Tuesday, September 23rd, 2014

Walk-O-Meter

Require use of accepted accounting principles to balance all state budgets


Will "require the use of generally accepted accounting principles (GAAP) to balance every state budget, just as we require every local government and school district to do."


Updates

Even critics are not talking about the ball being dropped on this one

In his unsuccessful campaign for governor in 2006, Scott Walker said then-Gov. Jim Doyle told a "world champion” lie in claiming the state budget was balanced.

Walker said it actually was out of balance by $2.1 billion if you keep the state's books as other governmental units do -- using what are known as Generally Accepted Accounting Principles (GAAP).

In 2010, when he ran to succeed Doyle, Walker made an explicit promise, on his campaign website: To "require the use of generally accepted accounting principles (GAAP) to balance every state budget, just as we require every local government and school district to do."

The promise dealt with some technical issues, but it was a bold pledge with potentially big ramifications for all Wisconsinites because balancing the budget using the GAAP method would cut state spending dramatically.

The state budget, under the Wisconsin constitution, must be balanced. But the cash accounting method the state uses allows gimmicks to bring the budget into balance. For instance, the state has in years past shifted payments to local governments into the next fiscal year in order to make the budget appear balanced in the present, said Robert Lang, director of the non-partisan Wisconsin Fiscal Bureau.

Walker balanced the budget, and in a way that eliminated the state's structural deficit, under the manner the state has long used.

But GAAP, an accrual accounting method, is a tighter standard that counts future liabilities that flow from past budget actions.

We examined Walker's first budget, the 2011-13 biennial budget, to see if he lived up to his promise to balance the budget using GAAP.

There's a chart every two years in the state budget demonstrating the bottom line under GAAP. The chart in the Walker administration's Budget in Brief shows that the 2011-13 budget was not close to balanced by that standard.

In fact, the document shows that based on GAAP accounting, the state would have been left with a deficit of $3 billion by 2012-13 under Walker's budget. That compares to the $2.9 billion GAAP deficit he inherited at the end of Doyle's term, the state's financial statements show.

Walker's critics didn't highlight those numbers -- it was not in their interest to call for even more cuts in the state budget.

The governor's office told us to judge this promise based on the next budget -- for 2013-15. Walker, though, promised to balance "every” state budget on the more stringent GAAP principles. He did not do that in his first budget.

We rate this as a Promise Broken.

Sources:

Scott Walker, campaign web site promise, accessed Nov. 11, 2011

Governor Scott Walker, 2011-13 Budget in Brief, page 33, March 2011
   
State of Wisconsin, Comprehensive Annual Financial Report, page 165, December 10, 2010

Walker for governor, campaign news release, Jan. 19, 2006