Report says state budget woes mostly self-inflicted

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In his State of the State address Gov. Jim Doyle warned that the state's $5.4 billion budget deficit might grow.

A week later it did, to $5.7 billion, according to figures from the Legislative fiscal bureau.

A report by the Wisconsin Policy Research Institute finds that while the recent economic downtown has a role in the state's budget woes, spending by the governor and Legislature are the main reason for the state's budget problems.

"When faced with balancing the budget or spending more taxpayer money, the governor and Legislature virtually always side with spending as much as possible, leaving future government officials to address shortfalls," the report read.

According to the report "The Wisconsin Budget Deficit - A Self-Inflicted Wound," one of the chief causes for budget problems is a practice by both the governor and Legislature of taking money from segregated accounts to fill holes in the general fund.

The report notes that in Gov. Jim Doyle's 2003-05 biennial budget he shifted $100 million from the transportation fund and put that into the school aids equalization formula.

Money from the transportation fund comes from gasoline taxes and from license fees not general revenue such as individual income taxes, sales taxes or business taxes where the state gets the majority of its revenue.

The money for school aids equalization had previously been paid for with money from the general fund.

"By replacing $100 million of spending previously paid from general purpose revenue with segregated transportation funds, the governor and the Legislature sought to create the appearance that general fund spending was being held in check," the report read.

Another example is during last year's budget repair bill the governor and Legislature took $200 million from the state's Injured Patients and Families Compensation Fund to fill in for a shortfall in general revenues.

The state is now being sued by the Wisconsin Medical Society which claims that money was not the states to take since it was paid for by taxpayers' funds, rather than by fees from doctors.

The fund helps protect doctors against malpractice lawsuits.

The report also puts the blame on the current budget woes on the fact that the state has less than 1 percent of its general revenues in a budget stabilization fund or "rainy day fund."

State spending has also increased according to the report.

It notes that from 2004-08 state general fund spending increased by 25 percent or about 5 percent a year.

WPRI points out that if the state had held annual spending increases to the inflation rate, general fund spending would have been $943 million lower in 2008.

Consequently, an increase in state spending has worsened the current fiscal condition by approximately $943 million, according to the report.

Like other states Wisconsin is looking for a bail-out from the federal government. The current spending package proposed by President Obama was passed by the U.S. House, but is now faltering in the U.S. Senate.

The reported noted that federal bail-out money would probably make matters worse in the long-term because the money is a one-time package and that it will force either tax increases or program cuts later on.

The report suggested some fixes to the budget problem.

• First, simply stop spending more than is being taken in.

• The report also recommends setting long-term budget targets for spending in key areas. Those recommendations should be based on what the report terms as sustainable projections of affordable overall spending levels.

• Another suggestion is to not start any new programs and use any federal money to fix current budget problems and to enhance the state's rainy day fund.

• Reduce the use of debt or bonding is another suggestion.

• And finally, fund meaningful budget reserves.

The full report can be found on the WPRI Web site (www.wpri.org).

Tags: wisconsin news, budget, woes, selfinflicted