending lower?

“If you’re looking for a culprit, you’ve got to say it’s Medicaid and the structural imbalance carried over from the past,” says Todd Berry, president of WisTax.

About $1.2 billion in federal stimulus funding for Medicaid helped balance the 2009-2011 state budget, but that funding has expired. Meanwhile, Medicaid enrollment has almost tripled in Wisconsin since 1998, rising particularly quickly in the wake of the recent economic downturn. The program, paid for with a mixture of state and federal funds, provides health care services to the state’s poor.

Says Walker’s executive budget summary: “The cost of the (Medicaid) programs has grown tremendously, exerting pressure on all other areas of the state budget and putting the future of the programs at risk.”

Although it directs major state resources to support the programs, Walker’s budget still requires the state Department of Health Services to find about $500 million in “re-estimates and efficiencies.”

The other factor driving up spending, according to Berry, is Walker’s desire to fix the state’s structural imbalance. The governor inherited an estimated imbalance of about $1.2 billion going into fiscal year 2012, which begins July 1.

Berry says past budgets were balanced by delaying payments into later fiscal years or drawing money from segregated funds (such as the state transportation fund) that would have to be paid back later. These maneuvers created the so-called “structural imbalances” that Walker decries and is seeking to eliminate.

They’ve been mounting in this state for many years, Berry says. “In the past 10 to 15 years, we have either increased taxes or played games or both.”

According to the WisTax report, structural imbalances carried over from one state budget to the next have exceeded $500 million since 1997.

This budget is much cleaner. “There is a limited structural imbalance going into the next budget, which is good news,” Berry says. “They haven’t done any major accounting tricks or transfers.”

But it’s not totally clean. WisTax notes that Walker’s 2011-13 budget refinances $438.5 million in state debt, a move that “helps balance this budget in exchange for higher debt service later.” Berry says the refinancing allows the state to avoid debt payments in 2011-13, postponing them to a later date when they will be larger.

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