State reports demonstrate Wisconsin had surplus in 2017

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The Wisconsin Policy Forum, the organization formed recently by the merger of the Public Policy Forum and the Wisconsin Taxpayers Alliance, put out a new report today demonstrating that Wisconsin ran a budget surplus in 2017.

The analysis aimed to reconcile two recent state reports that had conflicting information. The Annual Financial Report and the Comprehensive Annual Financial Report use different accounting standards.

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According to the AFR, general fund revenues were $16.1 billion in 2017, and expenditures were $15.9 billion, leading to a $116 million surplus.

The CAFR also includes other revenues and expenses, such as federal aid and segregated funds. That report showed $25.5 billion in revenue and $25.4 billion of expenses, generating a $96.7 million surplus.

A surplus is relatively rare, with Wisconsin reporting a surplus in the AFR report in seven of the past 17 years, and six of the past 17 years in the CAFR report. When there’s a deficit, the state makes up the difference by spending from its balances.

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While the reports agree the state ran a surplus in 2017, they differ on its general fund balance. The state currently has a $579 million balance in its budgetary general fund, according to AFR accounting. But in the CAFR’s GAAP accounting, the balance is at negative $1.6 billion.

The CAFR’s calculation of the state’s balance, though, has been negative since it was first reported in 1990, according to the Wisconsin Policy Forum report. It fell as low as negative $3 billion in 2011, driven by outdated income tax withholding leading to higher tax refunds, shifts of increased property tax credits to the following fiscal year, and falling cash balances in the AFR general fund.

“Wisconsin’s negative GAAP balance is akin to the amount owed on a credit card. It represents spending the state has committed to, but will pay for in the next fiscal year. Like one’s personal credit card, the balance is manageable if future revenue growth is sufficient to support it and new spending commitments are controlled,” the WPF report says.

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Improving the GAAP balance would require higher budgetary balances and more allocations to the rainy day fund.

“However, the 2017-’19 state budget approved last summer uses about $250 million of these balances to pay for ongoing spending. An improved revenue outlook reported in January could reduce that drawdown, but lawmakers appear poised to spend much of the additional revenue,” the report concludes.

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