Editor’s note: Susan Urahn, managing director of the Pew Center on the States, wrote the following Milwaukee Biz Blog in response to Thursday’s Biz Blog entry by Wisconsin Department of Administration Secretary Michael Morgan about Pew’s study, "Beyond California: States in Fiscal Peril."
Pew’s report is factually accurate and fair. Wisconsin was highlighted in our report because it exhibits many of the same fiscal warning signs seen in California, as documented by widely accepted, publicly available data.
The facts are clear. Wisconsin, like California and the eight other states Pew profiled, faces serious fiscal challenges. In reaching this conclusion, Pew relied on data from respected sources including the U.S. Department of Labor Statistics, the Nelson A. Rockefeller Institute of Government, the U.S. Census Bureau and experts in both academia and government.
Our report states that California’s budget problems are in a league of their own. But Wisconsin has had persistent budget shortfalls – the state has had a negative general fund balance from fiscal years 2002 to 2008, according to its own Comprehensive Annual Financial Reports. Additionally, Wisconsin has used short-term fixes to meet budget challenges, such as relying on its transportation funds to cover day-to-day operating expenses.
Prior to the 2010 fiscal year, Wisconsin faced a more than $3.2 billion budget gap – nearly a quarter of its general funds, according to the Center on Budget and Policy Priorities. During the first quarter of 2009, the state’s revenues declined by $370 million from the same quarter of the previous year, according to the U.S. Census Bureau and the Rockefeller Institute. Wisconsin’s revenues declined even further in the next quarter from the previous year, down $1.25 billion or 24.3 percent.
Wisconsin’s third-quarter unemployment rate shows job losses are moderating. However, while Wisconsin manufacturing may be performing better in the current downturn than that of some of its neighbors, such as Michigan, the job losses in this sector have been heavy. The Center on Wisconsin Strategy, based at the University of Wisconsin-Madison, reported in September that, from December 2007 to July 2009, the Badger State lost one-eighth of its manufacturing workforce.
As our report reflects, Wisconsin, like other states, has made attempts to deal with its fiscal challenges. The legislature passed the current spending plan on time, before the biennium started, for the first time in 32 years. It used $2.2 billion in federal stimulus funds to plug some budget shortfalls this year. To cover the rest of the gap, lawmakers took difficult steps such as raising taxes on the wealthy, hospitals and smokers, and cutting spending by $3 billion. But for the next biennium, which starts July 1, 2011, additional budget shortfalls of about $2 billion are expected, according to the Wisconsin Legislative Fiscal Bureau
For the report Beyond California: States in Fiscal Peril, Pew identified factors that have contributed significantly to California’s difficulties, then determined the degree to which other states are experiencing the same challenges. These factors are: (1) loss of state revenues; (2) the relative size of budget gaps; (3) increasing joblessness; (4) high foreclosure rates; (5) legal obstacles to balanced budgets—specifically, a supermajority requirement for some or all tax increases or budget bills and (6) poor money-management practices.
Pew scored all 50 states using the best available data as of July 31, 2009. The snapshot captures an important juncture: the first and second quarters of 2009, the pressure point for governors and legislatures in the throes of crafting their budgets for fiscal year 2010 (which began on July 1 in all but four states). More information on the methodology and the report in its entirety is available at www.pewcenteronthestates.org/beyondcalifornia.
Susan Urahn is the managing director of the Pew Center on the States in Washington, D.C.
