MADISON — It took the Republican-controlled Legislature the better part of a decade to get the state government’s fiscal house in order.
Now, lawmakers are pushing a constitutional amendment aimed at budgeting without the kind of gimmicks, tricks and smoke and mirrors that put Wisconsin in a budget bind.
Senate Joint Resolution 85, authored by Sen. Howard Marklein (R-Spring Green) and Rep. Terry Katsma (R-Oostburg), would require the state to account for and report all funds it receives or expends in accordance with generally accepted accounting principles (GAAP). This set of strict accounting standards minimizes budgetary tricks. It’s required of local governments, school districts, and businesses, but Wisconsin state government hasn’t lived up to the same standards — at a cost to taxpayers.
Wisconsin has historically “balanced” its books by using cash-basis budgeting. The looser method of accounting and budgeting recognizes revenue and expenses when cash exchanges hands. The more rigorous accrual accounting found in GAAP documents line items when they occur. Cash basis accounting is easier, but accrual accounting portrays a more accurate portrait of a government’s health.
As the amendment resolution sponsors note, Wisconsin state budgeting has been subject to all manner of “creative techniques” to balance the budget, including deferring payments to local governments, school district and vendors.
“Using cash-basis accounting is like spending on your credit card: you purchase gifts in December, but you don’t pay the bill until January. Under GAAP that expense is recorded when it is incurred, while the cash-basis would not recognize it until the bill is paid,” the resolution’s authors said this week in a press release.
Wisconsin’s budget was mired in a mess of credit card debt when conservatives swept into power in 2010. At that time, the GAAP deficit topped $2.9 billion. Through a return to more disciplined budgeting (there were relapses along the way), 2020 brought the first GAAP surplus in 30 years. By the end of the 2021 fiscal year, the state had banked a GAAP surplus of nearly $1.2 billion.
“We spent more than a decade responsibly budgeting to get Wisconsin out of a $3 billion hole. This amendment will eliminate the temptation for future legislatures and governors to use budget gimmicks to balance the state budget,” said Marklein, co-chair of the Legislature’s budget-writing committee. “ Local governments, school districts and businesses use GAAP accounting. The state should too.”
Wisconsin would be joining most states in requiring the truer accounting standards. Just 15 states don’t follow GAAP accounting for budgeting.
The resolution does not require the governor’s signature, but it would have to pass two consecutive sessions of the Legislature. Then the proposed constitutional amendment would go to voters as a ballot issue.
“While Washington keeps spending trillions of dollars that don’t exist, Wisconsin’s books are truly balanced for the first time in decades. Our proposals will help prevent ever returning to the bad old days of unsustainable spending,” Katsma said.