Rare Opportunity Emerges to Reduce Spending Without Making Cuts in Next State Budget

For the first time in decades, the starting point for spending in Wisconsin’s next state budget will be lower than it is in the current state budget, creating a golden opportunity to reduce state spending without making any cuts.

The state budget is based on a two-year cycle. Government planners only consider what was spent in the second year when determining the baseline for the next state budget. When writing the budget, lawmakers usually stack more spending in the second year. At the start of the next budget cycle, that amount is then doubled to calculate the new baseline, which is called “base year doubled.” It is also disparagingly referred to as “budget math.” Because of this accounting process, increased spending is baked into each new budget from the start.

For example, the Department of Public Instruction (DPI) got $8.6 billion last year and $8.9 billion this year. That makes its total funding in the current budget is $17.5 billion. However, using budget math, we double the $8.9 billion, which results in a total of $17.8 billion. That means even under a zero-growth policy, DPI’s budget would grow by $311 million.

This phenomenon is a major contributing factor in the ever-expanding state budget. Each time government planners sit down to start on the next budget, the current budget looks slightly bigger than it actually is.

The 2021-23 budget spent a total of $87.5 billion (without bonding), but budget math creates the perception that it spent $88 billion. The difference was only 0.6% that time, but it was inflated none the less. In 2017, the difference was 1.9%. Every budget for the past 20 years has started out this way. However, this year will be different.

It turns out that not every state agency enjoyed higher second year funding like DPI has in this budget. For example, DOT’s second year funding dropped $634 million, WHEDA’s dropped $525 million, and DHS’s dropped $227 million. Some of that was due to reduced federal funding, but much of it was a conscious decision made by the legislature. The impact of this arrangement is monumental.

For the first time this century, Wisconsin’s budget math makes the current state budget look smaller than it actually is. The 2023-25 budget is $98.7 billion (without bonding). Because year 2 spending is lower than year 1, the government’s budget math has the reverse impact it usually does. When planners begin their work on the next budget, they will work under the perception that the current budget is $97.9 billion. The difference is not quite 1%, but it’s a huge milestone. That lower baseline means that if every state agency was held to a zero-growth mandate, the state budget would actually shrink. It means that if the legislature made no changes, spending would actually decrease without making any cuts.

Unfortunately, you cannot assign all the blame for Wisconsin’s ever-increasing spending on budget math. The different between actual spending and base year doubled spending averages 1.2%. Each state budget, meanwhile, spends 7% more on average than the previous budget. At least this time around, no one will be able to blame budget math for higher spending.