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Odd Wisconsin Archive

The Budget Deficit of 1921

This is by no means the first time that state government has faced a budget crisis. Eighty-odd years ago, Wisconsin's government apparatus nearly ground to halt when state revenues failed to keep up with the expense of serving the public.

Lawmakers acknowledged the crisis in February 1921, when the head of the Board of Control warned that state prisons, colleges, and hospitals didn't have enough money to pay staff through the end of the fiscal year. "Administration Faces Huge Debts," proclaimed the Wisconsin State Journal.

Agency after agency had under-budgeted, over-spent, or both. Even the Tax Commission itself -- the department that collected the revenues -- faced lay-offs. "We cannot guarantee your salary," the superintendant told its employees, "and if you continue to work, you will do so without any promise of pay." The head of the Department of Public Instruction told the press, "We will either have to close our doors or work for nothing," and promised to "do the best we could and as good-naturedly as possible." Agency heads lined up before lawmakers to ask for emergency appropriations to continue running their departments.

Naturally, lawmakers were reluctant to hand over more tax dollars. Critics charged the bureaucrats with wasting money, and many demanded that the government operate with more economy. Other legislators defended the government and those who made it work. One veteran lawmaker responded that "economy does not mean being 'penny wise and pound foolish.'... This economy talk sounds good and makes choice and popular political talk, but those things don't solve problems of state government."

Newly elected Progressive Gov. John J. Blaine (1873-1934) was caught in the middle. Although he believed in the power of government to rectify evils and produce benefits otherwise unobtainable, he would not countenance inefficiency or the expectation that tax-payers should provide agencies with a blank check. "We are now in a period of depression, reconstruction and uncertainty," he said, in words that sound eerily familiar today. "On the other hand, there are services due the people from government, and it would be an unwise financial policy if we neglect any necessary or essential needs of our institutions."

Blaine calculated that the fiscal year 1921 deficit would total $3 million if nothing were done, and that the next biennium's projected state budget would exceed revenues by a staggering $16 million. Revenues were falling at least 10% below expenditures.

The solution to the immediate problem came from a combination of raising taxes and cutting expenses. As advocates submitted agencies' bailout bills, lawmakers generally passed them by veto-proof margins. But in other cases Blaine was able to freeze agency spending and stop new projects. For the upcoming 1921-1923 biennium, he insisted on tight budgeting and a much more accurate method of assessing and collecting tax revenue.

What none of them knew, of course, was that in just a few years the bottom would fall out of the economy altogether, crippling not only state government but virtually all social institutions.

[Sources: Wisconsin State Journal Feb. 22 and 24; March 1, 3, and 6 (which traces the history of state budget deficits, 1890-1920); and June 24 and 26, 1921]
:: Posted in Curiosities on November 23, 2008

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