AB272: Bill Text

LRB-2387/2

RAC:wlj:jf

2005 - 2006 LEGISLATURE

2005 Assembly BILL 272

March 28, 2005 - Introduced by Joint Legislative Council. Referred to Committee on Budget Review.

AB272,1,7 An Act to renumber 16.002 (1); to amend 13.093 (2) (a), 16.40 (3) (title), 16.50 (7) (b), 16.518 (title), 20.875 (1) (a) and 25.60; to repeal and recreate 16.46 (9); and to create 13.95 (1m) (c), 16.002 (1g), 16.40 (3m), 16.50 (8), 16.518 (4) and (5), 20.877, 25.17 (1) (fr) and 25.64 of the statutes; relating to: the budget stabilization fund, the generally accepted accounting principles deficit reduction fund, the general fund deficit based on generally accepted accounting principles, and making appropriations.

Analysis by the Legislative Reference Bureau

This bill is explained in the Notes provided by the Joint Legislative Council in the bill.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

Joint Legislative Council prefatory note: This bill was introduced at the recommendation of the Joint Legislative Council's Special Committee on Improving Wisconsin's Fiscal Management.

The provisions in the bill relate to the state's budget stabilization fund and the state's general fund deficit based on generally accepted accounting principles (the GAAP deficit).

Budget Stabilization Fund

1985 Wisconsin Act 120, which created the budget stabilization fund, established that the fund was to be used to "provide state revenue stability during periods of below-normal economic activity when actual state revenues were lower than estimated revenues." This statutory language was deleted by 2001 Wisconsin Act 16, and currently moneys in the budget stabilization fund may be used for any purpose specified by the legislature. The governor may also request under current law that moneys in the fund be used to address a fiscal emergency when authorized expenditures exceed projected revenues.

The budget stabilization fund is currently funded through two mechanisms. First, if actual tax revenues deposited into the general fund during the fiscal year are greater than had been projected, an amount equal to 50 percent of the difference is transferred from the general fund to the budget stabilization fund in that fiscal year. Second, as a result of 2003 Wisconsin Act 33, the net proceeds from the sale or lease of state surplus land or buildings, and from the sale of any state surplus supplies, materials, and equipment are, in general, deposited in the budget stabilization fund.

The bill does the following to the budget stabilization fund:

• Transfers from the general fund to the budget stabilization fund each fiscal year an amount equal to the statutory reserve for the fiscal year until the budget stabilization fund reaches a balance of 5 percent of the estimated expenditures from the general fund during the fiscal year.

• Specifies that moneys in the budget stabilization fund are reserved for a transfer from the fund to the general fund to provide state revenue stability during periods of below-normal economic activity when actual general fund revenues are 98 percent or less of the estimated general fund revenues published in the biennial budget act.

GAAP Deficit

Currently, the Department of Administration (DOA) prepares a state financial statement based on GAAP under its general authority. The bill explicitly directs DOA to prepare this statement and identifies it as the comprehensive annual financial report (CAFR).

The bill creates a GAAP deficit reduction fund. The bill:

• Transfers to the fund from the general fund each fiscal year that a transfer is not made to the budget stabilization fund an amount equal to the statutory reserve for the fiscal year, until the unreserved balance of the general fund in the CAFR for the previous year is no longer a negative amount.

• Specifies that moneys in this fund may only be used to increase any unreserved balance of the general fund reported as a negative amount in the most recent CAFR.

The bill also creates a mechanism to address the worsening of the state's GAAP deficit. In particular, the bill directs the governor, when the unreserved general fund balance in the most recent CAFR is a larger negative amount than the unreserved general fund balance reported in the CAFR for the previous year, to recommend legislation to eliminate this increase.

Currently, the biennial state budget report prepared by the secretary of DOA under the direction of the governor must contain a number of specified types of information, including the effect of the recommendations in the biennial budget bill or bills on the GAAP deficit. The bill clarifies this requirement by removing ambiguous text and simplifying this requirement.

The bill creates two other provisions to provide the legislature additional information on the effects of legislation on the state's general fund balance based on GAAP. These provisions:

• Direct the Legislative Fiscal Bureau to identify, where feasible, recommendations in specified versions of a biennial budget bill that may have a significant impact on the GAAP general fund balance.

• Expand the fiscal estimate process to include an estimate of the effects of a bill, other than an executive budget bill, on the GAAP general fund balance.

Effective Dates

In general, the bill takes effect on the day after publication. The expansion of the fiscal estimate process in the bill takes effect nine months after publication. The transfer by the bill of moneys in the general fund to the budget stabilization fund and the GAAP deficit reduction fund and the duty of the governor to recommend legislation to address any worsening of the GAAP deficit take effect on July 1, 2007.

