Milwaukee Biz Blog

During this season, political pundits often pen columns offering tongue-in-cheek holiday gifts for politicians. With so many new faces (38) in the 2011-12 Legislature, this might be the year to reverse the gift-giving and suggest a few real gifts state legislators could offer constituents.

First, some stocking stuffers . . .

Hearings. In recent years, lawmakers have voted on some bills without a public hearing or with only a last-minute one. A useful legislative gift to constituents is a pledge to hold hearings on all bills, and to provide at least a week’s notice beforehand.

Scheduling. Too often, the legislature does important work after midnight or on weekends. The new legislature could end this practice. Concentrating floor business on Tuesday, Wednesday, and Thursday would add further family-friendliness to the proposal.

Catchall budgets. State budget bills used to be modest in length and limited to financial items.  Today they exceed 1,000 pages and contain many “nonfiscal” items. Lawmakers could commit to removing all nonfiscal policy items from budgets and redraft them as separate bills.

Budget earmarks. Another budget problem involves amendments from individual lawmakers that have no state benefit. Like federal earmarks, these amendments impact specific local programs or policies. Legislative leaders (backed by gubernatorial veto) could stop this practice, too.

“Affordable” gifts. The state budget prompts other gift-giving ideas for a new legislature eager to please voters.

Deadlines. State budgets here are sometimes not enacted until fall. To ensure timely budgets, Wisconsin could look elsewhere for ideas. Some states shut down nonessential state programs until a new budget passes. Others stop paying or freeze legislative expenses or salaries until passage.

Prudent planning. Financial planners urge households to set aside savings for emergencies. State government has rarely done this.  A welcome gift to the state would be legislative and gubernatorial commitments to follow the intent of state law and place 2 percent, or more, of what it appropriates in statutory reserves.

More inclusion. In many states, the two legislative houses and multiple committees make independent budget decisions. In Wisconsin, activity is concentrated in the 16-member Joint Committee on Finance (JCF). This approach may streamline budgeting, but it also leaves many important decisions to as few as nine of 132 legislators. At one time, JCF used issue-area “study groups” that included JCF members and legislators from relevant standing committees. This added expertise, diversity, and credibility to budget deliberations; returning to it would be a meaningful gift to all 132 legislators and the people of Wisconsin.

“Big” presents

In addition to small gifts, what eye-popping presents might legislators offer the people they represent?

Calendar discipline. Wisconsin is one of a few states without a time limit on the length of legislative sessions. Lawmakers could establish statutory or constitutional limits on the number and timing of total days in session.  Such a change could end tardy budgets; create more opportunities to serve for citizen-lawmakers; and reduce the cost and mischief associated with per diems claims.

Fiscal discipline. The state budget process is unusual: Spending decisions come first; if revenue is needed, tax and fee hikes are voted; and, if any money remains, it is saved.  A major reform could reverse the process. First, “budget framework” legislation would set the revenue amount available and make a mandatory appropriation to statutory reserves. Then, remaining revenue could be spent or taxes cut. This would ensure that the state manages its finances responsibly - saving first and spending within its mean. An added advantage might be an end to recurring state budget crises.

Todd Berry is president of the Wisconsin Taxpayers Alliance.

Wisconsin can be proud that more people — over 300 — are running for the state legislature this year than in any gubernatorial year in at least two decades.

Now it’s our turn. Candidates are knocking on our doors, sharing brochures that all too often make unrealistic promises. Let’s greet them with an election-year resolution to encourage informed discussion of real issues with unprecedented candor.

The first step in keeping this resolution is to identify and understand the challenges Wisconsin faces. As it has in past election years, the Wisconsin Taxpayers Alliance (WISTAX) is working to educate candidates and voters. WISTAX is an independent, nonpartisan organization dedicated to improving state and local government through citizen education.

One way we do this is by providing factual information to every legislative hopeful, regardless of party or political bent. WISTAX briefing packets arrived several weeks ago, providing detailed information on such issues as the state deficit, prison costs, schools, public employee benefits, and unemployment compensation.

