Wisconsin Taxpayer Magazine The Ups and Downs of State Fiscal Health

April 2016  •  Vol. 84 No. 4
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  • Summary
  • Press Release
  • Wisconsin’s official financial statements are unknown to most residents, but they contain information that can be used to measure state fiscal health over months, a year, or much longer. A review of these reports shows fiscal health eroding during 2002-09 and then improving. Nevertheless, despite recent gains, the Badger State ranked 37th among the states in 2013 in overall fiscal condition, based on an average of fiscal measures covering multiple time frames.

  • Todd A. Berry or Dale Knapp
    608-241-9789
    wistax@wistax.org

    Wisconsin’s Fiscal Health Improves, But Still Lags Most States

    WISTAX Uses Official Financial Statements to Measure Fiscal Health During 2002-15

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    MADISON—The state’s announced restructuring of more than $100 million of debt to shift expenditures into the future raises a question asked often over the past 15 years: How fiscally healthy is Wisconsin? There is no need for the debt push-off if the state has adequate reserves or cash on hand. The answer comes in a new report from the Wisconsin Taxpayers Alliance (WISTAX), “The Ups and Downs of State Fiscal Health,” which draws mainly on information from the state’s official financial statements. Now celebrating its 85th year, WISTAX is a nonpartisan research organization dedicated to citizen education.
    WISTAX researchers examined a number of short-, mid-, and long-term measures of fiscal health, including two that focused on Wisconsin’s long-term liabilities, mostly debt. Liabilities per capita and relative to total state assets deteriorated during 2002-11, as long-term obligations rose 55% from $9.5 billion to $14.7 billion. Three actions accounted for most of the increase. First, the state borrowed $1.8 billion to fund post-retirement benefits for state employees. Second, it borrowed $1.1 billion to fund transportation projects after using gas taxes to balance the general fund budget. Third, rather than pay off debt as scheduled, the state restructured $985 million of debt, pushing borrowing costs into the future.
    According to the Alliance, long-term liabilities have stabilized since 2011. In 2015, they were $2,700 per capita, down from $2,811 in 2011 and about the same as in 2004 ($2,738). Liabilities were 35.6% of total assets, an improvement over both 2011 (41.2%) and 2004 (40.9%).
    Despite this improvement, Wisconsin’s long-term fiscal health still trails most states. In 2013, the Badger State ranked 38th on long-term health (a combination of the two liability measures mentioned and a third discussed in the report). Among neighbors, Iowa (13th), Minnesota (23rd), and Michigan (25th) placed in the top half of states, while Illinois ranked 49th.
    WISTAX notes that the state’s long-term fiscal challenges are partly attributable to short-term decisions made over the past 15 years. In particular, budgets were repeatedly enacted with only small ending balances, rendering
    state finances vulnerable to recession. Rather than match revenues and expenditures, governors and lawmakers often used balances in other funds to keep the state’s general fund in the black. For example, $826 million from the tobacco reserve fund and $200 million from the injured patients and families compensation fund were used to pay for general fund programs. The state also had persistent imbalances in its unemployment reserve fund, draining a $1.5 billion balance over seven years.
    As a result, four measures of short-term fiscal health—ranging from 60 days to one year—deteriorated for much of 2002-10. Of particular note, total state spending exceeded revenues in four of nine years during 2002-10. Revenues exceeded spending in every year since, peaking at a 7% differential in 2013.
    Combining all short-, mid-, and long-term health measures shows Wisconsin’s overall fiscal health still has room for improvement. In 2013, the state ranked 37th on total fiscal health, and trailed three of its neighbors (Iowa 17th, Minnesota 24th, and Michigan 27th). Illinois ranked 49th behind New Jersey.
    The information used in the WISTAX study is from the state’s Consolidated Annual Financial Report, or CAFR, that is compiled each year by state accountants using generally accepted accounting principles (GAAP). The CAFR covers all state spending and revenues, not just the general fund which is often the focus of elected officials and the press. Use of the CAFR and GAAP accounting permits meaningful tracking of state fiscal health during 2002-15 and makes possible fair comparisons across states.
    For more information, a free copy of The Wisconsin Taxpayer report, “The Ups and Downs of State Fiscal Health: Wisconsin’s Decade-Long Roller Coaster Ride” is available by calling 608.241.9789; emailing wistax@wistax.org; visiting www.wistax.org; or writing WISTAX at 401 North Lawn Ave., Madison, WI 53704-5033. 

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