Budget Example Analysis

1027 Words Mar 16th, 2011 5 Pages
Introduction
-In the wake of the dot-com industry’s collapse, the steep stock market drop, the rise of the dollar against foreign currencies, increased unemployment, and other economic factors, March 2001 officially began a nationwide recession that triggered budget problems in at least forty-five states.
-The 2001 recession was the fourth recession in 30 years. After past recessions budget experts recommended establishing a “rainy-day fund” (saving funds during boom times in order to cushion the shocks of economic busts). Wisconsin established the fund but never put money into it.
-During the 1990-1991 recession Wisconsin’s fiscal stress was ranked the lowest among the 50 states. During the 2001 recession Wisconsin was among the
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European and some of the Far East economies were growing slowly or were in a recession before the U.S.
Remedies Proposed and Implemented
-During a deficit lawmakers have four options.
-They can raise taxes, cut spending, employ a combination of both, or employ a method of “creative bookkeeping”.
-The required spending cuts might have been reduced if the lawmakers could have drawn from a Rainy Day Fund.
-The other option was to tap into the tobacco settlement money that the state was supposed to get over a 30 year period, the lawmakers decided to draw heavily from this fund.
Remedies
-Act 16, the 2001-2003 biennial budget bill was passed in August of 2001 contained five major initiatives. -5 percent cuts to state agency budgets -delays in staffing new prisons -use the proceeds from the sale of tobacco settlement agreement revenue bonds -reallocation of federal transfer revenues to support state medical assistance funding -“extraordinary accounting devices…employed to ensure a positive budget balance
-“High-priority programs” were exempt from budget reductions (these included assistance to the poor, disabled, and the elderly, funding of K-12 schools, medical assistance, the court system, and public defenders).
-Three largest elements that remained to tax were the University of Wisconsin System, Shared Revenue Fund, and corrections.
Consequences
-Groups that were helped by these tax breaks were anti-tax

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