Another way we do this is by giving voters clear, succinct background information on major issues. The latest issue of our monthly Taxpayer magazine does this and suggests possible voter questions for candidates. You can get a free copy by going to our website, www.wistax.org.

Armed with this information, we must ask candidates specific questions to determine who would best represent us. No issue is more important than the economy. Jobs and output have declined. State per capita personal income is 6 percent below the nation’s. We need to ask candidates what Wisconsin government can or should do to boost the economy.

Taxes are another popular issue. State and local taxes claim 11.8 percent of personal income, 13th highest among the states. Part of the reason we tax ourselves more is that we make below-average use of fees and rank low in receipt of federal dollars. Ask candidates what combination of fees and taxes they think is best to fund government.

A third area of broad interest is schools. With enrollments declining in many places, districts face state-imposed revenue caps. Yet labor, transportation, and utility costs are increasing. The revenue-cost gap presents tough choices for school leaders. WISTAX research shows that small, sparsely populated districts spend more per student than other districts. Ask candidates what can be done to address the problems such districts face.

Higher education is a related issue. As state support as a share of total college and university spending has declined, students are paying for a larger part of their education. Ask candidates what share of costs they think students should pay.

Wisconsin has good roads, according to federal reports. Wisconsin spent $627 per capita on highways in 2008, 12th highest nationally. Transportation is funded through “earmarked” gas taxes and registration fees that, in recent years, state officials have taken to balance the budget. Ask candidates which of the following approaches to transportation finance they support: increased taxes and fees, more borrowing, an end to using transportation dollars for other purposes, or less road construction.

Finally, there is the issue of state deficits. In 2011-12, the new governor and legislature will inherit a $1.2 billion structural imbalance, the largest since 2003-04 and the second largest ever. This will require tough decisions about cutting costs and raising revenues. Ask candidates if they are committed to a truly balanced budget and what specific steps they would take to ensure it.

If candidates and voters make a concerted effort to be better informed this year, and if we ask candidates for specific answers to our questions, the result can only be a better legislature come January.

Todd A. Berry is president of the Wisconsin Taxpayers Alliance.

A week before Christmas, an important report appeared on a Wisconsin government website. There were no press releases from Madison politicians. No headline news stories.

Yet no public official, taxpayer or citizen can afford to ignore the report’s bottom line: According to its just-released financial statements, state government closed its 2008-09 books with a $2.71 billion deficit in its general fund.

To many readers, this might come as a surprise. By law, state government is supposed to balance its budget. On paper, it does. However, for more than a decade, governors and legislators of both parties have “balanced” budgets through use of accounting maneuvers, timing delays, borrowing, and billions in one-time money.

When the state controller, a CPA, prepares the state’s official financial statements, he must follow generally accepted accounting principles, or GAAP. That means he must reverse the budget gimmicks and accurately represent the state’s true financial condition. When he does this, the budget’s black ink turns red.

What does this mean in everyday terms?  Suppose you use your credit card to buy a new living room set. You take it home; the kids, their friends, and your pets make active use of it.

Credit card or no credit card, according to the state controller - who must follow accounting rules - you spent money. However, that is not the way the folks under Madison’s Capitol dome see it. The living room furniture might be well used, but they don’t budget the money until the credit card bill has to be paid.

Now, some state officials who have practiced politics full-time will try to reassure us by saying: “There’s no real problem; it’s just the recession.”

True, this year’s deficit is the largest ever reported. But it is the fifth consecutive year that the GAAP shortfall exceeded $2 billion and the ninth that it has topped $1 billion. We have not had a recession every year since the late 1990s. This recession didn’t really get underway until early 2008.

Even more troubling than the size of the deficit is its trend. Since 1999, the shortfall has grown in every year except one:  $830 million in fiscal 1999, $1.21 billion in 2000, $1.48 billion in 2001, $2.24 billion in 2002, $1.93 billion in 2004, $2.12 billion in 2005, $2.15 billion in 2006, $2.44 billion in 2007, $2.50 billion in 2008, and now, $2.71 billion in 2008-09.

“No need to worry. Other states are in worse shape,” career legislators will tell us.

