Wisconsin Has At Least $7.44 Billion In Surpluses of the Taxpayers Money it is not using.

  FY 2003 Report Home Page Flags courtesy of Robesus Inc.



The State of Wisconsin at the State-level has approximately $7.44 billion of the taxpayer's money it is not using, i. e. surpluses equal to $1,368 for every man, woman and child in Wisconsin or $5,471 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Wisconsin.

The Exhibit A below shows the results of the FY 2003 review.

What are these surpluses we refer to?

Government surpluses, as used in this report, are funds that are not required or needed for the operation of all government operations, funds, accounts, agencies, etc., directly or indirectly, for the year(s) covered by the budget which is usually one year. Theoretically, at the end of every fiscal year, governments should have little or no cash/investments on hand. But what we have found is that most governments have huge amounts of cash and investments on hand at the end of the fiscal year. And somehow these cash and investments are not being recycled back through the budget process the next year, but are being held year-after-year.

A Government Can Have a Budget Deficits/Shortfalls and Financial Surpluses At The Same Time.

This is the most deceiving topic that governments, politicians, and the news media have conveyed to the public about governmental financial matters. In realty, a government can simultaneously have a budget shortfall and a financial surplus of the taxpayers' money.

The problems are focused in four areas:

1. The budget only covers a small portion of the State's financial condition. There are a group of funds not part of the budget process. The complete list of funds and budgetary requirements are found in the Comprehensive Annual Financial Report (CAFR). This report depicts the complete financial status of the State. The budget only covers a portion of the financial resources of the government.

A Little Background:

The CAFR usually has four categories.

Governmental Funds
Proprietary Funds
Fiduciary Funds
Component Units

Governmental Funds involve activities of the government including most basic services such as environmental resources, general government, transportation, education, health and human services, and protection of persons and property. Most of the cost of these activities are financed by taxes, fees , and federal grants.

Proprietary Funds are used when a government charges customers for the services it provides, whether to outside customers or to other agencies with the state. For example, Enterprise Funds, a component of proprietary funds, are for activities that provide goods and services to outside (non-government) customers, which includes the general public. Fees, charges for services or goods, assessments, fines, licenses, etc. are the major revenue sources.

Fiduciary Funds are activities in which the state acts as a trustee or fiduciary to hold resources for the benefit of others. These funds are pension trust funds, investment trusts, and agency funds (which are for assets held for distribution by the government as an agent for other governmental units, other organizations, or individuals).

Component Units reportedly are legally separated organizations for which the government is financially accountable. Usually fees, charges for services or goods, assessments, fines, penalties, licenses, etc. are the major revenue source.

The budget, as commonly known to the public, only involves the Governmental Funds and may not even include all of the governmental-type funds. The remainder of the Funds shown above are not part of the budget and are commonly called "off-budget" items.

2. Next year's budget consists only of next year's estimated revenues and next year's estimated expenditures. Previous years' revenues not used (spent) are normally not considered in the next year's budget, but should be. In other words, the previous years' revenues (as shown in the CAFR) are not recycled back to the budget process.

Historically, a budget consists of three parts: 1) Funds brought forward (funds not previously spent); 2) Next year's estimated revenues; and 3) Next year's estimated expenditures.

But somewhere along the way the funds brought forward category was lost. In accounting, the previous years' revenues are no longer called revenue but have been converted to Cash and Investments. Since they no longer called Revenues governments have forgotten about them to the public. They are there but not considered in the budget process, but should be.

3. The budgeted items and non-budgeted items (off budget) should be budgeted to zero (usually referred to as zero-based budgeting). In addition, the government should be on a pay-as-you-go basis, no reserves for future years. What this means is that you budget to have a zero fund balance. If you plan to spend $100 you budget for $100 with no excess or reserve allowed.

For example, the State of Wisconsin Special Revenue Funds (Governmental Funds), considered part of the budget, have fund balances of $209 million that probably will not be considered in the next year's budget. The total cash and investments, funds that were not used during the current year, was $513 million (surplus) and should be part of the next year's budget. So if next year there is a "budget deficit" ask about these funds not being considered or used.

4. Budgeted expenditures should be last year's expenditures (as shown in the CAFR) with an adjustment for increase in requirements (costed out) or reductions in requirements. In most cases the CAFR expenditures are not considered in the next year's budget because the CAFR in many cases is published after next year's budget is considered and sometimes approved.

Running Surpluses is Stealing

Although taxation is legitimate, running a government surplus isn't. It represents a taking by the state, because it exceeds the government's contract with the community. It is no different than if a federal agency were to take a person's land or possessions without just compensation (an activity barred by the Fifth Amendment). Excess taxation isn't what the people bargained for.

In presuming entitlement or authority not ceded by the community, the state abrogates its moral pact with those it governs. Its power is no longer derived from the people, whose rights to liberty and property it boldly denies.

The Governor and the Legislators

The Governor and the legislators should include in the next year's budget the previous years revenues not spent as indicated by the CAFR. These were once a revenue and should still be considered revenue for budgetary purposes.

