Wisconsin ended fiscal 2021 with a record $1.73 billion balance in its once meager rainy-day fund after closing out its books with $300 million more in tax revenues than previously expected.
The state ended the last fiscal year with a higher-than-expected $2.58 billion budget surplus, pushing up its rainy day fund, formally known as the budget stabilization fund, to $1.73 billion, according to the
“A healthy rainy-day fund will help us face tomorrow’s challenges head on,” said DOA Secretary Joel Brennan.
The undesignated general fund balance rose to $2.58 billion from $1.17 billion in fiscal 2020. State statutes require that a portion of positive balances go to the rainy-day fund until a cap is hit, so $967 million was deposited in that account.
General fund tax collections rose by 11.6% over the prior year exceeding the most recent projections by $319 million. The prior projection anticipated the rainy-day fund would hold about $1.5 billion at the close of fiscal 2021.
The peak level marks a sharp turn for the rainy-day fund, which maintained a zero balance two decades ago, according to data provided by the Legislature Fiscal Bureau. It saw small deposits rising to $56 million in 2007 before shrinking again until fiscal 2012, when it finally crossed the $100 million mark.
Levels remained modest until fiscal 2019 when it doubled to $649 million from $320 million the prior year. The state closed out fiscal 2020 with a $762 million rainy-day balance, so the $1.7 billion represents more than a doubling, according to the LFB.
The state is currently operating on a two-year $87 billion budget.
The previously anticipated strong results based on projections along with a positive generally accepted accounting principles, or GAAP, balance helped drive two recent
Kroll Bond Rating Agency upgraded Wisconsin’s general obligation bonds to AAA from AA-plus and S&P Global Ratings raised its long-term rating on the state’s GOs to AA-plus from AA ahead of an August bond sale.
Kroll said its upgrade reflected “the state’s substantial liquidity, evidenced by a near tripling of budget reserves over the past three years; continuing healthy revenue growth, despite substantial tax cuts; and an ongoing post-COVID-19 recovery, fueled by a mature and expanding economy and favorable business climate.”
S&P analyst Thomas Zemetis said its upgrade reflected in part “well-embedded statutory procedures in place that reinforce a commitment to preserve considerable reserve flexibility in its budget stabilization fund over the longer-term to mitigate fiscal volatility in future economic recessions."
The state sold $326 million of taxable GO refunding bonds in August that achieved $58 million in net present value savings and expects to return in November with a new money deal, said David Erdman, capital finance director. The office is seeking State Building Commission approval this week for up to $265 million in new money and will also seek approval to replenish its GO refunding authority with an up to $595 million authorization.
“No transaction is pending or planned just authorization for when the time is right,” Erdman said of the refunding. The state's GOs are rated Aa1 with a stable outlook by Moody's Investors Service, affirmed in June, and AA-plus with a stable outlook by Fitch Ratings. All four ratings carry a stable outlook.
