Nov 19, 201211:20 AMOpen Mic
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Wisconsin’s coming choice: Grasshopper or ant?
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In Aesop’s fable, a grasshopper enjoys a carefree summer while an indefatigable ant stockpiles food for the cold months ahead. When winter arrives, the famished grasshopper asks for help, only to be rebuked by the ant for his past indolence.
The lesson is timeless: Early and persistent saving is the best way to prepare for an uncertain future. Yet it is a lesson Wisconsin’s elected officials have failed to grasp after multiple recessions over 30 years. The result? Unnecessary tax hikes and divisive program cuts.
Now, as state government begins budgeting for 2013 and beyond, our political leaders will have to decide whether to embrace fully the discipline of the ant.
It will be a challenge, if the last recession and past state management of its budget balances and rainy-day fund are any indication.
When the downturn began in 2007-08, Wisconsin and Arkansas had the smallest budget reserves relative to spending of any states (1% and 0%, respectively). Most states were better prepared, with reserves averaging 8.6% of spending. Minnesota (11.3%) and Iowa (10.9%) did even better.
Wisconsin finances improved little in subsequent years. By 2010-11, only Arizona, Arkansas, California, and Washington were fiscally weaker than Wisconsin (0.6%). In 2012, budgeted reserves here rose to 1.6% of spending. Still, about four in five states had larger balances.
The state recently released its 2011-12 Annual Fiscal Report, which details how Wisconsin raises and spends its tax revenues. Wisconsin ended fiscal 2012 with a surplus of $342.1 million, an amount larger than first budgeted.
In dollar terms, this is the largest general fund surplus since 1999-2000, the final year of an economic boom. During nine of the last 12 years, budget balances were less than $100 million. Though this seems large to a family, school, or municipality, $100 million equals only 0.7% of last year’s net state spending. It’s a small amount that could last the state only a few days.
Moreover, the 1999 state budget required Wisconsin to maintain a “statutory reserve” equal to at least 2% of spending by mid-2005. But all subsequent governors and legislatures have delayed implementing the law.