Also, they should consider a zero-balance budget concept for all budget and non-budgetary items in the CAFR including the College and Universities and the Component Units.

Budgeted expenditures (for the budget) should be last year's expenditures (from the CAFR) adjusted for demonstrated requirement changes in project, program or services. An increase in requirements should include the costs of these additional requirements. Conversely, a decrease in requirements should result in a decrease in costs associated with the decreased requirements.

The Governor and legislators should take into consideration the entire financial condition/status of the State in the budgetary process by including all of the funds in the CAFR as being a part of the budget.

This system is covered in the CAFR Budget System. This system needs to be implemented in all governments.

If the State holds the excesses/surplus, it will earn 4% to 5% on that money. If the State returns the money to the people it will receive 20% in revenue because of the increased economic activity. This is elementary economics.

Laws need to be changed.

Every thing done by governments is by law. There are laws that state this or that regarding the use of some of the funds. Man made the laws, man can change the laws. How much effort would it be to include at the end of every law "...or if considered excess or not needed for the current operation that the funds will be refunded to the taxpayers?" See how easy it is.

At one time every law had its place, but things change. The laws need to be reviewed for change to meet the current needs of the government and the people to release these funds for use/refunded.

If this were accomplished, the State would have a huge surplus to refund (rebate or tax reductions) to the taxpayers. Such a refund would create considerable wealth and jobs, increase wages, increase State and local government revenues, dramatically increase the economy, and create the greatest economic expansion in the history of the State. Everyone wins.

If you want to know the financial condition of your government(s), do not look at the budget. Get the CAFR.

The Synergistic Magic of Economics.

What happens when the government holds the $7.44 billion.

  (In Thousands) Investment Income   Per   Capita Family of 4    
  The government holds and investments the surpluses at 4.5%.
62 246  

Here is what happens when the $7.44 billion is returned to the taxpayers (the private economy).

  (In Thousands) Surplus
Per   Capita Family of 4    
  The surplus is returned to the taxpayers. 7,441,302 1,368 5,471  
  Wages are increased. 3,720,651 684 2,735  
  State government revenues increase. 1,488,260 274 1,094  
Local government revenues increase. 1,190,608 219 875  
  Federal government revenues increase. 2,976,521 547 2,188  
  Total Benefits...   3,091 12,363  

In addition, 148,826 jobs are created. This is why it is disastrous for governments to hold excesses/reserves of the taxpayers money.

Note: The economic impact analysis is further explained at Economic Impact Analysis.

The business community suffers the most.

Before the 9-11 tragedy, President Bush and Congress provided tax rebates which averaged $427 for every American. This was to create an additional $60 billion in consumer (economic) spending, turn the economy around and create jobs for the unemployed. However, 9-11 change that.

As the above economic impact chart shows, if the State returned the $7.44 billion in surpluses to the people the State economy would grow by $2,735 per capita. That is 6 times the amount the Federal government used to stimulate the U.S. economy. Businesses net incomes could double or triple. This is elementary economics.


The Environmental Improvement, an Enterprise Fund and not part of the budget,had net expenses of $6.3 million. It also had reserves (cash and investments) of $409 million. That is 65 years of net expenses as a reserve.

Veterans Mortgage Loan Repayment, another Enterprise Fund and not part of the budget, had net expenses of $11.3 million and cash/investment reserves of $252 million. The reserves represent 22 years of expenditures.

Dry Cleaner Environmental Response, a Special Revenue Fund and part of the budget had net expenditures of $109 thousand and cash/investment reserves of $3 million. Let's see that represents about 28 years of reserves.

Income Continuation Insurance, an Enterprise Fund, had net expenditures of $1.1 million and also had reserves of $75 million. That represents 67 years of reserves.

These only represent four of the 73 funds shown below that had cash and investment reserves not being used.

What to do?

Unless the budget flaws are corrected and the entire State finances are used in the budget process, the problems that created the surpluses willl continue to exist. The budget deficits reported by the Governor and legislatures will be used year after year for the excuses for tax increases and/or to reduce needed services.

Just stopping a tax increase or a reduction in services will not solve the problems. The problems will come back the next year.

I have provided the details of the surpluses and explained the ways the surpluses are accumulated. The data is accurate because it comes directly from the government's own financial statement, the CAFR. You must provide the where-with-all to convince the Governor and legislatures that the surpluses exist and what should be done about it. I live in Arizona. It is not my money that is at stake.

Exhibit A

The 2003 CAFR is located at:


Items not Included

The following items are not included in the amount of surplus shown:

-Buildings, roads, bridges, land (not for sale), and equipment.

-Deferred compensation plans for employees. These are plans in which the employee contributes to his/her retirement over and above the normal employee retirement contribution.

-Any fund that is 100% supported by donations, bequests, gifts, endowments, etc. These are not taxpayers money.

-For Colleges and Universities. All endowment and similar-type funds should not be included as surpluses. Sometimes these funds are combined with other college/university funds. We are interested in surpluses, so in these cases the total amount should not be included.

-Funds in which the revenues/contributions are 100% held for other individuals, organizations or another government.

