The Wisconsin deficit is already projected at a daunting $2.7 billion, but a new report from a University of Wisconsin professor said the deficit is actually at $3.1 billion.
Andrew Reschovsky, UW professor of economics, said previously uncalculated factors could increase the budget shortfall by as much as $400 million.
The Legislative Fiscal Bureau initially estimated the deficit at $2.7 billion based on the deficit in the state’s General Fund, the money the state uses to operate.
According to the report, the deficit is approximately one-tenth of the $27.7 billion dollar General Fund, which is 70 percent of the budget allotted to the entire UW system.
However, the Legislative Fiscal Bureau does analysis based on current costs and expenditures and could fail to account for changing costs in some key areas, according to the report.
“The fiscal bureau does superlative work, but they don’t do forecasts or projections,” Reschovsky said. “Their number does not factor in adjustments that could be made, such as the stimulus package.”
The calculations in the report differed from the Legislative Fiscal Bureau’s numbers by including the projected increase in Wisconsin’s population, specifically in the number of elderly people becoming eligible for government programs.
“The more elderly people there are, expenses for services like Medicaid will go up,” Reschovsky said.
Another factor the report found increased the projected deficit was an unexpected increase in the cost of providing public services.
The Legislative Fiscal Bureau calculated using only current expenditures for these services, while the report assumed certain costs will change. The report said as the economy improves, the price of certain goods is expected to rise.
“Is it going to cost the same to provide services in the next biennium? I think the answer is no,” Reschovsky said.
However, with the increase in costs the report forecasts increased revenue for the state as well.
Based on data from the Wisconsin Department of Revenue, the report predicted revenue will increase to $1.2 billion.
Reschovsky said the projected increase in revenue will not be enough to keep up with the additional expenses needed.
The report advocated closing the deficit by cutting spending or increasing state revenue, but cautioned cutting spending to address the deficit would most likely mean cutting public services for citizens.
An increase in the projected budget deficit could add flames to an already contentious gubernatorial election.
Both candidates have proposed solutions to the deficit problem.
Republican candidate Scott Walker also advocates cutting spending through his “Brown Bag” movement.
Democrat Tom Barrett recommends reducing the deficit by “putting Madison on a diet” and reducing state spending and also claims Walker’s plans will increase the deficit still further.
“We can’t trust Walker to get the state’s fiscal house in order because his plans will explode the deficit by $1.8 billion,” Barrett said in a statement.
However, Walker’s campaign places the blame for an increased deficit at current Gov. Jim Doyle’s door.
“The more news we hear the worse Governor Doyle has gone for Wisconsin,” said Jill Bader, a Walker spokesperson. “The budget hole he has put us in is unacceptable.”