State budget deficit: Practice makes perfect

Wisconsin State Roundup

Published May 1, 2008  | May 2008 issue

Wisconsin is going to have to get creative once again in balancing its checkbook. The state Legislative Fiscal Bureau is projecting a shortfall of $650 million for the two-year budget that runs through mid-2009. It also identified a handful of one-time items, including two court rulings involving the state, that could worsen the deficit by $500 million or more.

If this seems familiar, it is. The Legislature took until late October to pass the most recent state budget—in part because it was dealing with a projected deficit. Lawmakers then included $200 million in administrative cuts, which limits creative options this time around.

Gov. Jim Doyle has used the deficit to resurrect a previous proposal to tax hospitals. It would raise an estimated $125 million a year from hospitals to help fill the budget hole. Many hospitals actually support the tax because it would also trigger higher federal Medicaid payments to hospitals—estimated at $450 million, though only hospitals with high Medicaid caseloads would see a net financial gain.

Doyle has also proposed a transfer of $243 million from the state transportation fund, which lawmakers would mostly replace by issuing new bonds, in essence promising to repay the fund with future revenue. It's not the first time lawmakers have dipped into the transportation fund: $50 million was taken out of the same fund in October when lawmakers finalized the current budget. The Milwaukee Journal Sentinel reported that the state has siphoned $1.1 billion from the state transportation fund since 2003 to help balance the state budget.

It's also not the first use of creative accounting. Lawmakers and Doyle were expected to delay $125 million in school aid payments until just after the end of the fiscal year, which merely pushes the obligation to a future budget.

The state's budget deficit could torpedo various tax incentives and other proposals that Doyle had championed earlier, among them tax breaks to high-tech businesses, renewable energy and private sector research and development activities. Doyle has also proposed the creation of a health insurance pool for small businesses, which might include a state subsidy of as much as $100 million to help write down premiums, according to news sources.

Ronald A. Wirtz