By Michael Carroll for Watchdog.org
Like most states, Wisconsin has fattened up its rainy-day fund over the past decade, but the state remains in the bottom 10 in terms of the size of its dedicated reserves as a share of overall spending, according to a new Pew Charitable Trusts study.
The study found that Wisconsin made progress in putting more money into its rainy-day fund during Gov. Scott Walker’s years in office. In fiscal-year 2007, before the Great Recession hit, the state had $56 million in its dedicated reserve fund, or 0.4 percent of overall spending – enough to keep the state running for only 1.6 days.
“In (fiscal-year) 2018, the state had $320 million in its rainy-day fund, which is the equivalent of nearly seven days of operating costs for the state,” Justin Theal, a Pew state fiscal researcher, told Watchdog.org. That amount equals 1.9 percent of Wisconsin’s overall spending, according to the analysis.
The percentage is still well below the current national median for state rainy-day funds, which amounts to 6.4 percent of spending and is enough to keep a state government operating for 23.2 days, according to the Pew study, which is based on data from the National Association of State Budget Officers.
But the state is still headed in the right direction, according to Theal.
“Wisconsin was one of 32 states this past year which was able to add money to its rainy-day fund,” he said.
And if the state is ranked according to both its general-fund surplus revenues and its rainy-day fund, Wisconsin’s position is even stronger. Under that scenario, at the end of fiscal-year 2018, the state had enough in the bank to keep it operating for 19.4 days, since it had $909 million available, or about 5.3 percent of total spending, according to the Pew study.
And in fiscal-year 2013, Wisconsin’s combined general-fund reserves and rainy-day fund total exceeded the U.S. median for total surplus funds. The total for Wisconsin amounted to 9.2 percent of spending, or enough to run the government for 33.6 days, the analysis reported.
But Barb Rosewicz, another Pew state fiscal researcher, said that the general-fund reserves can dissipate more quickly, since they tend to be used as a cushion for the following year or may be targeted by lawmakers for spending programs.
“Because rainy-day funds are usually a policy decision, it’s intentional savings,” Rosewicz told Watchdog.org. “… If you’re trying to write about the state policy decisions … that’s probably the better gauge to look at.”
States have been socking away more money in their rainy-day funds for eight years in a row, reaching a combined total of nearly $60 billion, according to the study. Wyoming topped the Pew ranking with a rainy-day fund that would keep the state running for 366.9 days, researchers found, while Kansas, Montana and New Jersey had zero in their funds.
David Callender, spokesman for the Wisconsin Policy Forum, said that historically the state has ranked near the bottom of surplus fund studies and that this has been a bipartisan phenomenon over the years.
“Wisconsin typically has not had the kinds of reserves that other states do,” Callender told Watchdog.org. “… It’s important to look at not just the rainy-day fund but also that ending general-fund balance.”
The Wisconsin Policy Forum is not an advocacy organization, but it does advise policymakers about the consequences of the decisions they make, he said. A recent report on the forum’s website offers a warning about both Democratic Gov. Tony Evers’ proposed budget and fiscal policies that have been advanced by Republican leaders in the state legislature.
“Both sides have proposed spending cuts or tax increases that would lead to a draw-down of the state’s budget surplus despite a relatively strong economy,” the report says, “leaving fewer reserves to deal with any future downturn.”
The state has a tradition of spending money as it becomes available, and it is quite dependent on two revenue sources – income and sales taxes – according to Callender.
“Wisconsin still has a relatively narrow (tax) base, and it does tend to be affected by economic downturns,” he said.
The Evers budget, which makes public education and health care high priorities, would require a net increase in taxes and a reduction in surplus funds.
“What we point out, in the case of the GOP tax proposal as well as some of the recommendations in Gov. Evers’ budget, is there is a reliance on one-time revenues,” Callender said.
Dave Loppnow, assistant director of Wisconsin’s Legislative Fiscal Bureau, said his agency projected in January that the general fund would have a balance of $691 million by the close of the current fiscal year on June 30. Fifty percent of the general-fund surplus will be transferred to the rainy-day fund, also called the budget stabilization fund, which has a current balance of $324 million, according to Loppnow.
“Taken together, the projected balance in the general fund plus the budget stabilization fund is projected to be $1.015 billion,” he told Watchdog.org in an email, adding that the total surplus funds amount to 5.9 percent of current annual expenditures.