Fiscal Bureau Releases Remainder of the Budget Papers as JFC Enters Last Week

The Joint Finance Committee will seek to wrap up its work on the biennial budget bill this week – with meetings Tuesday, Thursday, Friday and perhaps even Saturday (June 4). The committee has now released a lengthy agenda for June 2 and 3, which includes the remaining topics (in addition to the many kids and families issues on Tuesday’s itinerary). The agenda for June 2 and 3 includes UW issues, local aid (Shared Revenue) for counties and municipalities, the Commerce agency (including the proposal to convert the recycling surcharge to an economic development surcharge), issues relating to choice and charter schools, the state’s building program, and debt restructuring.

Also on the agenda is another issue we’ve been anxiously waiting for – the Governor’s proposal to centralize and privatize the income maintenance (IM) system for enrollment and related services for the Medicaid and FoodShare programs. The Walker administration has had to substantially scale back the privatization aspect of the plan, after USDA officials informed DHS that the proposal would violate federal food stamp regulations. A 22-page Fiscal Bureau paper (#355) compares the recently revised DHS plan with a somewhat similar plan developed by the counties, which has roughly the same cost but retains more of the IM functions and funding at the county level.

 Jon Peacock

Finance Committee Votes Tuesday on Important Issues for Low-income Families

Many very important issues in the budget bill have gotten little or no public attention. That’s true of most of the topics coming up this Tuesday, May 31, relating to support for low-income families – including topics like Wisconsin Works (W-2), the Wisconsin Shares child care subsidy program, the state Earned Income Tax Credit (EITC), and other uses of federal funds from the Temporary Assistance to Needy Families (TANF) block grant.

The full May 31 agenda of the Joint Finance Committee and links to all of the Legislative Fiscal Bureau (LFB) papers can be found on the JFC website. This post provides a summary of some of the more significant issues for children and families, and links to those LFB papers.

Our Recommendation: Any Changes Made to State EITC Should Be Temporary

Expiring Federal Provisions Mean that State Spending on EITC Will Decrease in Next Biennium

On Tuesday, May 31st, the Joint Finance Committee is scheduled to vote on the $41 million cut proposed by the Governor to the state’s Earned Income Tax Credit (EITC). WCCF has submitted a memo to the Joint Finance Committee with recommendations for the credit.

There are several reasons why the EITC should be preserved at the current level:

• It’s a refundable credit, which allows it to offset the impact of the social security tax for low-income workers, and increases the incentive to work.
• The EITC is good for Wisconsin’s economy. Because families that receive the credit don’t have a lot of money, they tend to spend those dollars on necessities -- quickly and in their own communities. That gives local businesses a much-needed boost.
• It’s also good for Wisconsin’s families. The credit lifts an estimated 5,000 people in families with children above the poverty line in Wisconsin and helps to ease poverty for another 43,000 each year.
• Cutting the EITC would increase the amount of tax paid by low-income workers who can least afford it.

What’s the Wisconsin Budget Project Up To?

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•  Subscribe to the Wisconsin Budget Project blog to get updates via email or feed reader;
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•  Sign up to receive our Revenue Matters e-newsletter; and
•  New! You can now follow us on Twitter, @WIBudgetProject.

JFC Approves New Budget Adjustment Bill Setting Aside Revenue for Medical Malpractice Fund Debt

The Joint Finance Committee (JFC) voted today to advance a new budget adjustment bill that appears to be intended to establish some of the parameters for deliberations on the rest of the biennial budget. The bill, AB 148, which was unveiled just a couple of days ago, makes a few changes that affect the current budget for fiscal year 2010-11, but that doesn’t seem to be the primary purpose.

With the Finance Committee preparing to vote today on the size of cuts in state school aids, AB 148 sends the message that legislators should not entertain big ideas about how much of the recently identified $636 million increase in tax revenue could be used to reduce budget cuts. It accomplishes that by setting aside funds to be used in the next biennium to pay $235 million owed to the state’s medical malpractice fund. Despite objections to the bill from Democrats on the committee, it was ultimately approved on a unanimous vote.

$81 Million GPR Increase for Medicaid Spending, But Small Reduction in Cuts

The Joint Finance Committee (JFC) took up Medicaid issues this week and added a total of $250.6 million (all funds), including $81.1 million in state GPR funds – over the amounts recommended by the Governor. That’s a relief in several respects, but the net result is only a modest improvement to the bill, because most of the spending increase offsets a higher estimate of the base level cost of the state’s Medicaid-related programs.

