The Ups and Downs of State Fiscal Health

Wisconsin's Decade-Long Roller Coaster Ride

April 2016


Wisconsin’s official financial statements are unknown to most residents, but they contain information that can be used to measure state fiscal health over months, a year, or much longer. A review of these reports shows fiscal health eroding during 2002-09 and then improving. Nevertheless, despite recent gains, the Badger State ranked 37th among the states in 2013 in overall fiscal condition, based on an average of fiscal measures covering multiple time frames.

Over the past two decades, state fiscal health has been much-debated. Often, personal opinions shift depending on political perspective and party leanings.
Regardless of which major party is in power, there are at least three aspects of state finance that make it relatively easy for those in control to mask Wisconsin’s overall fiscal health.
First, press and political attention usually focuses on the “general fund,” even though it comprises only about half of state revenues and spending. For example, the general fund does not include transportation taxes and fees; hunting, fishing, and other recreation charges; university tuition; or unemployment taxes.
Second, this narrow focus can mask shifting of dollars from separate funds to erase would-be general fund deficits. For example, during 2003-11, lawmakers used $1.4 billion from the transportation fund to pay for general fund programs. While these transfers made the general fund appear healthier than it was, they also aggravated underlying transportation fund issues.
Third, state budget accounting allows lawmakers to “spend” in one fiscal year, but withhold actual payment until the next. Like fund transfers, these budget maneuvers make the state general fund look superficially healthy.
Is there a source of state financial information that does not have these deficiencies and can be used to more honestly assess Wisconsin’s fiscal health? Yes, it is the Comprehensive Annual Financial Report, or CAFR, which is analogous to tightly regulated financial statements found in annual reports issued by publicly-owned companies to their shareholders.