Assembly Approves Constitutional Amendment that Narrows Budget Options

Wednesday, February 22, 2012 at 3:01 AM by
Approval Aided by Adoption of Amendment to AJR 100 Addressing One of the Concerns
Our blog post yesterday described Assembly Joint Resolution 100, which would put key details of fiscal policy into the Wisconsin Constitution.  An amended version of the resolution was approved Tuesday night by a vote of 69-25, and it now moves on to the Senate.  If that house also gives it the green light, AJR 100 will need to be approved again by the Legislature in 2013 or 2014, and will then have to go to a public referendum. 
Before the vote in favor of AJR 100, the Assembly adopted an amendment offered by the resolution’s author, Rep. Kooyenga, deleting the portion that would have annually required the first 10% of any new revenue to be used to pay down the GAAP deficit.  That amendment makes the effect of the new accounting somewhat less worrisome, because the legislature won’t have to commit 10% of revenue growth to pay down the GAAP deficit every year, even during a recession. 
Nevertheless, the amended version would still prohibit future legislatures from passing any bill that would cause or increase a GAAP deficit in any budget fund, regardless of the state’s economic circumstances.  Wisconsin would become the first state in the nation to put such a restriction into the state constitution. 

As the bill moves to the Senate, I hope state Senators and interested members of the public will take a careful look at AJR 100 and grapple with the following questions:
  • Is it appropriate to always prevent policymakers from using budget-balancing strategies that push back the fiscal pain, such as borrowing from another fund or refinancing debt (as was done by Walker and the legislature in both the budget and budget repair bills), no matter how dire the state’s economic and fiscal circumstances?
  • Will the change have unintended consequences by leading policymakers to use loopholes in the GAAP standards?
  • Is this an effective strategy for avoiding future structural deficits, considering that GAAP doesn’t take into account future or phased-in  tax breaks (except to the extent that they take effect with the first 6 months of the next biennium)?          
  • Does the change have the effect of tilting budget decisions in favor of tax cuts and budget cuts?  (I think that’s a possibility because delayed spending increases will generally need to be accounted for in the GAAP calculations, whereas delayed tax cuts often won’t be.)   
  • What will be the effects of the constitutional change on other funds, such as the Transportation Fund, the Unemployment Insurance Trust Fund, the Pension Fund, etc.? 
  • What would the change have meant for the decisions in the 2011-13 budget bill to refinance debt and to take funding from a number of program revenue funds (such as the recycling fund)?
We will track AJR 100 carefully over the closing weeks of the legislative session.
Jon Peacock
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