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Families are cutting back, working harder, taking extra jobs and finding ways to stretch the dollars. Families are not alone in their struggles.
Just like a family, state government is trying to do more with less. The downturn in the economy affects the state too. People make less, buy less and the state takes in less money. The state must balance its budget — so something has to go.
Our state is facing a
$650 million deficit in the next 14 months. There has been much discussion about how to cut and what to do. The governor and the two legislative leaders have been in negotiation for several weeks to find answers to the state’s financial problems.
As a rookie state senator, I am just beginning to understand the state’s financial situation and the effects of decisions made by former lawmakers. What I have learned is sobering:
n Over the past 10 years, Wisconsin has doubled its indebtedness — or principal-owed on bonds. Our total outstanding principal owed is over $8 billion.
n The state’s savings account or “rainy day fund” has been very low. In 2002, the fund was only $3,000. Gov. Jim Doyle worked to bring that number to $56 million today. This is a big step forward, but the balance remains the second lowest in the Midwest as a percent of total general spending. Minnesota has more than
7 percent of its general fund stashed away. Iowa and Illinois are close behind. Wisconsin has less than a half of a percent of our general fund in savings.
n In the face of the budget shortfall, the governor
has delayed payments of $125 million in short term obligations. He is not the first governor to act in this way. Both the Senate and the Assembly have agreed to delay another $125 in school payments. Although the delay is only a few weeks, it shifts the payment to a new budget year. This trend in shifting payment started long ago and has an effect on our state’s financial health.
n Moody’s bond rating agency recently revised its outlook for Wisconsin’s bond rating from stable to negative. Some of the factors considered are the indebtedness of the state, the size of the rainy day fund and the shifting of obligations from this year to the next.
n The state’s bond rating is Aa3. Only two states — California and Louisiana — have a bond rating lower than Aa3. This means our cost of borrowing money is higher than most neighboring states.
n The state is paying more in interest. For example, the debt on transportation revenue bonds has more than doubled in the past 10 years.
These conditions are not new to the state although it is disconcerting to learn about them for the first time. Just like a family, we are where we are partly because of the decisions made in the past. We can only do so much today and we must work with the situation in which we find ourselves.
The decisions are difficult. There are no easy answers. Tough times require tough decisions. Sometimes one
of the toughest parts of the job is getting the information to be able to make wise choices.
It is through learning of the effects of our past mistakes that we begin to understand the real impact of the choices we make today.
State Sen. Kathleen Vinehout is a Democrat from Alma, Wis.
