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Anybody want to look at Wisconsin’s debt? … Bueller? … Bueller?

By   /   January 20, 2014  /   No Comments

By M.D. Kittle | Wisconsin Reporter

MADISON, Wis. — There’s been a lot of talk about what to do with the projected $912 million more than expected in the state’s main account, a windfall driven by strong tax collections.

Republicans mostly want to spend the money on tax cuts. Some want income tax relief. Others want to go after Wisconsin’s high property taxes. The robust revenue does, after all, belong to taxpayers, they say.

Democrats? Well, they just want to spend it.

Senate Democratic Leader Chris Larson, D-Milwaukee, in a news release, blustered that Gov. Scott Walker and Republicans should “put the $800 million that was stolen from Wisconsin children’s education back into classrooms across our state.”

But nobody seems to be talking much about tackling Wisconsin’s outstanding debt. Maybe some believe they’ve done enough.

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ASK FERRIS’ TEACHER: Seems like lawmakers don’t want to talk about debt reduction now that state revenue is projected to be nearly $1 billion better than expected.

After fiscal year 2013, the state’s real deficit, based on Generally Accepted Accounting Principles, is $1.7 billion. That’s down from the $2.9 billion when Gov. Scott Walker took office and is the lowest since 2003. The better-than-expected state revenue, some $760 million that materialized at the end of the past fiscal year, has played a big part in lowering that debt load.

But there’s more — so much more.

A newly released report by State Budget Solutions, a conservative public-policy organization, estimates the Badger State’s total debt is north of $45 billion. SBS’ fourth annual State Debt Study pegs total state debt nationally at $5.1 trillion, or roughly $16,178 per capita.

The group’s debt estimates for Wisconsin are nearly three times higher than the $15.98 billion in total debt noted in the state Comprehensive Annual Financial Report. That has everything to do with how the two reports measure public-pension debt.

SBS, like the CAFR, tracks outstanding government debt, outstanding unemployment trust fund loans, and unfunded other post-employment benefit liabilities, or OPEB, including compensation for health insurance and life insurance premiums.

Each also tracks public-pension liabilities, by far the biggest portion of the state’s debt load. But instead of viewing the liabilities through the prism of higher discount rates that proved unattainable during recent rough stretches in the economy, SBS, like other pension trackers, gauges pension debt by lower-rate market valuations.

“Using a high investment rate assumption doesn’t guarantee that investment return,” said Cory Eucalitto, editor with State Budget Solutions. “In doing so, you are putting the retiree’s financial security at risk.”

That certainly is the case in states like Illinois, which hold the dubious honor of possessing the worst-in-the-nation pension debt of at least $130 billion.

But Wisconsin’s public retirement system is prized as the best-funded, and best run, in the country, a point Eucalitto concedes.

Dale Knapp, research director of the Wisconsin Taxpayers Alliance, said he’s not sold on SBS’ calculations on pension obligations, because Wisconsin has a unique pension system. By standard pension-accounting measures, the Wisconsin Retirement System is fully funded, or near fully funded, Knapp said. And during big-loss years, like the system saw in Great Recession, the hits are smoothed out in part by reductions to beneficiaries.

That’s not to downplay Wisconsin’s heavy debt load overall, Knapp said.

“In 2011-13, general fund debt service payments were over 5 percent of expenditures,” Knapp said. “It’s becoming an important part of budget, squeezing out money that could go to other programs,” or tax cuts.

The unfunded OPEB liability stands at $446 million. Net long-term debt increased $216.6 million in Wisconsin in 2013, a trend that’s developed in the state during the past dozen years. Total long-term debt is $13.7 billion, which includes borrowing for the University of Wisconsin System.

Dealing with debt has and continues to be a bipartisan abdication, Knapp said.

Total debt in fiscal year 2010, the last full fiscal year of Democrat Gov. Jim Doyle’s tenure, topped $15.2 billion, according to the CAFR. It rose to $15.7 billion in 2011, and hit $16.1 billion in 2012, the first full fiscal year of Walker’s term. The debt levels did decline last year by about $200 million.

Asked if the governor planned to propose some level of debt reduction in his plans for the excess revenue, Walker’s communications director, Tom Evenson, told Wisconsin Reporter that Walker is focused on tax cuts.

Rep. John Nygren, R-Marinette, co-chair of the Legislature’s Joint Finance Committee, told Wisconsin Reporter that bonding rates are so low in a low-interest economy that lawmakers must ask, “Does borrowing make more financial sense” right now than paying down debt?

Knapp said he expects there will be little political will to deal with debt in these better-revenue times.

“It’s difficult to get consensus across the aisle on debt, which is too bad,” he said. “It’s not a partisan issue. It needs to be addressed.”

Contact M.D. Kittle at [email protected]

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M.D. Kittle is national First Amendment reporter at Watchdog.org. Contact him at [email protected]