Could Supermajority Requirement Lead to Higher Borrowing Costs in WI?

In the special session earlier this year, the Legislature passed a law (2011 Wisconsin Act 9) that requires a supermajority of the Legislature to approve any increase in tax rates. At the time, we wrote a blog post about our concerns that the law could put upward pressure on fees and local property taxes, and block even revenue-neutral efforts to reform our state’s tax system.

Recent developments in Nevada have shed light on another potential downside to the supermajority requirement: higher borrowing costs.

Decrease in Tax Revenue A Major Contributor to Budget Gap

The Wisconsin Budget Project has released new analysis of state tax revenue showing that a decrease in state tax revenues played a major role in contributing to the budget gap.

State tax revenue in Wisconsin was growing at a moderate, sustained pace before the national recession hit. Between 2004 and 2007, the tax revenue going into the General Fund increased by seven percent (adjusted for inflation). This increase (and more) was wiped out by the national recession, which had a devastating impact on state tax revenues. The state collected over a billion dollars less in GPR tax revenue in 2010 than in 2007, as shown in the chart below, which is taken from the analysis.

Wisconsin Not the Only State “Squeezing the Balloon”

The cornerstone of Governor Scott Walker’s proposed budget is a steep cut in aid to local governments, including counties, municipalities, and school districts. Wisconsin is among several states taking this approach to balancing the budget, according to an article in this week’s New York Times. Governors or Legislatures in Ohio, Nebraska, Michigan, New York, and Massachusetts, and Minnesota are also looking to make ends meet by reducing support for local governments.

The article likens reducing local aid to “squeezing a balloon,” with states able to reduce their spending by passing the brunt of the budget cuts down to cities and other localities, which may have to raise property taxes to make up for aid cuts. Governor Walker’s budget, however, would prohibit increases in property taxes by limiting municipal and county levy limits to be increased only to allow for new construction. Schools would be required to reduce their revenue limits by 5.5% in fiscal year 2012 compared to 2011.

First Step in Budget Analysis Released

The Wisconsin Council on Children and Families (WCCF) has released an analysis of the governor’s proposed budget, with a focus on how children and families would be affected. As the budget moves through the Legislature, WCCF will be updating the analysis to make it easy to compare changes the Joint Finance Committee and the rest of the Legislature make to the budget. You can read the first part of the analysis here.

Cost Overruns Prompt Changes that Threaten the Future of BadgerCare Basic

The Department of Health Services (DHS) announced Friday that it plans to freeze enrollment and increase premiums for the BadgerCare Basic program. BadgerCare Basic was initiated by DHS in 2010 to be a non-subsidized option for coverage of childless adults on the waiting list for the BadgerCare Core plan.

According to the DHS press release, the program’s costs over the last 8 months have exceeded premiums by more than $1.6 million, and outstanding bills will push that deficit considerably higher, necessitating the actions taken Friday. A WCCF blog post yesterday explains why the changes are likely to be the beginning of the end for this experiment in creating an unsubsidized option for low-income childless adults. It also discusses why the program’s problems underscore the importance of the federal health care reform act.

Read the WCCF blog post.

Jon Peacock

Budget Repair Bill Fails to Repair Budget; Debt Restructuring Still Under Consideration

A new Budget Project brief compares how the fiscal and non-fiscal items in the final version of the “budget repair” bill (2011 Act 10) compare with the versions recommended by the Governor and then by the Joint Finance Committee. It condenses into two pages the highlights of the Legislative Fiscal Bureau’s 48-page comparative summary of the bill.

The bottom line is that bill signed by Governor Walker on March 11 includes almost all of the Governor’s proposals that were judged to be non-fiscal policy items by the Legislative Fiscal Bureau . (See our Feb. 23 blog post.)  However, because the Senate didn’t have a quorum, it couldn’t vote on spending increases, so none of the increases proposed by the Governor to fill projected shortfalls could be included.

Although it appeared that a deal could have been reached that included all of the budget items that make changes relating to the current fiscal year, while putting non-fiscal measures on a somewhat slower track, Republicans essentially decided to do the opposite. As a result, the budget repair bill fails to resolve the looming budget shortfall that was the original rationale for trying to rush a bill through the Legislature in mid-February.

Are There Clouds on Wisconsin’s Horizon?

This week is National Sunshine Week, which has nothing to do with the fact that spring has at long last arrived, and everything to do with reminding us of the importance of open, transparent government.

We could do with a little more sunshine in Wisconsin. In the past month or so, there have been two big pushes to change the way state policies are made. These efforts would decrease public participation and concentrate power in the executive branch. Proponents of these changes argue that they give the Governor the necessary flexibility to cut spending. But these changes come at the cost of reducing transparency in government and allowing important policy decisions to be made behind closed doors.

