By M.D. Kittle | Wisconsin Reporter

MADISON — Here’s the bill for the Badger State taxpayer — $2,144.

At least that was Wisconsin’s debt load per capita as of fiscal 2010, according to a new report that ranks the state near the bottom in outstanding debt.

The state’s total outstanding debt was north of $12.123 billion, according to State Budget Solutions, or SBS, a conservative, free-market group in Alexandria, Va., that tracks best and worst practices in state budgets. The nonprofit advocates for budget, pension and public union reforms.

That $12.123 billion could be on the low side. A state comprehensive report released Dec. 15, 2010, showed that Wisconsin’s outstanding debt was more than $1 billion higher, around $13.2 billion, the Wisconsin Legislative Fiscal Bureau said.

And that doesn’t begin to factor in billions more in unfunded liabilities, SBS said.

The study ranks Wisconsin ranked 47th among all states in outstanding debt — including general obligation debt, appropriation obligation debt such as tobacco bonds, Department of Transportation revenue bonds, clean water bonds and petroleum bonds for the Petroleum Environmental Cleanup Fund Act program.

The data is based on the latest comprehensive fiscal reports of the states, said Andrew Guevara, associate writer for Sunshine Review, who put together State Budget Solutions’ second annual state deficit report. The vast majority of those reports are from fiscal 2010 or earlier.

Aggregate state debt topped $4 trillion, according to the latest data, and state budget watchers contend things haven’t fared much better since.

The exceptions, perhaps, are states like Wisconsin, said Bob Williams, president of SBS.

“The problem is, everything is historic in the data, but (Wisconsin) made a lot of changes” in the past 10 months, Williams told Wisconsin Reporter.

Williams pointed to the Legislature’s fix of an approximately $3.6 billion shortfall in the 2012-13 budget, and what he notes as the structural budget repairs through the controversial Act 10, which curtails collective bargaining for most public employees and requires those workers to cover a greater share of their health and pension benefits costs.

Smoke and mirrors?

But while Wisconsin’s budget may be balanced statutorily, tax trackers see a huge gap between balanced budget fiction and fact.

Dale Knapp, research director of the Wisconsin Taxpayers Alliance, a nonpartisan nonprofit, said the state ranks among the worst when it comes to budgeting by Generally Accepted Accounting Principles, with a GAAP deficit running right under $3 billion.

Lawmakers lay claim to balancing the budget, but the Taxpayers Alliance and others contend the state’s cash accounting system has often used tricks, such as moving payments into the next fiscal year. GAAP, or accrual basis, is much more rigorous, much less smoke and mirrors, as statutory budgeting critics attest.

Knapp grades Wisconsin’s fiscal health as average.

“We’re in a situation where there’s good and there’s bad,” he said, advising caution when reading into rankings like the SBS study. So much is up to interpretation, Knapp said.

Credit rating agencies, like Standard and Poor’s, have rated the state’s fiscal health well above average, with bond marks at AA status, the second highest level under the S&P grading chart. With a $13 billion-plus outstanding debt load, Wisconsin rates high because of its ability to tax, Knapp said. States and municipalities, unlike businesses, can tax their way out of financial straits — and they often do.

Long-term obligations

Combined state government unfunded liabilities, such as employee defined pension obligations and other post-employment benefits, and Unemployment Trust Fund loans, total more than $3.4 trillion, according to SBS.

“Although states themselves present deficit figures, those amounts do not offer a full picture of the state’s liabilities and can rely on budget gimmicks and accounting games to hide the extent of the deficit,” the study states. “While liabilities are not actually debt, they are a stream of future spending obligations that states have committed themselves to spending.”

In Wisconsin, unfunded liabilities soar into the tens of billions of dollars, according to data from the conservative, nonprofit American Enterprise Institute and the nonprofit public policy research organization, Pew Center on the States, both based in Washington, D.C. But there is dispute among Wisconsin budget watchers.

“If we don’t have the best, we have to be in the top three” funded pensions, said Robert Lang, the director of the nonpartisan Legislative Fiscal Bureau.

The Wisconsin Retirement System, with net assets in trust of $75.87 billion in 2010, was funded at 99 percent, according to The Comprehensive Annual Financial Report from the state Department of Employee Trust Funds, or ETF. Another analysis, based on a fair-market funded ratio, found the pension system funded at nearly 94 percent.

Shawn Smith, spokeswoman for ETF, said that funding level accounts for present and future benefits, built on contributions from employees and state agencies, and shared risk among employees and taxpayers. The pension system, Smith said, also doesn’t have a baseline cost-of-living adjustment as other states do. In more difficult economic times, when retirement funds took a beating, state employees saw declining dividends, she said.

But they still posted dividends, unlike most employees and their 401(k)s, which took a bath in recent years.

In these austere times, fiscal analysts assert states are having a difficult time coming to terms with the “800-pound gorilla in the room.”

Tad DeHaven, budget analyst for the Washington, D.C.-based nonprofit CATO Institute, a public policy research organization, said states are beginning to address the unfunded liability issue through changes like defined contribution retirement savings for new employees. But DeHaven said politicians don’t want to deal with the bigger-money questions today.

“As you saw in Wisconsin, it’s a very touchy subject. Going after the 800-pound gorilla in the room isn’t easy. Public employee unions are pretty powerful,” he said.