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.