Minding the GAAP: National Comparisons

Wisconsin’s general fund deficit reported in its annual financial statement declined for the third consecutive year and is now less than half as large as in 2011. However, when compared to other states, our fiscal position is not quite as rosy. That is the leading news that came from the December release of Wisconsin’s Comprehensive Annual Financial Report (CAFR).

The CAFR is produced by state accountants and reports state finances using generally accepted accounting principles (GAAP) as opposed to the cash accounting used for state budgeting. A simple example can help explain the difference between the two. Under cash accounting, when Sally buys a new appliance in December with a credit card, no money is considered “spent” until the credit card bill is paid, presumably in January of the following year. Under GAAP accounting, Sally’s charge is a December expenditure; she bought and owns the appliance.

As discussed in our recent Focus newsletter, the state’s GAAP deficit at the end of June 2014 was $1.38 billion, down from $1.73 billion in 2013 and $2.99 billion in 2011. The decline was due primarily to higher ending balances in the state’s general fund and less over-withholding of income taxes due to revisions last spring.

In addition to allowing a look at state finances through accountants’ eyes, GAAP reporting is useful because its uniformity permits comparisons across states. Although 2014 figures are not available for all states, 2013 figures show the Badger State still has work to do.

Very few states have a GAAP deficit. In 2013, the number—which included Wisconsin—totaled six. On a per capita basis, Wisconsin’s deficit ($303) was the third largest behind only Illinois ($570) and California ($375). Even with the improvement in 2014, the Badger State will likely remain in that spot.

Moreover, GAAP deficits have been more persistent here than in almost every other state. Since 1992, only two states have reported GAAP deficits every year: Wisconsin and Illinois. On a per capita basis, Wisconsin’s were larger in every year during 1992-2008. Since then, the tables have turned. However, the Badger State has a long way to go to join the other 44 states with GAAP surpluses.

 

 
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Filling Potholes: A New Look at Funding Local Transportation in Wisconsin

Wisconsin has a long-accumulating transportation finance problem. To help improve understanding about the challenges and possible solutions to this issue, the Local Government Institute (LGI) asked WISTAX to conduct a study. The WISTAX study is available at the LGI website: http://www.localgovinstitute.org/potholes.

 

 
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New Census Numbers: Illinois Tax Rank Tops Upper Midwest

In an unprecedented development, Illinois has leapfrogged every state in the upper Midwest to become the region’s most taxed state, according to federal figures for 2012 released today.

The newly available U.S. Census data show Illinois’ state-local taxes climbing to 11.7% of personal income, ninth highest in the nation and well above the U.S. average (10.5%).  In 2009, taxes took only 10.0% of Illinois income when the state ranked 26th.

By comparison, Wisconsin’s state-local tax load, which had increased from 11.2% of income in 2009 to 11.7% by 2011, retreated to 11.4% in 2012.  The state’s tax rank, which stood at 10th in 2009, fell to 13th by 2011 before moving up one notch to 12th in 2012.

State tax increases enacted in the wake of the “great recession,” most notably on income, were largely responsible for Illinois’ surprise jump, according to WISTAX analysis of the numbers.

WISTAX staff analyzed the newly available data from the U.S. Census Bureau, which each year releases state-local fiscal information for the previous two years. Hence, tax changes beyond mid-2012 are not included in the Census figures.

Like Illinois, Minnesota also increased taxes coming out of the recent downturn and moved ahead of Wisconsin in the 50-state comparison.  Minnesota taxes claimed 10.7% of income (14th highest) in 2009 and climbed to 11.9% (10th) in 2011, before edging down to 11.6% (still 10th) in 2012.

Illinois and Minnesota were not alone in making significant moves in tax rank from 2009 to 2012.  Indiana (13th to 23rd), Florida (36th to 47th), Louisiana (19th to 37th), Michigan (23rd to 32nd), Montana (17th to 33rd), and Nebraska (20th to 28th) all moved down significantly.

Meanwhile, Connecticut (15th to 6th), Delaware (29th to 16th), Nevada (34th to 19th), and Oregon (38th to 27th) all recorded major jumps in rank.

There’s much more to be unpacked in these new Census figures and in the coming weeks we’ll examine the data in detail and provide greater analysis.

 

 

 
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