Budget Challenges Grow This Week – As Lapses Shrink and Medicaid Spending Rises

The task of balancing the biennial budget became slighlty less onerous a week or two ago when the Legislative Fiscal Bureau announced that state revenue collections in the current fiscal year and next biennium would be $636 million more than previously estimated. Unfortunately, the news this week isn’t nearly as upbeat; in fact, several developments are cutting into the balance created by the improved revenue forecast.

Three pieces of news chip away at that balance:

• The Fiscal Bureau estimated (in Budget Paper #340) that the state share of Medicaid related spending is likely to be about $63 million (GPR) higher than the Dept. of Health Services projected;
• GOP leaders released the summary of a new budget adjustment bill that, among other things, will reduce anticipated agency lapses to the General Fund by $54 million, presumably because agencies haven’t been able to find the full amount they were directed to lapse; and
• The new budget adjustment bill would also make it official that the state won’t realize the anticipated $29.8 million in savings in the current fiscal year from increase state employee contributions for health care and retirement benefits, since the bill requiring those changes is stalled in the courts.

Comparative Budget Summary Updated

We've updated our comparative budget summary to include actions taken by the Joint Finance Committee through last week. The summary includes information about what the Governor has proposed and what action Joint Finance has taken so far, as well as links to other relevant information.

Our budget comparison focuses primarily on proposed budget items that affect children and families, broken down into general topical areas. It includes links to the Legislative Fiscal Bureau’s comparative summary and to specific LFB Budget Papers. This comparison will be updated as additional information becomes available and as the budget moves through the Legislature.

 
Tamarine Cornelius

New Analysis Reveals That Low-Income Families Stand to Take a Big Hit

In the days and weeks leading up to the introduction of his biennial budget proposal, Gov. Walker repeatedly pointed to the need for “shared sacrifice.” Once the Governor’s budget was unveiled, however, it quickly became clear that the sacrifice his budget calls for is not shared equally.

A disproportionate amount of the sacrifice is being required of the state’s most vulnerable populations, particularly low-income working families. The Wisconsin Council on Children and Families (WCCF) today released a brief analysis of the budget’s real-life impact on Wisconsin families, focusing on a number of specific budget measures that would make it more difficult for those households to get by.

Upcoming JFC Agenda Includes Transportation, Schools, and Tech Colleges

The Joint Finance Committee is next scheduled to meet on Tuesday, May 24th and Thursday, May 26th, at 11 AM in Room 412 East in the State Capitol. On Tuesday, the Committee is scheduled to vote on issues related to the Department of Employee Trust Funds, the Government Accountability Board, the Department of Transportation, and the Department of Health Services.

Here are some issues coming up on Tuesday that we’re especially interested in, and their associated Legislative Fiscal Bureau Budget Papers:

• Depositing a portion of sales tax revenue into the Transportation Fund: LFB Paper #644
• General transportation aids to local governments: LFB Paper #650
• Shifting mass transit costs from the Transportation Fund to the General Fund: LFB Paper #651
• Medical Asistance Base Reestimate: LFB Paper #340 
• Unspecified changes to Medical Assistance: LFB Paper #341
• Requiring SeniorCare Participants to Enroll in Medicare Part D: LFB Paper #344
• FamilyCare enrollment cap: LFB Paper #342

The Wisconsin Values Budget: Better Choices Based on a Balanced Approach

WCCF, in collaboration with Citizen Action of WI, the Institute for Wisconsin’s Future, and the Center on Wisconsin Strategy, has unveiled the Wisconsin Values Budget, an alternative to the Walker budget proposal based on a balanced approach to the state’s fiscal challenges. The Values Budget rejects the notion that the state has “no choice” but to make draconian cuts, and demonstrates instead that there are better options that preserve Wisconsin’s remarkable record of progress and innovation in such key areas as education, health care, mass transit, and support for low-income workers striving to join the middle class. The Wisconsin Values Budget maintains the state’s investment in the future without sacrificing our gains of the past. Over 20 other groups have endorsed the Values Budget, with more signing on every day.

$636 Million Worth of Change in the Sofa Cushions?

A recent re-estimate by the Legislative Fiscal Bureau shows that we will likely have an additional 636 million poisonous snakes between now and the end of fiscal year 2013.

Actually, the Fiscal Bureau forecasted an additional $636 million in revenue over that period, above previous estimates. But based on the way many state policymakers reacted to the news, you could be forgiven for thinking that the re-estimate involved something truly distasteful.

