Watchdog group says budget hole may be less

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A non-partisan watchdog group says the state's projected $5.4 billion budget hole is based on assumptions and may in fact not be that large.

Officials with the Madison-based Wisconsin Taxpayer's Alliance say the budget deficit being touted by state officials is based in part on more than $2.7 billion in spending requests in the coming 2009-11 biennial budget.

The $5.4 billion deficit figure was first reported in mid-November in the Wisconsin Department of Administration's "Agency Budget Requests and Revenue Estimates" report.

In that report, DOA Secretary Michael Morgan wrote that the coming projected deficit was "the worst deficit in the state's history."

In their report "State deficit: How big? Why?" the group notes that the $5.4 billion deficit is based on those spending requests being granted.

WISTAX notes that granting those spending requests and funding past state promises (the "structural deficit"), would result in state expenditure growth of 8 percent next year and 3.1 percent the year following.

The report questions that assumption since annual state general fund spending increases have averaged only 3.4 percent over the past decade.

In addition to assuming major expenditure increases, state deficit predictions also presume that state officials will take no action to close the deficit over the next 2.5 years.

The group notes in their report that how realistic these forecasts are hinges on what can be projected 31 months hence about the economy, federal actions, state tax collections, and expenditures.

The group notes that current projections show tax collections for this year and the next two years totaling $1.33b below 2008 collections.

A third factor contributing to the estimated deficit is what WisTax calls years of unwise fiscal planning.

During the 1990s, the state overcommitted to new programs for schools, health and welfare, corrections, and tax relief. It began every budget after 1995 with a "structural deficit" or future unfunded commitments of between $0.6 billion and $1.3 billion.

"With headlines and politicians repeating deficit estimates of more than $5 billion, the public is left thinking that a solution must require at least $5 billion in permanent spending cuts or tax increases," the report stated.

"Yet much of that figure assumes unrealistic spending requests, structural imbalances carried over from the past, and a failure to address fiscal problems immediately but instead allowing them to compound and grow," the report concludes.

Get more information about WisTax at www.wistax.org.

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