Monday, June 20, 2005

Budget Update Day One: Statistics a Go-Go

Now that you enjoyed your weekend watching Tiger choke like a dog, Robert Horry drive a stake through the Pistons, and getting an Old Spice gift pack for Father’s Day, it’s time to get back to business.

The state budget is the single largest bill that comes from the Legislature all session, and is perhaps the least understood. As a public service, I am going to try to provide my read on the budget and budget process without putting people to sleep.

Most of the information I will use is provided by the Legislative Fiscal Bureau, and is available to the public on their website. The LFB is the gold standard in state accounting, and is trusted by the Legislature. The LFB is run by Wisconsin’s version of Alan Greenspan, Bob Lang, who has enormous glasses that enable him to see the state’s revenue picture two years into the future. In fact, Lang may not realize it, but if the sun hit his glasses in just the right way, he could be incinerated on the spot. Like an ant, get it?

First, I’ll start with a general budget overview. The total state budget, rewritten every two years, amounts to about $54.3 billion. Of this amount, about half of that is raised through what everybody thinks of as “general” taxes – income, sales, and corporate taxes. The other half of the budget is provided by federal money, program revenue (money from fees, e.g. hunting fees), and segregated revenue.

Both Governor Doyle and the Legislature have written their versions of the budget for the 2005-2007 biennium, and both budgets are stitched together worse than Meg Ryan. Legislative Republicans, though, boast that their budget spends less, borrows less, and uses fewer budgeting tricks than Governor Doyle’s. Let’s take a look:

According to the LFB, the Legislature’s whole budget spends about $355 million less than Doyle’s. However, when one looks at just the general fund budget, where there is currently a deficit, the Legislature’s budget actually spends $88 million more than Doyle’s. Republicans will argue that this is because the Joint Finance Committee had to use general revenue to fill in some of Doyle’s questionable budget tricks, such as borrowing money for medical assistance and raiding the Patient’s Compensation Fund for Medicaid. Over the two-year period, the Legislature’s budget increases spending 6.4% for all funds and 9.9% in general tax revenue.

Bonding is also a large potion of the budget. When the state bonds for things, it essentially takes out a loan, and pays it back over anywhere between two and 20 years. Obviously, the state must pay back more than they borrowed, since interest must be paid (too bad Gary George is in prison – he could have gotten the state a good deal on a payday loan). The way bonding is reported is actually somewhat deceiving – it is listed as “revenue” in the budget, rather than a liability, since the state gets the cash up front. Bonding is a wicked temptress - it allows the state to prop up spending for programs without raising taxes, and pushes the liability off to the future. Generally, the state bonds for capital projects such as roads and buildings.

The total level of bonding is a concern, since it puts the state into debt. The Legislature’s budget adds about $1.4 billion in bonding to the state’s debt, which is about $600 million less that Doyle’s budget. While this doesn’t do the state any short-term favors, it will help Wisconsin in the long term by cutting down on its “mortgage,” so to speak.

You may hear the Legislature talk about the state’s “structural” deficit, or that the state “keeps two sets of books.” This is because the state budgets on a cash basis, not an accrual basis, meaning that future liabilities are not acknowledged. How programs are funded is almost as important to the future of the state as the level of funding provided. For instance, Doyle’s budget provided $832 million of “one time” funding for ongoing programs, which leaves a funding hole in the next budget. If I get a subscription to Cat Fancy Magazine and my grandmother gives me a check that covers just the first month, I either need to work extra at Krispy Kreme or cut spending on something else to pay out of my pocket next month. For the state, raiding other funds is like grandma’s check (although it smells a lot less like Aqua Net hairspray), in that it will need to either raise taxes or cut spending in the next budget to fund its programs.

The Legislature’s budget doesn’t eliminate the use of one time money, but it does reduce it significantly over Doyle’s. The Legislature provides $486 million in one time cash, which is $412 million less than Doyle provides. This allows the state to reduce the amount it will need in the next budget to balance the budget from $1.3 billion to $863 million, which is still a significant number, and will be dealt with in the 2007-09 budget. In case you didn’t feel old yet, consider that the 2007-09 budget is now on the clock. This structural deficit is likely the reason Republican Senator Rob Cowles voted against the budget in committee - Cowles has made reducing the structural deficit a priority, right behind concealing his bald spot with a horrific combover that appears that he combs his hair with a pork chop.

So while the Legislature’s version of the budget isn’t a perfect document, it lives up to its promise to spend less, borrow less, and use fewer accounting gimmicks (although there are still plenty present).

The budget is scheduled to hit the floor of the Assembly tomorrow, when I will talk about some of the chicanery that occurs during the voting.

Side note: It was nice of Stan Johnson, president of WEAC, the state teachers' union, to take last week off and reprise his role of lead singer of the band Cameo on NBC's "Hit Me Baby One More Time." Johnson and his bandmates performed his hit "Word Up," wearing his signature red codpiece.