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Will Wisconsin's Budget Stay in Black?

Written By: Ryan Ekvall - Wisconsin Reporter  |  Posted: Tuesday, December 4th, 2012

WisconsinReporter.com

             What a difference a biennial budget makes.

            At the beginning of 2011, with a $3.6 billion structural budget shortfall, Gov. Scott Walker and the Republican-led Legislature proceeded to cut aid to schools and overhaul public-sector employment compensation to match most of those cuts. They restructured some $500 million in short-term obligations to free up cash.

            The budget was balanced and after higher-than-expected revenue collection, Walker deposited $109 million into the state's depleted "rainy day fund" in 2012.

            One budget cycle later, the public trough may become more crowded, with an increased appetite for public dollars among Democrats, Republicans, municipalities and other special interests. And although the structural deficit was eliminated in the 2011-13 budget, Wisconsin owes more money than most politicians care to discuss.

            "Given the austerity in the last budget, there's going to be a lot of interest groups that are looking to get their piece of the pie," said Dale Knapp, research director at the nonpartisan Wisconsin Taxpayers Alliance.

            "Legislators have to sort through and think what they're priority is going to be … I think in terms of fiscal prudence one of the things they need to seriously think about is looking at a fairly healthy budget reserve balance to protect us from downturns. Start saving a little bit, put some money away. Times aren't great, but they're better than they have been."

            Earlier this week, Joint Finance Committee co-chair Sen. Alberta Darling, R-River Hills, and Sen. Tim Cullen, D-Janesville, spoke favorably of a potential $200-million taxpayer-funded venture capital project.

            Newly elected Assembly Speaker Robin Vos, R-Rochester, told WisPolitics.com that he wanted to "put more money into schools where it's needed" and hopes that public employees "are given an opportunity for a raise."

            In the previous session of the Legislature, public employees were required to contribute to their own pensions and, in many cases, to pay more for their health care coverage under Walker's Act 10, a full-scale reform - opponents say assault - on public-sector collective bargaining.

            Mayors and city managers from across the state called on Walker and the Legislature to boost shared revenue by about $48 million, the amount the Legislature trimmed from city and village shared revenue last year.

            There's been talk of a jobs-training bill and replenishing the oft-raided transportation fund. Act 10, and all the taxpayer savings it allows, remains tangled in the court system.

            It's still early in Wisconsin's budgetary process - agencies haven't yet submitted their requests to the governor's office. But the state's $342 million in excess revenue - remember, it isn't a surplus until all of the bills are paid - from fiscal year 2012 could evaporate along with the rainy day fund balance.

            Knapp noted that the Medicaid deficit will likely grow in 2013, the state still has a Generally Accepted Accounting Principles, or GAAP, deficit of a "couple billion dollars," and the uncertainty of the costs involved in the new health care law means that lawmakers have less wiggle room than they'd like to believe.

            According to the most recent Comprehensive Annual Financial Report, the state has $13 billion in debt outstanding and owes $760 million to unemployment trust funds. The unfunded portion of public-sector retiree health benefits is north of $1.5 billion. And while the state fancies its pension obligations fully funded, it's actually short some $63 billion, according to market valuation.

            "Wisconsin has no business spending any additional money," said Frank Keegan of State Budget Solutions, a free-market organization that tracks state budgets - gimmicks and all - and advocates for fiscal reform. "They say their pension fund is 100-percent funded. It's only about 61-percent funded.

            "All that risk is on the taxpayer. Politicians should pay down the debt, not take on new programs. Anytime they get any breathing room, they go on a spending spree," Keegan said.

                Contact Ryan Ekvall at rekvall@Wisconsinreporter.com

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