State Faces Possible $2.5 Billion Structural Deficit

Capitol & ForwardLast week, the Legislative Fiscal Bureau released a memo to all legislators detailing a potential $2.5 billion structural deficit for the next Legislature. The memo relies on current fiscal parameters and the deficit could change with revenue growth or program expansions. The expected gap grew by nearly $500 million over the the past year, resulting in the largest budget shortfall since Governor Jim Doyle took office in 2003.

Wisconsin will elect a new governor this fall, and the Legislature will have at least 23 new members. They will be faced with the difficult task of preparing the 2011-13 budget upon taking office in January.

The Milwaukee Journal Sentinel spoke with Mark Bugher, former secretary of the state Department of Administration last week about the budget situation. Bugher said that the incoming governor and legislators “are going to have significant challenges because the day of reckoning has arrived. They are going to have to face up to the notion of cutting spending pretty dramatically or raising fees or a little of both.”

Previous legislatures solved budget crises with federal stimulus funds or transfers from the state transportation fund. Those one-time fixes are not likely to be available for this budget.

A few days before the Fiscal Bureau memo was released, Governor Doyle asked all state agencies to plan for a spending freeze in the next biennium and prepare for a 10-percent budget reduction if necessary. A few specific programs were exempted from the freeze, including instruction and research activities focused on economic growth at UW-System.