Faced with the opportunity to roll back some of the most damaging cuts proposed in the Governor’s budget, many policy makers urged great caution. Exercising caution is fine, but a number of arguments made against using the additional revenue mischaracterize the increase:

Poorer Districts Will Take Bigger Aid Hit in Budget

Yesterday, we highlighted a new paper by UW Professor Andrew Reschovsky (link updated 7/26/11 -- see note at end of post) that described how and why the proposed state budget would both cut state aid to schools sharply and force most districts to reduce property taxes.

You can read yesterday’s post for a more thorough explanation, but here’s a quick summary, expressed in an equation:

Revenue limits = General state aid + Property Taxes

The biennial budget proposes decreasing revenue limits by 5.5 percent between fiscal year 2011 and 2012. The budget also reduces general aid to schools by $390.5 million in FY 2012 and $358.8 million in FY 2013. For many schools, the reduction in aid is less than the decrease in the revenue limit. This means most districts – more than 75 percent – will have to cut property taxes to stay under the revenue limits.

Professor Reschovsky’s paper includes interesting information about how schools will fare under the proposed budget. We made the information into charts in order to have visual representations of the budget’s effects and show how the reductions in state aid will impact districts by characteristic.

Poorer districts will be harder hit by the reduction in state general aid. The chart below shows that districts with less than 20 percent of their students eligible for free or reduced price school lunch will have an average general aid reduction of $378 per student, compared to $467 for schools with half or more of their students eligible.

Proposed Budget Would Force Most School Districts to Cut Property Taxes

We already know that Governor Walker’s proposed budget would result in deep cuts to state aid to public schools. A new study by University of Wisconsin professor Andrew Reschovsky (link updated as of July 2011; see note at end of this post) gives a more complete picture about how school funding will change if the Governor’s recommendations are enacted. Not only will schools receive less in aid from the state, but more than three-quarters of school districts will have to reduce the amount of revenue they raise at the local level as well, unless the voters approve a referendum increasing the revenue limit.

In addition to a decrease in state aid, the proposed budget calls for reducing each school district’s revenue limit, which restricts the amount of money schools can raise from the sum of general school aids and property taxes. The average per-student reduction in state general aid is $455, which is less than the average revenue limit reduction of $541. This means that in districts in which the reduction in state aid is less than reduction in the revenue limit, the school district will have to reduce property taxes to comply with the revenue limit.

May 19 JFC Agenda Includes DPI, Tech. College System and DNR

The Joint Finance Committee’s second meeting next week on the budget bill will be on Thursday, May 19th at 11 AM (in Room 412 East, State Capitol). The committee will take up many K-12 education issues, the Technical College System, and several DNR issues (including the Stewardship program and land acquisition and easements).

You can see all of Thursday’s budget papers on the Legislative Fiscal Bureau website. The issues we’ll be monitoring include the following:

JFC Schedules Many Children’s Issues on May 18 and 19

The Joint Finance Committee’s next executive session on the budget bill will be on Wednesday, May 18th at 11 AM (in the JFC meeting room -- 412 East, State Capitol). The committee will take up four papers relating to DHS issues, and 8 papers concerning the Department of Children and Families – including child welfare issues, foster care, and the Social Service Block Grant. The agenda also includes a variety of issues relating to the Department of Agriculture, Trade and Consumer Protection.

Late this afteroon the committee also posted the May 19th agenda, which includes a number of important K-12 education issues.

Flawed Rainy Day Fund Resolution Passes Assembly

This week Wisconsin is a step closer to enshrining poorly-designed fiscal policy in the state’s constitution. The Legislature is considering a constitutional amendment that would require the state to make contributions to a rainy day fund, and the amendment (AJR 21) cleared the Assembly Wednesday by a vote of 57 to 37, with one Democrat joining the Republicans in voting for the measure.

A rainy day fund is a great concept, and can help cushion the effects of an economic downturn. This particular rainy day fund, however, would be set up in a way to actually worsen the fiscal effects of some very deep recessions. In all but the most severe recessions, the money in this rainy day fund would be inaccessible without a two-thirds vote of the Legislature. (And it’s extremely difficult to get two-thirds of the Legislature to agree on anything, including that water is wet.) We’d have to make contributions to the rainy day fund even when the recovery was lagging.

Technical Colleges Face Increasing Enrollment, Decreasing Aid

Even in a budget full of cuts, the one proposed for Wisconsin’s technical colleges stand out. This cut may be especially hard for the technical college system to manage because it comes after a decade of decreasing state aid and increasing enrollment.

