Wisconsin is one of top 10 states facing “fiscal peril” this year, according to a report released Wednesday by the Pew Center on the States.
The Pew Center scored all 50 states using data taken as of July 1, 2009, in a study entitled “Beyond California: States in Fiscal Peril.” According to the analysis, Wisconsin is one of nine states — including Illinois, Michigan and Florida — following in California’s footsteps toward economic turmoil.
California itself has taken the national spotlight after a combined force of decline of state revenues, increased unemployment, high foreclosure rates and poor money management practices led to serious economic issues. The change in the state revenue of California was negative 16.2 percent, according to the study. Wisconsin is less than 5 percent behind, at negative 11.2 percent.
The recession has had a particularly negative effect on Wisconsin for several reasons. Even if it had not taken place, Wisconsin still would have been left with a major shortfall in its budget — a factor that has been exacerbated by the national economic problems, the study said.
UW professor of political science Charles Franklin attributed the rising deficit to the Wisconsin Legislature’s consistent refusal to balance the budget and continued spending.
“The state government has been borrowing money, paying bills in the following year and taking money away from the university, all of which have contributed to the current economic problems,” Franklin said.
Franklin added these problems are due to a lack of political responsibility in both the Republican and Democratic parties. Neither party is inclined to raise taxes; yet, neither wants to cut spending. The result is the $6 billion deficit the Pew Center’s analysis has exposed.
The recession has cost Wisconsin 140,000 jobs — one-eighth of the manufacturing workforce, according to a report released in September by the Center on Wisconsin Strategy. Wisconsin is currently matched with the national average of unemployment.
This fact will undoubtedly be a major issue in the upcoming gubernatorial race in Wisconsin, Franklin added.
“The underlying issue is that you create jobs by creating companies. The upcoming election will be really dependent on the question of how to go about this,” Franklin said.
Franklin suggested one possible solution to economic problems facing the state is to grow new businesses, citing Silicon Valley in California as an example.
Franklin added the state government should provide incentives to start up new companies.
The change in California’s unemployment rate is only slightly higher than Wisconsin’s at 4.6 percent, compared to 4.4 percent, according to the study.
The rising rate of unemployment is due in large part to the loss of manufacturing jobs.
“The loss of the manufacturing jobs isn’t just due to the recession. Many of the jobs have moved to low-wage states and countries,” Franklin said.
The repercussions of the “fiscal peril” of these 10 states will extend beyond their own borders. These 10 states contribute to one-third of the U.S. economic output and population. Any measures taken by state governments will affect the country’s economic recovery, the statement said.