Hmmm. We don’t yet know how other states’ 2008-09 deficits will compare with our $2.71 billion hole. But we do know what states reported in 2007-08. Wisconsin had a deficit of $2.50 billion. Three other states were in the red, according to their statements: California ($4.17 billion), Illinois ($3.93 billion), and Maine ($0.24 billion).

The problem with this comparison is that it ignores the relative size of states. California has 36.8 million people; Illinois, 12.9 million. Wisconsin has only 5.6 million residents. When 2007-08 deficits are compared on a per capita basis, the Badger State had the largest GAAP deficit in the nation ($445 per person), followed by Illinois ($305), Maine ($181), and California ($113).

Figures like these led the Pew Trusts recently to name Wisconsin one of 10 states most in “fiscal peril.” The news made headlines around the state. Of the states listed, however, only California, Illinois and Wisconsin reported GAAP deficits last year. Pew said California “was in a league of its own.” Yet it is worth noting that Wisconsin’s deficit per capita was four times larger than California’s.

Todd Berry, Ph.D., has been president of the Wisconsin Taxpayers Alliance (WISTAX) since 1994. Founded in 1932, WISTAX is a nonprofit, nonpartisan public policy research organization dedicated to teaching and informing Wisconsin citizens, public officials, and the press about our government.

As the proposed 2007-09 state budget has worked its way through the Legislature, it is readily apparent that our elected officials, regardless of title or party, have said little or nothing about the fundamental condition of state finances. By contrast, there have been countless press releases focusing on detail - specific tax increases, individual program changes and so on.

Nevertheless, the people have a right to know. According to Wisconsin's Comprehensive Annual Financial Report, or CAFR, the state ended the most recent fiscal year with a $2.15 billion deficit. Unlike state budgets that do not account for all future commitments, thus masking our true financial condition, the CAFR prepared by the state controller's office must follow generally accepted accounting principles (GAAP) from the nation's Governmental Accounting Standards Board and recognize these obligations.

This explains why state budget officials said the 2006 general fund balance was $49.6 million, while the controller put the deficit at $2.15 billion.  Last year, Wisconsin was one of only three states with a GAAP deficit and, relative to population, it had the largest deficit in the nation.

The state controller reported a second figure regarding the state's net assets that also merits attention. Accounting lingo can be confusing; but, in household terms, net assets are simply savings and investments, plus the value of cars, housing, and other property, less any loan debt.
According to the controller, the state's unrestricted net assets for governmental purposes were -$8.23 billion. According to the CAFR, "a positive balance in unrestricted net assets would represent the amount available to be used to meet a government's ongoing obligations to citizens and creditors." Wisconsin cannot now do that without selling roads, buildings, parks and campuses.

Much of the reason for the large negative asset amount is the state government's growing debt load.  In 2002, general obligation, revenue, tobacco and related bond debt for government activities equaled $4.13 billion. By 2006, the total was $8.99 billion, up 117 percent in four years.

These large negative numbers may not concern state officials, but they do impact Wisconsin's fiscal reputation. The simplest evidence comes from the nation's three leading bond-rating firms.  On average, 34 states have bond ratings higher than the Badger State; only three states have lower ratings. The figures from one firm, Standard and Poor's (S&P), are even worse, with 40 states rated higher than us and only two lower.

Wisconsin was settled mainly by Yankee, German and Scandinavian farmers who fervently believed in hard work, not in spending what they did not have. I don't think that today we are much different from our forebears.

Then why do the official financial reports tell us year after year that state government is running mounting deficits, as our bond ratings fail to improve and our debt continues to grow?

Certainly, governors and legislators of both parties, past and present, deserve much of the responsibility. But, as citizens, taxpayers and voters, we are not blameless. We have not done our homework. We have not insisted that our elected officials manage state finances like our forbears led their own lives.

The state budget has not yet been enacted. Whatever your individual opinion on these issues, you have a responsibility to communicate your expectations to your state officials. If you don't, your children and grandchildren will face even more troubling state finances in the years to come. And the hard-earned legacy of our Badger ancestors will be lost.

Todd Berry is president of the Wisconsin Taxpayers Alliance.