AB272, s. 1 Section 1. 13.093 (2) (a) of the statutes is amended to read:

AB272,4,6 13.093 (2) (a) Any bill making an appropriation, any bill increasing or decreasing existing appropriations or state or general local government fiscal liability or revenues, and any bill that modifies an existing surcharge or creates a new surcharge that is imposed under ch. 814, shall, before any vote is taken thereon by either house of the legislature if the bill is not referred to a standing committee, or before any public hearing is held before any standing committee or, if no public hearing is held, before any vote is taken by the committee, incorporate a reliable estimate of the anticipated change in appropriation authority or state or general local government fiscal liability or revenues under the bill, including to the extent possible the impact of such changes on the general fund balance in the most recently published comprehensive annual financial report, as defined in s. 16.002 (1g), and a projection of such changes in future biennia. For purposes of this paragraph, a bill increasing or decreasing the liability or revenues of the unemployment reserve fund is considered to increase or decrease state fiscal liability or revenues. Except as otherwise provided by joint rules of the legislature or this paragraph, such estimates shall be made by the department or agency administering the appropriation or fund or collecting the revenue. The joint survey committee on retirement systems shall prepare the fiscal estimate with respect to the provisions of any bill referred to it which create or modify any system for, or make any provision for, the retirement of or payment of pensions to public officers or employees. The director of state courts shall prepare the fiscal estimate with respect to the provisions of any bill that modifies an existing surcharge or creates a new surcharge that is imposed under ch. 814. When a fiscal estimate is prepared after the bill has been introduced, it shall be printed and distributed as are amendments.

AB272, s. 2 Section 2. 13.95 (1m) (c) of the statutes is created to read:

AB272,4,11 13.95 (1m) (c) The legislative fiscal bureau shall prepare a report identifying, where feasible, recommendations in each version of the biennial budget bill or bills that may have a significant impact on the general fund balance in the most recently published comprehensive annual financial report, as defined in s. 16.002 (1).

AB272, s. 3 Section 3. 16.002 (1) of the statutes is renumbered 16.002 (1m).

AB272, s. 4 Section 4. 16.002 (1g) of the statutes is created to read:

AB272,4,15 16.002 (1g) "Comprehensive annual financial report" means a financial statement prepared under s. 16.40 (3m).

AB272, s. 5 Section 5. 16.40 (3) (title) of the statutes is amended to read:

AB272,4,17 16.40 (3) (title) Prepare budgetary basis annual financial statement.

AB272, s. 6 Section 6. 16.40 (3m) of the statutes is created to read:

AB272,4,23 16.40 (3m) Prepare annual financial statement based on generally accepted accounting principles. Prepare at the end of each fiscal year not later than December 31, a financial statement for the state in accordance with generally accepted accounting principles as promulgated by the governmental accounting standards board.

AB272, s. 7 Section 7. 16.46 (9) of the statutes is repealed and recreated to read:

AB272,5,3 16.46 (9) The estimated impact of the recommendations in the biennial budget bill or bills on the general fund balance in the most recently published comprehensive annual financial report.

AB272, s. 8 Section 8. 16.50 (7) (b) of the statutes is amended to read:

AB272,5,14 16.50 (7) (b) Following such notification, the governor shall submit a bill containing his or her recommendations for correcting the imbalance between projected revenues and authorized expenditures, including, if the imbalance is caused by actual general fund revenues being 98 percent or less of estimated general fund revenues under s. 20.005 (1) as published in the biennial budget act or acts, a recommendation as to whether moneys should be transferred from the budget stabilization fund to the general fund. If the legislature is not in a floorperiod at the time of the secretary's notification, the governor shall call a special session of the legislature to take up the matter of the projected revenue shortfall and the governor shall submit his or her bill for consideration at that session.

AB272, s. 9 Section 9. 16.50 (8) of the statutes is created to read:

AB272,5,21 16.50 (8) Deficit increase. (a) If following the publishing of any comprehensive annual financial report the secretary determines that the unreserved balance of the general fund in that report is a larger negative amount than the unreserved balance of the general fund in the comprehensive annual financial report for the previous fiscal year, the secretary shall immediately notify the governor, the presiding officers of each house of the legislature, and the joint committee on finance of the difference.

AB272,6,4 (b) Following such notification, the governor shall submit a bill containing his or her recommendations for eliminating the difference, so that the unreserved balance in the most recently published comprehensive annual financial report, as adjusted by the governor's recommendations, is no less than the unreserved balance in the comprehensive annual financial report for the previous fiscal year. If the comprehensive annual financial report that contains the larger negative unreserved balance was published in an even-numbered year, the governor may include his or her recommendations in an executive budget bill introduced under s. 16.47 (1m).

AB272, s. 10 Section 10. 16.518 (title) of the statutes is amended to read: