A critical examination
In the fiefdom of the Wisconsin state budget, revenue forecasting is the king. Because of the state’s penchant for spending every dollar that is available, this mundane process takes center stage during the every-other-year ritual that is the preparation of a new biennial state budget for Wisconsin. State senators and representatives, both Republican and Democrat, wait with anticipation while the final determination of available tax revenues for the upcoming two-year period is calculated. It is these estimates that will establish what new spending programs can be embarked upon or whether current services need to be cut.
The lives of millions of Wisconsinites are affected by the decisions made during this budget process — and it all starts, and in many ways ends — with the revenue forecast. Will senior citizen prescription drug costs be partially subsidized by the state? Can those who require medical assistance from the state continue to receive it? Will municipalities continue to receive the portion of shared state revenue they have become accustomed to? Are economic development ventures affordable? The answers, which to a great extent determine the quality of life in this state, are all found in the estimation of revenue made during each budget cycle.
While every budget prepared in Wisconsin has long-term implications for the future of the state, it is developed using short-term fiscal tools. No long-range strategy, essential to the fiscal planning of any private business, is under-taken at the state level. Instead, intrinsically volatile revenue forecasts are used to cast short-term budgets often finessed to meet the state’s statutory requirement of a balanced budget. It will be shown that this reliance on unpredictable revenues has been a major cause of recent state budget shortfalls and deficits. In addition, Wisconsin’s lack of fiscal discipline in the creation of a budget reserve fund places still more pressure on the outcome of this innately flawed planning process. Wisconsin is doomed to repeat this predicament during the valleys of every business cycle unless this fundamentally flawed process is addressed.