Today's Blog: Time for the Guv to morph into Chris Christie My husband and I and a couple hundred friends watched in Green Bay as ...(more) Search Archives

Blogs

Time for the Guv to morph into Chris Christie (6/28/2011)

Time for Gov. Walker to talk more about the cake (3/4/2011)

Today, reality hits home (3/1/2011)

FoxPolitics News going on hiatus (1/28/2011)

Brown County Executive candidate forum Feb. 8 (1/28/2011)

Education done right (1/27/2011)

To Obama, the ‘We’ is Government (1/27/2011)

(more)

• "Official" deficit. Part of the confusion stems from various uses of the term deficit. One meaning refers to the state’s "official" budget as enacted by the governor and legislature. The 2006-07 budget calls for net expenditures of $13.06b, with a surplus now projected at $70.0 million (m)—$5.0m after a required reserve. Either amount leaves little margin for error. The $70m figure is just 0.5% of expenditures, while $5m is essentially 0.0%. Other states are averaging projected balances of about 5% of spending.
  
• "Structural" imbalance, or deficit. A second type of deficit has come to mean different things to different people. Traditional use of structural deficit suggested a recurring shortage of revenues vs. expenditures—a phenomenon that dogged Wisconsin for a good part of the prior decade. Official word is that there is now no structural deficit: Revenues will exceed spending by $21m this year. As will be seen, however, this is debatable.
  
• Many politicians and reporters have used the term in a second way. By structural deficit, they mean onetime budget-balancing maneuvers, plus promised tax cuts and new spending, that together are "advanced commitments" for the next biennium.

Going into 2007-08, such commitments approach $700m. The figure was $701m before the 2005-07 budget. Indeed, in planning for every budget from 1997 on, the state has faced structural imbalances of between $589m and $1.34b, which helps explain why Wisconsin has long had fiscal problems.

• GAAP deficit. The state’s "official" budget is prepared on a modified cash basis, e.g., expenditures are recorded when they actually occur. The cash approach can "balance" budgets an accountant would see as unbalanced. This leads to a third kind of deficit, a GAAP deficit.

According to generally accepted accounting principles (GAAP) used by the accounting profession, spending commitments must be budgeted and accounted for when made and not when money actually changes hands. Wisconsin has had GAAP deficits since 1990 when it first prepared financial statements according to GAAP. The 2004-05 GAAP deficit was $2.1b, and the 2005-06 amount will likely be similar.

Balanced budget?
Recent years offer several examples of how state budgets, unbalanced per GAAP, are officially balanced. One way to balance a budget is by artificially increasing revenues. The 2003-05 and 2005-07 budgets did that by, among other things, moving a total of $1.1b in gas taxes and related fees from the transportation fund to the general fund. Transportation projects were then paid for with increased highway bonding. User fees earmarked for transportation were instead counted as general purpose revenues (GPR) as are income and sales taxes.

A budget can also be balanced by appearing to cut GPR expenditures. For example, the state used timing differences between local government calendar-year and state fiscal-year budgets to increase property tax credits in 2006-07 that the state won’t "book" and fund until 2007-08. The effect was to "push off" to the next biennium $124m in current expenses.

The gas-tax- and property-tax-credit examples illustrate how the 2005-07 budget was balanced "on paper." However, if over $400m in segregated user fees had not been used to boost GPR revenues, and if $124m in property tax credits had not been "pushed" from this fiscal year to the next, a budget with an "official" net balance of $5m would be a deficit of over $500m—more if other budget balancing techniques used were included.

For a free copy of “’Deficit Day’ Again Observed,” email the Wisconsin Taxpayers Alliance at wistax@wistax.org.

Post a Reply

Print this Article

Email Article to a Friend