Wisconsin’s debt is increasing, with almost $8 billion outstanding at the end of 2006, largely due to taxes not keeping up with spending, according to government officials.
Director of the Capital Finance Office Frank Hoadley, who oversees the bonds issued by the state to pay for debts, said there are $5.7 billion in general bonds outstanding and $1.5 billion in transportation revenue bonds outstanding.
Investors and other financial groups buy state issued bonds, which allow the state government to pay for spending in the short term, having to later pay back those who bought the bonds.
Other major financial commitments include $773 million in outstanding clean water revenue bonds and $273 million in petroleum inspection related bonds, according to Hoadley.
Hoadley said the state’s overall debt typically increases with the economy, and that any recent increases were not large in the long term. However, he also said increases in total debt had been occurring for the past 10 years.
According to Hoadley, the major reasons for increases were recent state building and transportation projects, like replacing certain highways.
Dale Knapp, research director for the conservative Wisconsin Taxpayers Alliance, said the rising levels of state debt are “alarming.” Knapp said there has been a trend of state and local government debt levels increasing dramatically since the 1990s.
Consequences, according to Knapp, include Wisconsin receiving one of the lowest bond ratings in the nation. This means that it will cost the state more to borrow money, Knapp said.
Knapp said other effects include more tax dollars being used to pay off debt and therefore less available for programs like K-12 education funding.
One reason for the rising debt is spending increased while tax revenues have only modestly grown, according to Knapp. He said some legislators are resistant to raise taxes to pay for more spending and so instead the overall debt is increased.
State Budget Director Dave Schmiedicke said many projects that increased the overall state debt would create positive economic benefits in the long term.
According to Schmiedicke, a $1 billion transportation project in Milwaukee that increased the state debt $300 to $400 million would lead to greater business development in the area.
Schmiedicke said another important aspect to consider is how much of state tax revenues go toward repaying the debt. He said around 4 percent of taxes go toward debt repayment and that figure is within a manageable level.
