The Wisconsin state budget is balanced. That’s what Gov. Scott Walker tells us. The Wisconsin state budget isn’t balanced. That’s what Wisconsin Department of Administration Secretary Mike Huebsch tells us.
So what’s going on? Does Wisconsin have its fiscal house in order? Doesn’t state law require a balanced budget?
The answer is both Walker and Huebsch are correct. The state budget is balanced — depending on which set of accounting rules you use when you open up the budget book.
Using accounting maneuvers to balance Wisconsin’s budget is a bipartisan practice that goes back several governors and legislatures. By using one-time revenues, transferring money from one fund to another, borrowing or delaying payments, the state can achieve a balanced budget through the cash method accounting.
It’s like a big credit card — you use the revenue from what you have collected now, but don’t pay the credit card bill until later, when you have the money to do so. The problem is later seems to never come.
It doesn’t work that like that in the real world — when the bills need to be paid when they become due. That’s why once a year the state controller prepares the state’s official financial statement that follows generally accepted accounting principles (GAAP) used in the business world. Suddenly the ink that was black turns red, and the structural deficit appears.
By using cash accounting, the state will have an estimated surplus balance of $68 million on June 30, 2013. But in the 257-page Wisconsin Comprehensive Annual Financial Report released Dec. 21, the state’s general fund has a deficit of nearly $3 billion. Our ongoing spending is simply more than our ongoing revenue.
The deficit is certainly not all Walker’s fault. Chalk this one up to our state leadership – like former Gov. Jim Doyle — that has allowed us to kick the can into the next biennium.
But Walker did say during his 2010 campaign that he wanted to the state to adopt GAAP, which includes both cash method and accrual methods of accounting. The purpose would be to match revenues with expenditures for the periods they are generated, just like other units of government have to do in Wisconsin. And he’s the governor now, so the ball’s in his court.
So let’s make sure the governor speaks clearly when he says the budget is balanced, which will obviously be a campaign talking point in the likely recall election. At the same time he’s taking credit for making tough choices to balance the budget, he is advising the feds that the state really does have a deficit. And it’s under the auspices of the same Affordable Health Care Act despised by many Republicans that the letter from Huebsch to U.S Department of Health and Human Services was sent.
The Affordable Health Care act amended the Social Security Act and allows states to change the income guidelines for medical assistance coverage if they can show a budget deficit.
Huebsch’s letter certified that Wisconsin has a budget deficit based on generally accepted accounting principles. It does not mention that there is no deficit through the cash method accounting. Perhaps the feds won’t ask.
Changing the income guidelines would affect coverage for about 53,000 adults. State health care expenditures have soared because of heavy demand, which won’t change until more people are back to work and the economy improves. But we hope that spending cuts can be found in other areas rather than on the backs of the less fortunate who need health care coverage.
There are many difficult budget decisions facing state leaders. We don’t need more magical acts in Madison or slick sideshows for political gain —from either party. We need real explanations and solutions.
Our budget’s not balanced. Fixing Wisconsin’s real budget deficit won’t be solved overnight, which you won’t hear much about in an election year.
But for our long-term fiscal health, it’s essential.