WISCONSIN ACCOUNTING PRINCIPLES

http://www.legis.state.wi.us/assembly/asm40/news/2010%2001%2008%20-%20Petersen's%20E-Press.html

Representative Kevin Petersen's E-Press
State Representative -- 40th Assembly District

According to a report released by the Wisconsin Taxpayers Alliance, the generally accepted accounting principles state deficit for the 2008-09 fiscal year hit $2.71 billion.

The $2.71 billion figure was calculated using data from the 2008 – 2009 Comprehensive Annual Financial Report published in December by the Wisconsin Department of Administration.

Generally accepted accounting principles (often referred to as GAAP) are standards accountants use while calculating the financial statements of businesses and non-profit organizations. These standards are widely followed to maintain integrity in budgeting. Publicly traded companies are required to use generally accepted accounting principles by the Securities and Exchange Commission.

Instead of using generally accepted accounting principles, Wisconsin’s state government calculates its finances using month to month revenues and expenditures. This less stringent type of accounting ignores future obligations and covers up spending gimmicks used to balance bloated government spending.

For example, imagine two families purchasing a refrigerator during a “no money down, no payment and no interest for 2 years” sale. The 1st family uses generally accepted accounting principles, which will add the cost for the refrigerator to their monthly budget from the day of purchase until the payment’s due date. However, the 2nd family uses month to month current expenses budgeting. Their failure to account for the purchase will result in not having the means to pay for the refrigerator when the payment is due.

Wisconsin is much like the 2nd family which failed to address its impeding debt. In the current budget, the state purchased $2.71 billion of goods and services with no means to pay for them when their bills come due. Thus, the state’s structural deficit continues to grow into the future.

Since Governor Doyle took office, government spending has increased 32%; from $47.1 billion to $62.2 billion in the latest biennial budget. In fact, despite experiencing the worse recession in 30 years, spending increased over 6% in the current budget alone.

To break our debt down, according to the Wisconsin Taxpayers Alliance, the state’s generally accepted accounting principles deficit is $445 per person. In other words, Wisconsin has the highest structural deficit per capita in the nation.

Businesses use generally accepted accounting principles to ensure their solvency. It’s time for Wisconsin’s government to do the same. I’ve co-sponsored a bill that requires the preparation and passage of biennial state budgets using generally accepted accounting principles.

If Wisconsin is to chart a financially sustainable path, we must be honest in our budgeting and get spending under control. To not do so will burden our children with an unsustainable amount of debt.

Respectfully,

Kevin Petersen
State Representative
40th Assembly District