The Governor’s budget proposes reducing state aid to the technical college system by $71.6 million over the biennium, a cut of about 30 percent. This is on top of years of decline in state aid. Measured in 2010 dollars, general and categorical state aid to the technical college system declined by 21 percent between 2001 and 2010, according our analysis of figures from the Legislative Fiscal Bureau. The percentage of Wisconsin technical college district revenues from state aid dropped from 14 percent in 2001 to 8 percent in 2010. The steady downward march in state aid had leveled off in the last three years, as shown in the chart below. But that recent trend could be short-lived, if the provision in the Governor’s budget remains unchanged.

Apparently We're Not Broke: Revenue Forecast Climbs by $636 Million

Based on the most recent revenue estimate from the Legislative Fiscal Bureau, which was released today, we can expect an additional $636 million in revenue before the end of fiscal year 2013, compared to previous estimates. The new tax estimates call for $233 million above prior projections for the current fiscal year and about $200 million more in each of the next two years.

The revisions to estimated tax revenue include:

• $910 million increase in the estimate of revenue from the individual income tax;
• $240 million reduction in sales tax revenue; and
• $68 million reduction in corporate income tax.

Smaller changes were made to estimates for revenue from other taxes.

There is sure to be a number of different ideas about what we should do with this additional revenue. One possibility would be to reverse some of the most harmful cuts that were proposed in the executive budget.


Tamarine Cornelius & Jon Peacock

Jobs Jobs Jobs Jobs Jobs. Also: Jobs

A Look at Recent Employment Trends in Wisconsin

If Wisconsin has jobs on the brain, you can’t really blame us. Between January 2008 and October 2009, Wisconsin lost 171,400 jobs (seasonally adjusted), which amounts to 5.9 percent of all employment.

The recession decreased the number of jobs across the spectrum of industries, but the number of jobs in manufacturing in particular saw a precipitous decline. Nationally, the number of jobs in manufacturing declined more than twice as fast as the total number of jobs, according to figures from the Bureau of Labor Statistics. Wisconsin’s labor force is heavily concentrated in manufacturing -- in fact, Wisconsin has a higher percentage of its workforce in manufacturing than any other state. (You can read more about this in one of our issue briefs.) This concentration means that Wisconsin was particularly vulnerable to job loss.

There’s been some recent buzz about the pace of job growth in Wisconsin in the first few months of this year. After the recent free fall, any job growth is good – but let’s take a closer look and put this trend in perspective. Between January and March 2011, Wisconsin added 17,300 jobs according to the Bureau of Labor Statistics, seasonally adjusted. (Figures for March are preliminary.)

An All-Cuts Budget is a Choice

The Governor’s proposed budget relies almost exclusively on cuts to bring it into balance. These cuts would negatively impact K-12 education, health care for working families, local government services, human services, and higher education, among others

In outlining these and other cuts in his Budget in Brief, the Governor said “Our state is broke,” and “We have no choice to reduce state spending.” In other words, he and other policymakers are promoting the idea that the state must rely solely on cuts to balance the budget, because adding new sources of revenue simply isn’t an option.

It doesn’t have to be this way.

Budget Project Updates Comparative Budget Summary

The Wisconsin Budget Project has updated our comparative budget summary, which shows how selected provisions in the budget have been modified in the budget process. Yesterday’s update includes some of the recent decisions made by the Joint Finance Committee. We’ll be updating the budget summary on a regular basis, so watch this blog (or sign up to follow us on Twitter, @wiskids).

May 12 JFC Agenda Includes Property Tax Issues

The Joint Finance Committee will next be meeting on Thursday, May 12th at 11 AM. That executive session will begin at 11:00 a.m., in the JFC meeting room (412 East, State Capitol).

On the JFC agenda are 28 budget papers, 12 of which are related to the Justice Information System Surcharge. The remaining papers include items related to the Child Abuse and Neglect Prevention Board, Department of Financial Institutions, Secretary of State, Department of Veterans Affairs, levy limits, and property tax relief. Also being considered are papers related to the Government Accountability Board and the Office of Commissioner of Insurance, which were held over from previous sessions.

From our perspective, the most interesting of these issues are the First Dollar Credit (Paper #606), the levy limit for counties and municipalities (Paper #610), and the repeal of indexing for the Homestead Credit (Paper # 605).

You can see all of next week's budget papers on the Legislative Fiscal Bureau website.

Tamarine Cornelius

Alternative Measure of Poverty Shows Value of Recovery Act

A new report by University of Wisconsin researchers shows that the Recovery Act helped shelter state residents from the worst effects of the recession.