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Kooyenga: Evers’ budget takes state budgeting backwards

By State Sen. Dale Kooyenga

MADISON — As a certified public accountant and elected official, one of my main interests has always been the state’s financial health. I first ran for office in part because, as a CPA, I was astonished the state was using borderline fraudulent accounting methods.

In 2010, Wisconsin was in the company of California, Illinois, and New Jersey. We spent years lurching from one budget crisis to the next. Today we are fiscally solvent, we have been running one budget surplus after another, our pension system is one of the best funded in the nation, and our rainy day fund is stronger than ever and now stands at nearly $1 billion.

We have seen a lot of positive news in recent years, but the 2021-23 budget proposed this week by Gov. Tony Evers would turn back that progress if enacted. The governor’s budget would increase spending by 9.3 percent in one year, raise taxes by almost $1 billion, and repeal much of Act 10, which has saved taxpayers nearly $14 billion over 10 years.

The governor is proposing a $1 billion tax increase, but he is also proposing to increase spending by $3.8 billion from all funding sources in just the first fiscal year. To create the appearance of balance, the budget spends down cash reserves, taps revenue sources that don’t yet exist, and makes unrealistic assumptions about future revenue.

This is not a balanced budget. The budget introduced this week is out of balance by $938 million when utilizing private sector accounting methods required by law on public and many private companies. 

This is a billion dollar move backwards. If enacted, Wisconsin would rapidly return to the days of lurching from one budget crisis to the next, tax increases chasing unsustainable spending, and the inevitable deep budget cuts.

For a thorough overview of the governor’s budget, this summary prepared by The Wheeler Report lists the various proposals and is worth a look.

In contrast to the governor’s budget, fiscally responsible budgets passed by the Legislature over the past 10 years have led to true fiscal solvency. A recent audit revealed that revenue to the state’s general fund climbed from $27.8 billion at the end of June 2019 to $29.4 billion as of the end of June 2020 – a $1.6 billion increase.

Expenditures also increased from $25.5 billion to $26.8 billion over the same one-year span, or a $1.3 billion increase. In short, revenues increased by $300 million more than spending in one year. While the trajectory of state spending growth is always a concern for me, the fact that revenues greatly outpaced spending growth is good news for Wisconsin taxpayers.

Additionally, on January 26, the non-partisan Legislative Fiscal Bureau delivered a new report showing that over the remainder of the current biennium and through the next (2021-23), aggregate general fund tax collections will be nearly $1.2 billion higher than predicted just last November.

On top of higher than expected revenues, the report also showed a net balance of nearly $1.8 billion for 2020-21, $629.5 million more than November’s report.

Fiscally prudent budget management combined with pro-growth policies have ensured our state has been able to fund its priorities, cut taxes, and balance the budget using the strict standards of generally accepted accounting principles (GAAP).

Wisconsin has long been plagued by a GAAP deficit, which I like to describe as the accumulation of accounting sins over time. The GAAP deficit peaked in recent years at nearly $3 billion in 2010-11, but has gradually decreased over the past decade as a result of fiscally responsible policies that have put more money in Wisconsinites’ pockets and triggered economic growth and thus, more tax revenue.

As of December 2020, that GAAP deficit was replaced by a modest GAAP surplus of approximately $1.5 million, according to the state’s audited financial statements. It’s one thing to show balanced budgets using questionable accounting methods, but this surplus means that even under strict scrutiny, Wisconsin is now solvent.

In the coming months, the legislature will be countering Gov. Evers’ budget proposal with one that is balanced and sustainable. As a member of the Joint Committee on Finance, I will continue to fight for fiscally responsible budgets that keep Wisconsin solvent and economically prosperous.

Sen. Dale Kooyenga (R-Brookfield) represents Wisconsin’s 5th Senate District. 

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