The economic recession was not the only factor leading up to Wisconsin's worst budget deficit in state history, according to a report from the Wisconsin Policy Research Institute.
Although the recession is the main cause of the 2009-'11 budget shortfall now projected at $5.7 billion, poor budgeting practices have made it worse, the report says.
The increasing reliance on one-time revenue sources, such as money from a 1998 tobacco lawsuit settlement, results in the state spending more than it takes in as yearly revenue. This has allowed the state to live beyond its means while creating deficits in subsequent budgets.
According to the report, Wisconsin may receive up to $3.5 billion from Congress' stimulus package to fix its budget, but this one-time revenue source may make the budget difficult to balance in the future.
In addition, the study points out how Wisconsin has not set aside enough money for a rainy day fund"" and will have to cut more programs and raise taxes in order to balance the budget without this emergency fund to draw from.
In 2007, states set aside money for emergency funds, averaging 8.2 percent of total state revenue. According to the report, however, Wisconsin is one of the four states that requires less than one percent of revenues to be set aside.
Andrew Reschovsky, UW-Madison professor of public affairs and applied economics, said one reason Wisconsin lawmakers did not maintain the emergency fund may be that saving money is less popular politically than cutting taxes or paying for new programs.
""Politics have the upper hand,"" he said, but added that periods of crisis may create opportunities to implement reforms that are not normally politically feasible.
Nonetheless, Reschovsky said handling the budget differently in the past would not have prevented the current deficit, as the recession has caused a substantial drop in revenue.
""If starting in the 1990s we had in Wisconsin pursued a policy of putting money into a rainy day fund or stabilization fund, the problem today would still be there '¦ but it wouldn't be as large as we're now facing,"" he said.
