Crunching the budget numbers: Examining accounting practices - WQOW TV: Eau Claire, WI NEWS18 News, Weather, and Sports

Crunching the budget numbers: Examining accounting practices


Eau Claire (WQOW)- As lawmakers begin to debate the governor's budget proposal, we're examining what's in the bank.  The governor's office has said a $3.6 billion deficit has been turned into a $400 million surplus.  There are questions about how the state came up with that figure.

"Sometimes states tend to use accounting gimmicks to make the budgets balance," explains Eau Claire County Finance Director Scott Rasmussen.

When calculating a budget, there are a few different methods you can use.  At the local level, counties, school districts and local governments are required to use what's known as generally accepted accounting principles, or GAAP for short, while the state doesn't have to.

"The main difference with GAAP accounting is a full accrual versus a cash basis," explains Rasmussen.  "So on a full accrual, you are recognizing revenues when they are realized and when they are earned and expenditures when they are incurred."

That means counties using GAAP have to put expenses in the books when purchases are made, while the state only has to when it's time to pay the bill.  Let's look at an example.

"If you are making a $200 payment every month on a $10,000 vehicle, that's your expense," Rasmussen offers.  "Where really, somewhere in the books should be that if you took out a loan to buy that vehicle; that should be on the books as a liability of $10,000."

Governor Walker promised to use GAAP numbers during his campaign, and on Monday, he addressed why he's chosen to instead use the cash accounting method, which has helped him turn a $3.6 billion deficit into a $400 million surplus.

"For us, we've focused on what we've used in the past," Walker says.  "We'd love to go to a GAAP accounting measure in the future and that's something that is going to take some time just because of the way the budgets have been set up historically long before we came."

"The state does use some GAAP accounting, but they go back and forth and what best suits," Rasmussen points out.  "When you are only using some GAAP and some cash, the numbers can be manipulated and you open yourself up for more debate on just truly what the deficit is or if there is a deficit at all."

Wisconsin's Secretary of Revenue says when Governor Walker took office, the GAAP budget deficit was around $3 billion.  Since then, it has been reduced to between $2 billion to $2.5 billion.  The full legislature is expected to vote on the budget in June.

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