Effects of the Budget Bills on Working Families

What does the change to the Homestead Tax Credit mean for low-income households? How much is the proposed cut to technical colleges? How might income limits for low-income health care change? Wisconsin Council on Children and Families (WCCF) has put together a two-page summary of the effects of the biennial budget and budget adjustment bills on working families that answers these questions and more.

The new release by WCCF includes a brief, easy-to-understand synopsis of proposed cuts in tax credits, health care, child care subsidies, and transit programs, and also includes descriptions of worrisome policy changes in those programs that would shut out public input. This two-page summary gives an overview of how specific proposals would affect Wisconsin’s working families, and is just the right length to share with your family, coworkers, or friends interested in state budget issues.

The link to the summary, “Effects of the Biennial Budget and Budget Repair Bills for Working Families,” is here.

Budget includes Tax Increase for the Working Poor and Tax Cut for Wealthiest

Governor Walker’s budget would cut the Earned Income Tax Credit (EITC) by $41 million over the biennium, a harsh blow for the states’ struggling low-income families. This proposal stands in stark contrast to his recommendation to reduce the capital gains tax by more than $36 million, with nearly all the benefit accruing to the state’s wealthiest taxpayers.

In some ways, the EITC has been the anti-poverty program that everyone can agree on. The legislation creating it was co-authored by many Republicans, and the credit was signed into law by Governor Tommy Thompson. Even Ronald Reagan was a supporter – he heralded the EITC as "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress," and said that the credit “serves as an offset to social security and income taxes and provides work incentives for many low-income families with dependents.” Closer to home, Rep. Tom Petri (R-WI) said that the EITC “is especially good news for the working poor,” and that it helps “reward work, and to help families stay off welfare and continue in the world of work where they can work their way up.”

Fair Taxes 101

The Institute on Taxation and Economic Policy (ITEP) has released Fair State and Local Taxes, a new guide on state and local tax policy. This introduction to tax fundamentals gives a nuts-and-bolts overview of different taxes and who pays them. The report describes the regressive nature of many tax systems and steps we can take towards reform.

Budget Would Invest in Transportation, But At What Cost?

If there’s one winner in the Governor’s proposed biennial budget, it’s state highways. The Governor’s budget proposal characterizes spending on state highways as critical to economic development in the state, and calls safe and efficient movement of traffic through Southeast Wisconsin “one of his top priorties.” His budget includes proposals to create a new program for funding Southeast Wisconsin’s freeways megaprojects and to provide a total of $420 million for two highway projects over the biennium, including $151 million in general obligation bonding. The budget also recommends a two percent increase in each year for state highway maintenance (while cutting aid to maintain local roads).

Visit Wisconsin Budget Project Website for New Budget Adjustment Bill Resources

Looking for analysis of the 2011 budget adjustment bill? The Wisconsin Budget Project has developed a new page on our website that is devoted solely to issues surrounding that bill.  You can check out the site to read about non-fiscal policy provisions included in the budget adjustment bill, proposed fiscal changes, and a comparison of competing versions of the bill.

The Wisconsin Budget Project website also includes a section devoted to publications about the 2011-13 biennial budget, including policy briefs.  As that bill moves forward, check back often for updates.

Tamarine Cornelius

Budget Bill Cuts $500 Million from Medicaid, Doesn’t Tell Us How

The biennial budget bill introduced on Tuesday would cut the Medicaid-related portions of the state budget by about $500 million (GPR) over the next two years, relative to the cost of continuing the current services and policies. However, it doesn’t say a thing about how coverage of children, parents, childless adults or pregnant women would be changed, because the "budget repair" woudl strip from the Legislature the authority for making such changes.

A new WCCF blog post describes the changes in the controversial budget repair bill that shift the responsibility for making Mediciad  decisions from the Legislature to the Department of Health Services Secretary, and it describes some of the potential implications of the large cut and the extraordinary grant of authority to DHS.

Jon Peacock

WI Budget Project Releases Analysis of Competing Budget Adjustment Bills

The 2011 budget adjustment bill provoked intense debate in the Wisconsin State Assembly, but most of the disputes have centered on non-fiscal policy changes. A new analysis by the Wisconsin Budget Project shows that in terms of fiscal changes, the version of the budget adjustment bill that was offered by Assembly Democrats was substantially similar to the version that was eventually passed by the Republican-controlled Assembly. A third version, proposed by Senator Mark Miller on February 28th does not include debt restructuring but is otherwise similar to the two other versions.