The non-partisan Legislative Audit Bureau and the state auditor annually conduct an audit of the State of Wisconsin’s financial statements.
The audits are generally released in December. The legislature and Governor recently received the audit report for the fiscal year ended June 30.
The annual financial statement is called the Comprehensive Annual Financial Report, or CAFR. This report is especially interesting, since it is prepared on the basis of generally accepted accounting principles, commonly referred as GAAP. Since it is prepared on the basis of GAAP, it is the most accurate reflection of the financial position of the State. In state government, there has been a historical tendency to focus on cash basis reports and ignore the true financial picture of the state. For many years, this has led to some “creative accounting” to balance the state budget. Some common techniques were borrowing from the Transportation Fund, borrowing from the Patient Compensation Fund; ignore payment obligations (e.g. Minnesota reciprocity payment), etc.
What has been the result of the use of these accounting gimmicks? The CAFR for the year ended June 30, 2000 indicated that Wisconsin had a general fund deficit of $840 million. By June 30, 2011, the general fund deficit had grown to almost $3 billion! The bond rating agencies in New York were concerned about these deficits, and it had an impact on our bond rating.
The good news is that the most recent CAFR indicates that our general fund deficit has decreased by $500 million in the year ended June 30, 2013. This improvement in our state’s financial position follows a deficit reduction of almost $800 million for the prior fiscal year, ended June 30, 2012. In the past two years, we have paid down $1.3 billion on the credit card balance that was charged to taxpayers by previous administrations and legislatures.
Out of curiosity, I reviewed the most recent CAFR from the State of Illinois. What a contrast! Illinois’ most recent CAFR indicates that their deficit increased by over $1 billion. Illinois has the worst bond rating in the country. I am delighted that Wisconsin has chosen to go in a better direction!
Marklein is running for the 17th Senate District.