Mailbag; Rep. Brett Davis Writes: The Path to Responsible Budget for Wisconsin

80th Assembly District Update - October 30, 2009
Path to Fiscal Recovery is Responsible Budgeting
By Rep. Brett Davis & Rep. Leah Vukmir


In these tough economic times almost everyone has had to take a hard look at their budget. Small businesses and families sit down on a regular basis and examine ways to not spend more than they bring in. However, that same simple and responsible budgeting rationale has continued to elude those in government that craft the state budget.

For two decades our state has had a budget deficit despite the fact that Wisconsin's constitution requires the legislature to maintain a balanced budget. The problem lays in how "balanced" is defined. The Department of Administration and State Controller submit two reports each budget cycle: one based on statutory standards, and another based on Generally Accepted Accounting Practices (GAAP) as approved by the Government Accounting Standards Board.

In 2007, the budget report based on statutory standards claimed a general fund balance of $130.7 million. This report allows various budgeting gimmicks, such as lapses from segregated funds, to be used to "balance" the state's budget. The other, based on GAAP, revealed a more realistic balance of a $2.5 billion deficit. Sadly, there is no requirement for the budget to adhere to the principles of GAAP.

If our budget is compared with other states, only Wisconsin and Illinois have reported GAAP deficits in each of the past 10 years. In 2007 alone, Wisconsin joined the ranks of California, Illinois, and Maine as the only four states with GAAP deficits. In fact, Wisconsin's deficit, as a measure of personal income and population, was the largest in the country for our size.

Things are not getting any better, either. The state budget that passed earlier this year continues these harmful fiscal policies, and has once again spent its way beyond the means of the taxpayers to the tune of $2 billion.

As a state, we cannot allow this to continue. One thing is clear - state government shouldn't be exempt from common-sense budgeting techniques. Therefore, we are introducing the Truth in Budgeting Act, which will implement two major provisions to put Wisconsin back on the road to fiscal recovery.

First, the legislation will ensure balanced and honest budgeting practices. Starting in 2015-16, the bill will require the state budget to be prepared according to GAAP principles. While we would all prefer to accomplish this far sooner, we also recognize closing this large of a budget gap will take time.

The second provision focuses on budget accountability by implementing zero-based budgeting. Currently, state agencies operate on the cost to continue, which equates to the amount received last year plus additional funds based on inflation. Instead, the Truth in Budgeting Act requires agencies to prepare their budgets starting at zero, and justify each component on the basis of cost, need, and relation to statutory responsibilities. Ultimately, this will provide for increased accountability through executive and legislative review of agency funding.

By enacting these common-sense budgeting reforms, we can take a large step toward putting our state back on the right track. Balancing our state budget should be a simple concept that both sides of the aisle can get behind. We believe strongly that government needs to learn to tighten its belt, just like families and small businesses across Wisconsin, especially in times of economic downturn.