Monday, February 21, 2011

Why $137 Million is Peanuts.

Obviously it's been in the news lately, and the wrangling over the $137 million dollar deficit facing the state has been pretty epic, as it should be.  However, it's important to realize just what this money really means from a budgetary perspective.

Budget surplus fiscal 2010:  $70,980,000
Debt service fiscal 2010:  $652,063,000

The thought would naturally arise:  "Why in the hell is Wisconsin paying that much in debt servicing?"

Great question, reader.  After all, per this:

The ratio of principal to interest + expenses is greater than 1:4.  Pretty dumb to be throwing $488 million right out the window for no good reason, right?  So what is the reason then?

Back to this one:

Interest and Investment income:
Fiscal 2008:  -$4.4 bln (total $28.7 bln revenues)
Fiscal 2009:  -$14.9 bln (total $20.3 bln revenues)
Fiscal 2010:  +$8.6 bln (total $46.2 bln revenues)

Three year return:  -$10.7 bln

Yes friends, as a result of the stock market crash, a gigantic bazooka was leveled into the state budget, and because those budget items are mostly non-discretionary (and the state workers already took a hit through salary freezes, reductions, and hiring freezes meaning more work for the remaining workers), the state had to borrow so much money that, coming full circle, came to $652 million in borrowing expenses in one year.

So, the next time you hear somebody complain about state workers not being particularly happy about cuts to their already frugal compensation, point out that the reason the state is in this mess is because of Wall Street and their aforementioned $194 million in external management fees.