Friday, January 30, 2015

More hints that Wisconsin finances are slipping away

As we await the release of Governor Scott Walker’s budget, we continue to get clues as to the direction of the state’s finances. I’ll direct you to the quarterly General Fund Cash Forecast report that came out this afternoon. While not a direct match for the status of the state’s General Fund, it usually goes in the same direction, and what’s worth comparing here are the numbers that came out with what was predicted three months ago.

Cash balance, forecast vs actual Oct –Dec 2014
Oct 2014
Actual beginning balance $1,729.1 million
Predicted ending balance $2,154.3 million
Actual ending balance $2,072.5 million
Difference -$81.8 million

Nov 2014
Predicted ending balance $1,874.4 million
Actual ending balance $1,847.9 million
0Difference -$25.5 million

Dec 2014
Predicted ending balance $1,318.9 million
Actual ending balance $1,202.0 million
Difference -$116.9 million

That’s not a good sign, and even worse is the predicted direction for the coming months. The same documents cash forecast predicts the gap between the October report and the January one to widen in the next three months, as taxes get filed.

Jan 2015
Actual beginning balance $1,202.0 million
Predicted ending balance Oct ’14 $2,197.5
Predicted ending balance Jan ’15 $2,043.0 million
Difference -$154.5 million

Feb 2015
Predicted ending balance Oct ’14 $1,915.9 million
Predicted ending balance Jan ’15 $1,738.8 million
Difference -$177.1 million

Mar 2015
Predicted ending balance Oct ’14 $1,234.4 million
Predicted ending balance Jan ’15 $1,011.0 million
Difference -$233.4 million

And the reason for why the state’s treasury keeps falling short? Lower revenues, as the three months for October through December 2013 missed on cash receipts by $105.5 million, and all of the additional $116.5 million change in predicted cash balance in the first three months of 2015 are due to a lowering of expectations for receipts.

With the month ending on Saturday and tax season beginning, we will start to see very soon if these numbers have any chance of making up these deficiencies in receipts over the last five months of Fiscal Year 2015. But given the last year of lower-than-predicted tax revenues leading to increasing budget deficits not just for this year, but for the 2-year budget after that, I sure wouldn’t bet on it. Somehow I’m guessing this information about these lower revenues and higher deficits isn’t being told to the suckers GOP supporters that might be attending our Governor’s latest out-of-state speaking engagement.

P.S. It's also interesting that these numbers are not included in the disclosure for the state's attempt to refinance $260 million in debt in the coming weeks. They cut it off in November. By the way, this refinancing is in addition to the $279 million in borrowing that's going to happen next Tuesday- the same day that Walker reveals his budget.


  1. Jake,

    The state is heading for a train wreck in July of this year.

    Did you look at the estimated General Fund beginning balance for July? $ 867.4 billion.

    The General Fund beginning balances for 2013 and 2014 were: $ 1,826.6 and $ 1,500.6, respectively ( see: look on page three).

    SO Huebsch's beginning balance estimate is coming in one billion dollars below previous years, with typical July disbursements nearly $3.5 billion, and tax payments in the $1.3 - $1.4 billion range (and not decreasing them for the already noted declines in individual and corporate tax collections--since most of that month's revenues are the July estimated tax payments) Wisconsin's General Fund goes negative in July.

    I predict that in order to prevent this, Walker will call for an end to state-shared revenues--the largest payment of which is due in July.

    You heard it first here.

    Dr. Morbius

    1. The $867.4m estimate being from the JFC memo?

      In July 2014 there was a net outflow of $879.5m and in July 2013 $867.3, so if the 2015-17 budget looks anything at all like the 2013-15 one we're staring at State of Wisconsin checks literally bouncing at or around the end of July.

      The one potential short-term salvation straw being grasped at by our (I hesitate to use the term) leaders is lower refunds due to the withholding changes, but that will of course be in the past by the time July swings around.

    2. From what I can tell, going into a negative cash position has happened here and there, they just borrow and reallocate in the short term.

      But it is telling that these numbers have slipped downward in recent months, and what the numbers look like with the new fiscal year in July could be verrry different.

      On a related note, see that Kansas had yet another budget shortfall last month?

    3. Borrowing for this purpose would be unconstitutional. Reallocation from which fund though?

      Perhaps $150m would be needed to cover July's downs of the day-to-day balance vs its close; Transportation would now be unconstitutional to tap for this, the Core Retirement Investment Trust would be an illegal option, Local Government Pooled Investment is likely illegal for the exact same reason, the Budget Stabilization Fund can't be touched without the political ramification of this being a rainy day which Walker will want to avoid.

      That leaves the Capital improvement Fund (maybe) or the Environmental Improvement Fund, or a mix of smaller ones.

  2. Reallocations aren't that unusual, especially when it's the start of the fiscal year and those accounts have all the money in them at the start of July. Chapter 20.02 explains this.

    " the secretary of administration shall limit the total amount of any temporary reallocations to a fund other than the general fund to $400,000,000.

    2. Except as provided in subd. 3, the secretary of administration shall limit the total amount of any temporary reallocations to the general fund at any one time during a fiscal year to an amount equal to 5% of the total amounts shown in the schedule under s. 20.005 (3) of appropriations of general purpose revenues, calculated by the secretary as of that time and for that fiscal year. During the 2013-15 fiscal biennium, the amount that may be reallocated under this subdivision during a fiscal year may not exceed 9 percent of such revenues."

    So it's a short-term loan that can be done and later paid back (I think with a minor amount of interest), again, it's the year-over-year trend that's the real concern here.

    1. Understood; my only point though is that once you subtract out from those July 2014 fund conditions the amounts in the General Fund (because there won't be any), the Transportation Fund (because it's unconstitutional to tap), certain Trust Funds (that are by judicial precedent illegal to tap) and the Budget Stabilization Fund (that would be politically difficult to tap), you have about $1.3 billion there.

      So whether we're up the creek or not depends on the commitments of those funds prior to this July vs their situation last year.

  3. Well, no cuts to local aids, almost as if there were no deficit at all.

    Very strange, indeed.

    Dr. Morbius