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STATE CAPITOL
P.O. Box 7882
Madison, Wisconsin 53707-7882
 
To:
 
All
 
Legislators
 
From:
 
State
 
Representatives
 
Leah
 
Vukmir
 
and
 
Brett
 
Davis
 
Date:
 
February
 
10,
 
2009
 
Re:
 
The
 
Truth
 
in
 
Budgeting
 
Act,
 
LRB
‐
1356
 
 –
 
Co
‐
sponsorship
 
memorandum
 
We
 
are
 
circulating
 
LRB
‐
1356,
 
the
 
Truth
 
in
 
Budgeting
 
Act,
 
for
 
co
‐
sponsorship.
 
FEDERAL
 
STIMULUS
 
FUNDS
 
 AND
 
THE 
 
STRUCURAL
 
DEFICIT:
 
Federal 
 
Stimulus
 
Funds
 
and 
 
their 
 
Impact 
 
on
 
Wisconsin’s
 
Future
 
Budgets
 
We
 
all
 
recognize
 
that
 
the
 
current
 
economic
 
downturn
 
has
 
had
 
a
 
significant
 
impact
 
on
 
Wisconsin’s
 
budget
 
problems.
 
We
 
must
 
also
 
recognize
 
that
 
two
‐
decades
 
of 
 
spending
 
beyond
 
the
 
means
 
of 
 
the
 
taxpayers
 
has
 
left
 
us
 
unprepared
 
for
 
this
 
economic
 
challenge.
 
Most
 
states
 
have
 
built
 
reserves
 
that
 
help
 
them
 
deal
 
with
 
economic
 
downturns.
 
This
 
is
 
a
 
fundamental
 
part
 
of 
 
responsible
 
budgeting
 
and
 
fiscal
 
stability.
 
In
 
2001,
 
the
 
budget
 
was
 
balanced
 
using
 
one
‐
time
 
money,
 
including
 
securitizing
 
tobacco
 
settlement
 
revenue.
 
This
 
reliance
 
of 
 
one
‐
time
 
funding
 
made
 
the
 
challenge
 
of 
 
balancing
 
our
 
budget
 
during
 
the
 
subsequent
 
economic
 
recovery
 
even
 
more
 
difficult
 
and
 
encouraged
 
even
 
more
 
reliance
 
on
 
one
‐
time
 
funding
 
sources,
 
including
 
the
 
use
 
of 
 
the
 
transportation
 
fund
 
and
 
the
 
Injured
 
Patients
 
Compensation
 
Fund.
 
If 
 
our
 
economy
 
continued
 
to
 
grow
 
at
 
a
 
normal
 
rate,
 
we
 
still
 
would
 
have
 
found
 
ourselves
 
with
 
a
 
structural
 
deficit
 
well
 
in
 
excess
 
of 
 
$2
 
billion.
 
Even
 
under
 
the
 
best
 
economic
 
conditions,
 
Wisconsin
 
has
 
run
 
out
 
of 
 
one
‐
time
 
funds
 
and
 
other
 
gimmicks
 
that
 
we
 
have
 
relied
 
on
 
to
 
balance
 
our
 
state
 
budget.
 
Our
 
budget
 
challenges
 
have
 
indeed
 
been
 
exacerbated
 
by
 
the
 
current
 
downturn,
 
but
 
we
 
cannot
 
rely
 
on
 
a
 
federal
 
bailout
 
to
 
put
 
us
 
on
 
a
 
path
 
to
 
fiscal
 
stability.
 
Much
 
of 
 
the
 
revenue
 
in
 
the
 
Federal
 
Stimulus
 
versions
 
(which
 
are
 
yet
 
uncertain)
 
that
 
would
 
go
 
towards
 
our
 
state
 
budget
 
are
 
short
‐
term,
 
one
‐
time
 
revenue.
 
If 
 
we
 
balance
 
the
 
current
 
budget
 
using
 
this
 
revenue,
 
we
 
will
 
find
 
ourselves
 
in
 
an
 
even
 
bigger
 
budget
 
deficit
 
in
 
the
 
coming
 
years.
 