-Funds that are required by law in which a bank, financial institution, insurance companies, etc. are required to deposit with the government a certain amount for insurance against the entity going bankrupt. These are not taxpayers' money.

-Retirement/Pension Funds - only included are 1/2 of the actuarially determined excesses, the taxpayers portion. The other 1/2 is the government employees portion.

  Review of The State of Wisconsin CAFR- FY 2003

CAFR Page Investments by Fund (In Thousands) Surpluses
  Governmental Funds:  
37    General 10,377
37    Transportation 370,835
37    Tobacco Settlement Endowment  
     Special Revenue:  
136       Conservation Fund 44,654
136       Heritage State Parks and Forests Fund 1,177
136       WI Health Education Loan Repayment Fund 14
136       Waste Management Fund 11,576
136       WI Election Campaign Fund 343
137       Investment and Local Impact Fund 168
137       Election Administration 7,017
137       Industrial Building Construction Loan Fund 207
137       Self-Insured Employers Liability Fund 259
137       Medical Assistance Trust Fund 330,765
137       Work Injury Supplemental Benefit Fund 4,405
137       Tobacco Control Fund 4,216
138       Uninsured Employers Fund 9,805
138       The Utility Public Benefits Fund 27,572
138       Mediation Fund 151
138       Agricultural Chemical Cleanup Fund 196
138       Agrichemical Management Fund 2,367
138       Agricultural Producer Security Fund 4,177
139       Historical Legacy Trust Fund 61
139       Petroleum Inspection Fund 20,355
139       Environmental Fund 26,787
139       Dry Cleaner Environmental Response Fund 3,011
139       Recycling Fund 3,038
139       Information Technology Investment 24
140       Universal Service 4,488
140       Budget Stablization 3
140       WI Public Broadcasting Foundation 5,826
140       Childrens' Trust Fund 296
     Capital Projects:  
141       Building Trust Fund 28,378
141       Energy Efficiency Fund 204
141       Capital Improvement Fund 81,581
141       Transportation Revenue Bonds Fund 79,240
     Debt Service:  
142       Bond Security and Redemption Fund 15,225
142       Petroleum Inspection Revenue Bonds Fund 19,187
142       Transportation Revenue Bonds Fund 88,442
     Permanent Funds:  
142       Agricultural College Fund  
143       Common School Fund 283,725
143       Normal School Fund 19,296
143       University Fund 234
143       Historical Society Fund  
143       Benevolent Fund 14
  Proprietary Funds:  
40       Patients Compensation 658,882
40       Environmental Improvement 408,949
40       Veterans Mortgage Loan Repayment 252,006
41       University of Wisconsin System 848,997
41       Unemployment Insurance Reserve 1,084,171
160       State Fair Park Fund 1,290
160       Home For Veterans Fund 3,235
160       Mendota Mental Health Institute 1,920
160       Winnebago Mental Health Institue 36
160       Northern Developmental Disabilities Center       Fund 20
161       Central Developmental Disabilities Center Fund 4
161       Southern Developmental Disabilities Center       Fund 17
161       Institutional Farm Operations Fund  
161       Correctional Canteen Operations 1,286
161       Lottery Fund 42,116
161       Health Insurance Risk Sharing Plan Fund 40,265
161       Local Government Property Insurance Fund 11,628
162       State Life Insurance Fund 81,010
162       Income Continuation Insurance Fund 75,177
162       Duty Disability Fund 125,141
162       Long-term Disability Insurance Fund 221,897
163       Health Insurance Fund 45,714
163       Veterans Trust Fund 33,997
163       Wisconsin Education Revenue Bonds Fund 1,311
163       Transportation Infrastructure Loan Fund 411
     Internal Service:  
178       Technology Service Fund 8,617
178       Fleet Services Fund  
178       Financial Services Fund 1,328
179       Facilities Operations and Maintenance Fund 18,101
179       Risk Management Fund 2,340
179       Badger State Industries Fund 4,755
  Fiduciary Funds:  
     Pension and Other:  
190       Wisconsin Retirement System  
190       Accumulated Sick Leave Fund 537,140
191       Employee Reimbursement Accounts Fund  
191       Life Insurance Fund 2,638
191       Deferred Compensation Plan Fund  
     Investment Trust:  
194       Local Government Pooled Investment Fund  
194       Milwaukee Retirement System Fund  
     Private Purpose:  
196       Unclaimed Property Program Fund  
196       Special Death Benefits Fund  
196       Tuition Trust Fund  
196       College Savings Program Trust Fund  
     Agency Funds:  
198       Insurance Company Liquidation Account  
198       Inmate and Resident  
198       Bank and Insurance Company Deposits  
198       Support Collection Trust  
33  Component Units: 1,417,207
  Total Surpluses… 7,441,302
  Per Capita… 1,368
  Family of 4… 5,471

Note: For those familiar with governmental accounting, for surpluses we basically used GFOA Balance Sheet Account Classification Codes 101, 102, 103, 151, 153, and 170.

USAF Image

This report was prepared by:
Gerald R. Klatt
Lieutenant Colonel, USAF, Retired



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