Economy & Budget

Wisconsin is teaching the nation a lesson on budgets

Greg Nash

“Saving money” rarely seems to be high on politicians’ list of policies, but that doesn’t make it less important. In fact, the current pandemic shows just how important it is — and how the nation can learn from states like Wisconsin.

States across the nation are seeing enormous drops in tax revenues due to stay-at-home orders and reduced economic activity. Some are asking for the federal government to make them whole — the House even passed a bill to give out $1 trillion in state and local bailouts. But some states have been responsible in recent years and can survive by themselves — like Wisconsin. While states like Illinois struggle with debt and pension liabilities, Wisconsin and other states will be able to quickly bounce back from the pandemic. It’s a classic cautionary tale: the prudent, careful state will come out with more freedom, while the tax-and-spend state will be forced to beg other states for charity.

Most Wisconsinites already know this. According to an unscientific Heritage Action phone survey conducted over the last three months, swing voters in Wisconsin believe by a 3-to-1 margin that getting businesses running is the best solution to the current economic crisis, not cash payments or more government spending. Thankfully, years of preparation mean the state won’t have to resort to further government support.

Much of the credit for Wisconsin’s sound budget situation goes to former Gov. Scott Walker. When he began as governor, he faced a $3 billion deficit. He immediately made hard choices, fixing the state budget without mass layoffs or tax hikes by changing the state’s public sector union rules. While Walker faced immense pressure at the time from protesters and lawmakers, some of whom fled the state to avoid a vote, he didn’t relent. Nearly a decade later, his solutions have saved Wisconsinites more than $12 billion, according to a MacIver Institute analysis.

While some on the left fiercely opposed Walker’s choices throughout the 2010s, he left Wisconsin far better than he found it. In 2010, the state had less than $2 million in its rainy day fund. But in 2018, the fund had $320 million, by far the highest the state had ever seen. In addition, the state had a surplus every year of Walker’s governorship.

And thanks to the efforts of generations of responsible lawmakers, Wisconsin has the #1 healthiest pension system in the nation with 103 percent funding — the only state with more money in assets than it currently owes in pensions. Illinois, on the other hand, is #48, with only 38 percent of its liabilities funded.

And now the rainy day is here. The coronavirus pandemic has thrown a massive wrench into budget plans nationwide. While a $2 billion loss is projected for Wisconsin’s current budget, which runs until next June, the state’s $844 million in savings will help it get through the crisis. The Badger State’s sound planning ensures it will survive the pandemic with a little belt-tightening, and it will have the freedom to chart its own course.

But other states expected ever-rising tax receipts to keep their underfunded pensions and bloated budgets from fiscal disaster — they had no room for error. Wisconsin’s cash reserves could fund its government for more than 35 days with no budget cuts at the end of 2019, while Illinois could last for 4 days. It’s no wonder the president of the Illinois Senate begged Congress for $40 billion to fix its self-inflicted budget problem before raising spending yet again.

Wisconsin’s improvement in finances will pay big dividends in the coming months: while state legislatures across the country are scrambling for cash and slashing budgets, Wisconsin has the freedom to focus its efforts on safely reopening again. Wisconsinites know reopening will resume their path of prosperity and freedom — meanwhile, states that have to hope for bailouts will continue their cycle of dependency and ruin.

The coronavirus pandemic holds many lessons for our leaders, but smart governance is the most important. While Scott Walker and other governors made hard decisions to fix their state budgets and pensions, many other states failed to plan for the future during an economic boom. The first group will be free to chart a quick recovery, while the second group will have a painful reckoning. The nation could learn a thing or two from Wisconsin.

Jessica Anderson is Executive Director of Heritage Action for America.

Tags pensions state budget deficit Wisconsin

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