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1/5/2010
The $2.7 billion Wisconsin deficit no one told you about
I share the news atrocious news here because it was made public last week (and was included in FoxPolitics News), smack in between Christmas and New Years (and you may not have seen it). Since Todd Berry, President of the Wisconsin Taxpayers Alliance (WISTAX) made the huge deficit public, it’s been mentioned by many and varied media outlets, including David Ignatius yesterday at the Washington Post.
Read Berry’s whole piece – it’s very important stuff. And while you’re at it, send a note to your State Representative and State Senator and see what they think about it.
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 onetime 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.
…. 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.
…. “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).
….[I]t is worth noting that Wisconsin’s deficit per capita was four times larger than California’s.
A free copy of the WISTAX publication quoted above is available by e-mailing WISTAX at wistax@wistax.org. You can also subscribe to WISTAX publications and/or become a supporting member of the nonpartisan, non-profit research organization.
Jo Egelhoff, FoxPolitics.net
COMMENTS
Let me add a few red flags. Before the current economic downturn, former US comptroller General David M Walker warned that in order to pay for unfunded liabilities like Medicare and Social Security, plus various underfunded federal insurance programs, taxes (then 36%) would have to double.
And this spring it was announced by Americans for Tax Reform that the total cost of government was over 60%. That is, all taxes direct and indirect, plus licenses and other fees, and the costs of filling out all those forms and other compliance costs, total 61.34%, up from about 54% the year before. Without any new programs, like health, it is clear that cost of government will have to be about 100% of our gross domestic product. HOW will that be possible?
And state, federal and local governments both increase regulation and taxes, making our economic future even more untenable.
I liken this to Hurricane Katrina x3. Why are so few politicians headed for the high ground?
Ken Van Doren (Tue Jan 05 13:56:05 2010)
Jo:
I addressed this with Representative Dean Kaufert last summer and voiced my concern that the Legislature was not using GAAP (Generally Accepted Accounting Principles) as Municipalities, Counties, and all of the private sector are required to adhere to.
There will several bills at that time that addressed the decade old problem but they never saw the light of being brought out of committee and to the floor. I asked him why not and he said that the state would be forced into "Draconian" measures if they were to use GAAP and that would mean significant cuts to local governments and school districts.
I said if you would have addressed it years ago(when the Republicans were in power) we would not be in the mess we are in. He just smirked and walked away.
I got the same lip service from other legistalors that they thought it "could" be a good idea but no action has been taken. We need to face up to reality and we have run out of smoke and mirrors. Both Democrats and Republicans have ignored this issue and now instead of minor surgery it will be a major one this coming spring for the all but certain budget adjustment bill and next year's budget.
We need to elect representatives that will pledge to right the ship and put GAAP principles in place.
Scott Walker, who is running for Governor, has already stated he would. We need to hold our other representatives accountable to the same plege or find someone to run who will.
The legislature is playing dangerously with the future of our state and most of the legistalors don't even have a business background. It shows and we need to get involved with this upcoming election for the sake of our state and our way of life.
Mike
Mike Thomas (Wed Jan 06 10:46:54 2010)
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