CHICAGO — Wisconsin’s increased issuance of debt — growing by 157% between 1992 and 2005 — is hurting the state’s fiscal condition, according to a report by a local policy group that state officials criticized for failing to accurately portray true debt levels and their impact on state finances. The report — “The Exploding Use of Debt to Finance Government in Wisconsin” — was released yesterday by the Wisconsin Policy Research Institute. It found that between 1992 and 2005 issuance by the state and its authorities shot up by 157%, putting the total debt level at $19.3 billion as of last year. Between 1992 and 2000, total outstanding debt grew by an average of 6.3% per year while over the last five years it grew by about 10.8% annually. Wisconsin’s $19.3 billion of debt equated to $3,476 for every resident.The report argues that the increases will impact future generations and the tax rates they pay as the state attempts to balance its books. “Increased debt means increased long-term costs to taxpayers” as “short-term decisions made by elected officials can cost taxpayers millions in interest costs for decades,” it said.In summary, the report recommended that state leaders curtail future borrowing and “employ real budgetary strategies that can slowly bring Wisconsin’s borrowing back in line with its citizens’ ability to pay.”The state’s long-time capital finance officer, Frank Hoadley, said the report addresses policy issues state leaders should consider in their decisions, but added that it failed to provide a true picture of the state’s use of debt due to inaccuracies and sometimes misleading figures and information.“The concern that is expressed is not entirely a hollow concern about the total amount of debt, and I think it underscores that governments like Wisconsin have to be careful in issuing debt, but the problem with the report is in the details and some inaccuracies that detract from the central message,” Hoadley said.The report counted as state debt issuance from various state authorities, although their debt is not state-supported. The $19.3 billion figure includes $5.7 billion of outstanding state GOs, another $2.6 billion of revenue-supported borrowing for such programs as transportation and $1.8 billion issued to wipe out the state pension and sick leave liability. The remaining debt was sold for university hospitals and state housing and health care agencies. Hoadley noted that the $1.8 billion in pension-related borrowing wiped another debt off the state’s books, a position viewed favorably by rating agencies.The report also highlighted some of the state’s past issues viewed unfavorably by rating agency analysts, including the use of $1.6 billion in tobacco bond proceeds to help wipe out an operating budget deficit, debt restructurings that pushed off principal repayment and increasing transportation borrowing to permit the one-time use of cash in the transportation fund.Rating agencies have not cited the state’s debt levels as one of its significant challenges, instead focusing their concerns on the lack of reserves and the budget’s structural imbalance — although the current budget made advances on both fronts.Standard & Poor’s earlier this month stripped the state of its positive outlook saying it lacked the revenue strength, tax structure, and spending restraint to make greater strides in building reserves to warrant an upgrade of its AA-minus credit. In affirming its Aa3 for Wisconsin, Moody’s Investors Service earlier this month named as challenges the state’s negative balances based on generally accepted accounting principles, its exposure to manufacturing struggles, and the months-long budget impasse this past summer that delayed passage of a new two-year spending plan into the fall. Fitch Ratings rates the state’s GOs AA-minus.
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