To
 
address
 
this,
 
LRB
‐
1356
 
prohibits
 
the
 
legislature
 
from
 
passing
 
a
 
budget
 
that
 
appropriates
 
federal
 
economic
 
stimulus
 
funds,
 
unless
 
the
 
governor
 
submits
 
a
 
plan
 
to
 
the
 
legislature
 
to
 
eliminate
 
the
 
structural
 
deficit
 
by
 
the
 
end
 
of 
 
the
 
2015
‐
2016
 
fiscal
 
year.
 
 
 
BALANCED
 
BUDGETING:
 
 Achieving
 
 A
 
GAAP
 
Balanced 
 
Budget 
 
by 
 
2015
 
Wisconsin’s
 
Constitution
 
requires
 
the
 
legislature
 
to
 
maintain
 
a
 
balanced
 
budget.
 
To
 
determine
 
the
 
condition
 
of 
 
the
 
state’s
 
finances,
 
the
 
Department
 
of 
 
Administration
 
and
 
State
 
Controller
 
Office
 
produce
 
the
 
Annual
 
Fiscal
 
Report
 
(AFR).
 
This
 
report
 
is
 
based
 
on
 
statutory
 
accounting
 
standards
 
(budgetary
 
basis).
 
According
 
to
 
the
 
2008
 
AFR,
 
Wisconsin
 
ended
 
the
 
fiscal
 
year
 
on
 
June
 
30th,
 
with
 
a
 
General
 
Fund
 
balance
 
of 
 
$130.7
 
million.
 
The
 
Administration
 
Secretary
 
also
 
submits
 
the
 
Comprehensive
 
Annual
 
Financial
 
Report
 
(CAFR).
 
This
 
report
 
is
 
based
 
on
 
Generally
 
Accepted
 
Accounting
 
Principles
 
(GAAP)
 
as
 
approved
 
by
 
the
 
Governmental
 
Accounting
 
Standards
 
Board
 
(GASB),
 
an
 
independent
 
standards
 
organization.
 
According
 
to
 
the
 
2008
 
CAFR,
 
Wisconsin
 
ended
 
the
 
fiscal
 
year
 
on
 
June
 
30th,
 
with
 
a
 
General
 
Fund
 
deficit
 
of 
 
$2.5
 
billion.
 
Unfortunately,
 
the
 
CAFR
 
or
 
GAAP
 
deficit
 
is
 
the
 
accurate
 
reflection
 
of 
 
Wisconsin’s
 
actual
 
financial
 
condition.
 
The
 
surplus
 
reported
 
in
 
the
 
AFR
 
is
 
produced
 
by
 
using
 
creative
 
accounting
 
standards.
 
This
 
situation
 
is
 
not
 
new.
 
Wisconsin
 
has
 
been
 
running
 
GAAP
 
deficits
 
for
 
nearly
 
twenty
‐
years,
 
and
 
is
 
one
 
of 
 
only
 
two
 
states
 
(Illinois
 
and
 
Wisconsin)
 
with
 
deficits
 
in
 
each
 
of 
 
the
 
last
 
ten
‐
years.
 
According
 
to
 
the
 
Wisconsin
 
Taxpayers
 
Alliance,
 
Wisconsin
 
was
 
one
 
of 
 
only
 
four
 
states
 
with
 
a
 
GAAP
 
deficit
 
in
 
2007
 
(California,
 
Illinois,
 
Maine
 
and
 
Wisconsin).
 
Wisconsin’s
 
2007
 
deficit
 
as
 
a
 
measure
 
of 
 
personal
 
income
 
and
 
population
 
was
 
the
 
largest
 
shortfall
 
in
 
the
 
country.
 
The
 
course
 
we
 
are
 
on
 
is
 
unsustainable.
 
Our
 
level
 
of 
 
debt
 
has
 
nearly
 
doubled
 
since
 
2002.
 
