Assembly Votes Tuesday on Putting Detailed Fiscal Policy into the State Constitution
Almost all of the sponsors of AJR 100 are Republicans, with the exceptions of Rep. Molepske and Rep. Ziegelbauer (who is an Independent). However, a Senate Democrat, Julie Lassa, is circulating a bill to require the state to use GAAP accounting. Her proposal would actually require the current GAAP deficit to be paid down at a faster pace than AJR 100, but Senator Lassa wouldn’t make the changes constitutional requirements. Thus, the debate over the issue is likely to boil down to the question of whether this sort of fiscal policy belongs in the Wisconsin Constitution or in the statutes.
AJR 100 was introduced on February 1 and appears to be on a fast track for approval by the Assembly tomorrow (Feb. 21). If it’s approved there, it will then go to state Senate, for consideration during the last few weeks of the session. Like other constitutional amendments, it also has to be approved by the Legislature in the following biennial session and then in a statewide referendum (sometime in 2013 or 2014).
- Unless or until the state establishes a substantial Rainy Day Fund, the proposed constitutional amendment is likely to result in deep cuts or tax increases during recessions, when the need for public assistance is greater and when either benefit cuts or tax increases will tend to exacerbate the economic downturn.
- As an example, if this constitutional requirement had been in place in 2011, it appears the state would have had to cut substantially more than it did in the 2011-13 budget bill, or would have needed to increase taxes.
- During an economic downturn, when economic stimulus is needed, legislators would be precluded from using an increase in Transportation Fund bonding to increase spending and jobs for transportation system improvements.
- GAAP is an imperfect way to avoid budget-balancing gimmicks and structural deficits because it doesn’t consider things like unfunded pension benefits for retirees. As a result, putting it into the Constitution could have the unintended consequence of inducing legislators to use other sorts of short-sighted measures for balancing the budget. (Requiring GAAP by statute has the same problem, but the shortcomings of GAAP could be addressed without the cumbersome process of amending the state constitution.)
We welcome efforts by legislators to make budget decisions more transparent, and requiring the use of GAAP during the budget process could help with that. But that can be accomplished without making Wisconsin the guinea pig for putting this inflexible fiscal policy into the constitution.