Gov. Evers’ irresponsible budget

Proposed spending would bring General Fund balance to dangerously low level

Gov. Tony Evers’ proposed budget for the biennium that starts in July increases spending by more than $3 billion a year over current levels. That increased spending would be funded in part by increased revenues — about $4.6 billion in higher tax revenue over the two-year period — but also by using up $3.6 billion of Wisconsin’s General Fund balance.

Evers’ proposal would reduce the General Fund balance to an amount equal to only 2 percent of annual General Fund state spending — well below the 16 percent that experts in state finance recommend, and far below the 18 percent projected for the end of the current fiscal year.

The budget Evers released on Feb. 18 is laid out in a 1,917-page book, “2025-27 Executive Budget,” and is summarized in a “Budget in Brief” document. The table accompanying this analysis summarizes that brief’s Table 4, “General Fund Condition under Governor’s Budget.”

The summary shows that Wisconsin is projected to end the 2024-25 fiscal year — the current fiscal year — with a General Fund budget balance of almost $4.3 billion, which equals approximately 18% of total expenditures and transfers.

In the governor’s budget, the General Fund budget balance decreases to about $2.3 billion by the end of the next fiscal year, on June 30, 2026, and to only $646 million on June 30, 2027.

That means the General Fund budget balance drops to 8 percent of budgeted spending by the end of fiscal 2026, and to 2 percent of spending by the end of fiscal 2027.

The Government Finance Officers Association, a 20,000-member professional association that provides guidance on state and local government policy and procedures, recommends that states set aside a minimum of two months’ operating expenditures, or an amount equal to approximately 16% of their annual budgets, for emergencies or unanticipated budget deficits. 

Wisconsin currently meets that recommendation, but Evers’ budget would see Wisconsin fall well below it, leaving the state vulnerable to unplanned revenue shortfalls or unanticipated expenditures. An economic downturn or natural disasters could put the state into a deficit.

The Budget in Brief, in fact, projects such General Fund deficits in two additional fiscal years beyond its required scope, estimating a deficit of nearly $4 billion by the end of fiscal year 2028-29. Due to the scant nature of the presentation and the size of the deficits, it is difficult to provide serious analysis for such estimates.

The dwindling of the accumulated surpluses in the General Fund under Evers’ budget results from the governor’s spending plans. In his budget, total expenditures and transfers for 2025-26 would increase by almost $3.8 billion, or 16%, above the 2024-25 levels. Spending for 2026-27 would be 1.8% less than the 2025-26 total, but it still would be about $3.3 billion over 2024-25 levels.

While many governments use fund balances over established minimum levels to finance spending, usually what they finance with fund balances is capital projects or other non-recurring outlays. Generally, it is not considered a best practice to use fund balances for operating expenditures. Doing so not only decreases the fund balance or any “rainy day fund,” such as Wisconsin includes as part of its General Fund, but also sets up significant challenges in financing future budgets once the surplus is spent.

It should be pointed out that the state uses different accounting principles to develop its budget and record financial transactions.  Those principles differ from generally accepted accounting principles, or GAAP, for government units. Estimates of GAAP General Fund balances included in the budget documents are not materially different from the non-GAAP basis.

Mike Konecny, owner of the financial consulting firm MWK LLC in Green Bay, has provided financial advice to local governments for more than 40 years.

Any use or reproduction of Badger Institute articles or photographs requires prior written permission. To request permission to post articles on a website or print copies for distribution, contact Badger Institute Marketing Director Matt Erdman at matt@badgerinstitute.org.