At
 
almost
 
$9
 
billion,
 
we
 
now
 
rank
 
among
 
the
 
most
 
indebted
 
states
 
in
 
the
 
country
 
for
 
our
 
size.
 
Recognizing
 
that
 
our
 
deficit
 
was
 
built
 
over
 
the
 
past
 
decade
 
and
 
that
 
we
 
are
 
in
 
a
 
very
 
difficult
 
financial
 
downturn,
 
this
 
bill
 
provides
 
the
 
legislature
 
several
 
years
 
to
 
begin
 
the
 
process.
 
LRB
‐
1356
 
provides
 
that
 
the
 
legislature
 
may
 
not
 
pass
 
any
 
biennial
 
budget
 
bill
 
in
 
2015
−
17
 
and
 
succeeding
 
fiscal
 
biennia
 
that
 
would
 
produce
 
a
 
state
 
budget
 
deficit
 
according
 
to
 
GAAP.
 
The
 
bill
 
further
 
requires
 
that,
 
beginning
 
on
 
January
 
1,
 
2011,
 
the
 
executive
 
budget
 
bill
 
or
 
bills
 
must
 
be
 
prepared
 
according
 
to
 
GAAP
 
and
 
that
 
the
 
bill
 
or
 
bills
 
may
 
not
 
contain
 
recommendations
 
for
 
the
 
succeeding
 
biennium
 
that
 
create
 
a
 
state
 
budget
 
deficit,
 
according
 
to
 
GAAP.
 
Recognizing
 
that 
 
this
 
legislature
 
cannot 
 
 prohibit 
 
 future
 
legislatures
 
 from
 
bypassing
 
the
 
GAAP
 
 provisions
 
in
 
this
 
legislation,
 
Rep.
 
Strachota
 
will 
 
be
 
introducing
 
a
 
companion
 
resolution
 
amending
 
Wisconsin’s
 
Constitution.
 
BUDGET 
 
 ACCOUNTABILITY:
 
Requiring
 
Every 
 
 Agency 
 
to
 
Begin
 
With
 
a
 
 Zero
‐
Based 
 
Budget 
 
Every 
 
Ten
 
Years.
 
Wisconsin’s
 
budget
 
process
 
is
 
based
 
on
 
a
 
system
 
known
 
as
 
“cost
‐
to
‐
continue.”
 
This
 
method
 
presumes
 
that
 
each
 
government
 
entity
 
and
 
program
 
should
 
be
 
funded
 
starting
 
at
 
the
 
amount
 
they
 
received
 
in
 
the
 
previous
 
budget
 
plus
 
an
 
increase
 
based
 
on
 
inflation,
 
enrollment
 
or
 
other
 
factors.
 
LRB
‐
1356
 
requires
 
that
 
the
 
Department
 
of 
 
Administration,
 
beginning
 
with
 
the
 
2011
−
13
 
budget,
 
utilize
 
the
 
principles
 
of 
 
zero
−
based
 
budgeting
 
principles.
 
Under
 
this
 
provision,
 
each
 
agency
 
must
 
undergo
 
this
 
 
 
process
 
once
 
every
 
ten
 
years.
 
In
 
terms
 
of 
 
the
 
biennial
 
budget
 
cycle,
 
20%
 
of 
 
the
 
government
 
agencies
 
will
 
undergo
 
this
 
process
 
during
 
each
 
budget
 
cycle.
 
The
 
legislation
 
defines
 
“zero
‐
based
‐
budgeting”
 
as
 
a
 
compilation
 
of 
 
 justified
 
costs
 
including
 
the
 
statutory
 
responsibilities
 
for
 
which
 
the
 
expenditures
 
will
 
be
 
made.
 
This
 
provision
 
will
 
help
 
provide
 
the
 
proper
 
level
 
of 
 
Executive
 
and
 
Legislative
 
review
 
of 
 
each
 
agency
 
funding
 
request
 
as
 
part
 
of 
 
the
 
budget
 
process.
 
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