Wisconsin's Debt Continues to Fall

Monday, April 22nd, 2024 -- 11:00 AM

(Robert D’Andrea, Wisconsin Public Radio) The state of Wisconsin’s debt has continued to fall from its height during the Great Recession, and when adjusted for inflation is lower than at any point in at least 25 years.

According to Robert D'Andrea with the Wisconsin Public Radio, that’s according to a new report from the Wisconsin Policy Forum. The reduction in debt could allow the state to borrow money to fund infrastructure projects like roads, bridges and buildings.

It also helps the state improve its credit rating so it can borrow at lower interest rates. “That’s a really positive thing for everybody that relies on the state to serve them in one way or another,” said Jason Stein, the forum’s research director.

“In an environment where the markets are giving us higher interest rates, that’s an advantage to the state to be able to shade that down a little bit and get some savings for taxpayers,” he continued.

As of December 2023, the state had $11.14 billion in total outstanding debt, according to a state Department of Administration report. That’s down 2.6 percent, or more than $296.3 million, from the prior year before adjusting for inflation.

“On an inflation-adjusted basis, that represents the lowest debt level for the state in at least a quarter-century,” the report states. The share of the state’s main tax revenue going to debt payments fell below 2.7 percent in both 2021 and 2022, its smallest share since 1984 excluding years when the state skipped making debt payments because of budget challenges.

The state has long sought to keep annual debt payments lower than 4 percent. The state’s general fund balance reached a record high of $6.7 billion by June 2023. That was an increase of nearly $2 billion, or 42 percent, over the year prior. The current balance equates to $1,133 per Wisconsin resident, according to the report. 

“All through the aughts, when I started following the state’s finances, the state would have only enough room in its budget or reserves to cover its operations for like two, three days,” Stein said. “It’s not a good place to be for a household to only have enough money to cover its expenses for the next two and a half days. And it’s not a good place for the state government to be either.”

In contrast to those lean years, as of last summer, the state “was clearly in its best shape in decades,” the report states. Last June, Wisconsin had almost two-and-a-half times more cash and other liquid assets than it had short term bills and other obligations due within 60 days.

The report warns that while the state’s current finances are “notable and encouraging,” this may “turn out to be a high point that will not be repeated in the near future.” Federal pandemic relief funds that boosted state and local governments will run out this year.

awmakers and Democratic Gov. Tony Evers also drew on the surplus to cut property and income taxes and increase spending. By the end of June, the Legislative Fiscal Bureau projects the state’s general fund will spend nearly $3.3 billion more than it takes in from taxes and fees.

Future years are projected to have a smaller drop in the fund balance.

Feel free to contact us with questions and/or comments.