MJS: Contrary to Walker's claims state budget deficit still exists

January 22, 2012
Jason Stein

Madison - Gov. Scott Walker's administration has touted for months its efforts to balance the state budget, but now it also has acknowledged a significant way in which the budget isn't balanced.

To keep the possibility alive of making further cuts to state health programs, the Walker administration quietly certified to the federal government on Dec. 29 that the state had a deficit.

Federal law allows the state to drop tens of thousands of adults to save money on health care costs if the state can show it has a deficit. Walker has said he wants to cut health care spending in other ways, but hasn't ruled out dropping those 53,000 adults if the other methods aren't approved by the federal government.

To keep that option alive, state Administration Secretary Mike Huebsch wrote in a December letter to the U.S. Department of Health and Human Services that the state would have an undisclosed deficit from Jan. 1 of this year through June 30, 2013.

"It's nothing more than what we've been saying all along," Walker spokesman Cullen Werwie said.

How can the Walker administration say that the 2011-'13 state budget is both balanced and in deficit?

In June, Walker and Republican lawmakers passed a balanced budget according to the measure that is always used for state budgets - cash accounting. That means essentially that the state will have cash left in its main account - an estimated balance of $68 million - when the budget ends on June 30, 2013.

That's the measure that state officials use for budgets and the one Walker has repeatedly touted in statements when he says he eliminated a $3 billion budget deficit on a cash accounting basis.

But the state's accounting method falls well short of those used by publicly traded companies. Those "generally accepted accounting principles" count not just whether the state has cash on hand but also whether it has made promises to pay money that it can't back out on.

For example, a consumer may have money in his or her bank account, but if a looming credit card bill is even larger, then he or she would have a deficit under that method of accounting. This so-called GAAP deficit isn't new to the Walker administration - it goes back years in state government to past governors such as Democrat Jim Doyle who also have said they balanced the budget on a cash basis while the GAAP deficit remained.

Werwie said the administration already had acknowledged that it had a GAAP deficit in state financial documents that estimate it at $3 billion for this fiscal year and next fiscal year.

Rep. Sandy Pasch (D-Whitefish Bay) said Walker's different statements on the budget amounted to financial doublespeak.

"On one hand, he claims he balanced the budget when he's raising money from special interests - on the other hand, he claims we still have a $3 billion hole when he's looking to drop health care for Wisconsinites when they need it most," Pasch said in a statement.

Rep. Jon Richards (D-Milwaukee) noted that as a candidate Walker had called for the use of generally accepted accounting principles to balance every state budget.

The 2010 federal health law requires a state to maintain health coverage levels and not drop people from coverage programs for the needy unless the state can show that it has a budget deficit. In that case, states can drop certain recipients with higher incomes - a group that in Wisconsin works out to around 53,000 people.

Jon Peacock, research director of the Wisconsin Council on Children and Families, questioned whether President Barack Obama's administration would accept the Walker argument that the state has a budget deficit for that purpose when in other forums the governor is adamant about saying the state has no deficit.

"Whether you can pick and choose I think is the question here," Peacock said.

A spokeswoman for the Centers for Medicare and Medicaid at the Department of Health and Human Services had no comment.

Rep. Robin Vos (R-Rochester), the co-chairman of the Legislature's budget committee, noted that the GAAP deficit stretches back more than a decade and that it would take work to eliminate. "We're trying to address the GAAP deficit over time."