Other Views: Does new budget take us back to the future?

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Todd A. Berry
Friday, July 5, 2013

MADISON--Save before you spend. Don’t spend more than you earn.

Financial planners often share this common-sense advice with clients. It is wise counsel for state officials, too.

Unfortunately, our political leaders have long had difficulty following it.

It’s not that they don’t understand the value of saving and balancing budgets.

As years of economic boom, surging tax revenues and overly ambitious state budget commitments gave way to recession and deficits, state lawmakers enacted two laws aimed at avoiding future fiscal problems.

The first, part of the 1999-2001 budget, required the state to build a contingency reserve equal to 2 percent of general fund spending by 2005-06.

Problems began immediately, as that same budget exempted 2001-02 from the requirement. The budgets that followed continued to ignore, reduce, or delay the required fiscal cushion.

The 2011-13 budget deferred the 2 percent requirement to 2015-16. And the 2013-15 budget passed by the Legislature pushed it off to 2017-18.

The second law—holding spending below revenue in any given year—has fared no better.

A Democratic Legislature amended the 2009-11 budget to exempt fiscal 2011 from the law’s impact.

The 2011-13 Republican Legislature went further, requiring that spending had to be less than revenue—but only in the second year of a biennium, not both.

This Legislature continued the drift from discipline. When lawmakers discovered several weeks ago that revised, ongoing revenues would not cover ongoing appropriations, they simply exempted 2014-15 from the second-year rule.

Of the last eight biennial budgets, this latest one is perhaps the most surprising—and ironic.

Having made extraordinarily difficult fiscal decisions two years ago, state officials are about to end the fiscal year with $670 million in the bank. That’s a surplus equal to more than 4 percent of annual state spending—double the 2 percent requirement.

Preserving even half that would have provided some protection against repeating the controversial spending cuts and growth-sapping tax increases of recent years.

In the end, the Legislature reserved only $65 million of the $670 million as a recession hedge. And even that amount assumes that state revenues in each of the next two years will run $180 million ahead of January’s projections.

This is risky because the $180 million the state now expects is less than the average annual forecasting error of the past decade.

To their credit, state leaders some years ago enacted laws to encourage precautionary saving and prudent spending. Sadly, the laws were ignored.

How ironic that, with the best prospects in years to restore long-term fiscal stability to Wisconsin, the 2013-15 budget risks returning us to the difficult years of the previous decade.

Todd A. Berry is president of the Wisconsin Taxpayers Alliance, 401 N. Lawn Ave., Madison, WI 53704-5033; phone (608) 241-9789; website www.wistax.org.

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