DOT deficit means the UW System raid's a-coming

It took a couple of days, but it looks like the Journal-Sentinel has finally caught onto the memo released Thursday from the LFB showing that Gov. Walker's budget now has a $63 million deficit in the Transportation Fund. This is even with the hundreds of millions of dollars in extra borrowing that the Transportation Fund is taking on as part of Gov. Walker's payback to the Road Builders in exchange for years of major support through donations.

What caused the deficit to blow up, when Walker's original budget didn't have one? The LFB says it was a rosy scenario from the Walker boys on gas tax revenues, combined with the bad Wisconsin economy in the Age of Fitzwalkerstan.

Compared to the amounts in the bill, motor vehicle fuel tax revenues are estimated to be $42.5 million lower in 2013-14 and $42.8 million lower in 2014-15. In addition, the base year fuel consumption estimate in 2012-13 decreased from the earlier estimate due to lower than estimated actual gasoline and diesel fuel consumption through December, 2012, and lower forecasted consumption for the remainder of the year. Overall, compared to the amounts in the bill, motor vehicle fuel tax revenues are estimated to be $107.4 million lower over the three-year period from 2012-13 through 2014-15 compared to earlier estimates.

For the three-year period, fuel consumption is estimated to be 347.7 million gallons lower than earlier estimates. Overall fuel consumption in 2012-13 is now estimated to drop by 1.4% from the 2011-12 level and then is projected to increase over the prior year by 0.2% in 2013-14 and 1.0% in 2014-15. The decline in 2012-13 reflects actual consumption being notably lower than earlier projections, due to actual fuel prices being higher and Wisconsin disposable income being lower than projected.

The scary part is that the deficit may grow larger in the Transportation Fund, due to a few items in the last 2 budgets. This is related to previous borrowing that now has to be paid back, and payments that may have to come due with the recent floods and snowstorms that this state has been plagued with.

the [2011 budget's] debt service estimates assumed an earlier issuance of bonds than has actually occurred in the 2011-13 biennium. The later issuance of bonds in each fiscal year delayed the start of the amortized schedule of payments on the bonds, which lowered the principal and interest amounts that needed to be repaid in the biennium. Second, the bonds issued in the biennium were generally sold at a premium. Bonds are sold at a premium when the coupon rates on the bonds exceed the market rates, at the time of sale, for the same maturity. The premiums were proceeds in excess of the bond principal, which were used in the biennium to offset a portion of the annual debt service payments on bonds sold for the same purpose. However, it should be noted that while bond premiums can offset debt service payments in the near term, a tradeoff occurs because payments in the later years of the bond issue are somewhat higher than otherwise would be the case due to the higher coupon rate...

One additional factor should be considered in evaluating the implications of the revised fund condition statement. AB 40 [the current budget bill] includes a proposal to expand the current flood damage aids program to include other disasters and costs incurred in response to a disaster..The proposal would also extend aid retroactively for costs incurred in response to any disaster that occurred on or after July 1, 2011. Based on preliminary damage estimates related to timber salvage operations occurring after major storms in the summer of 2011 in Burnett, Douglas, and Washburn counties, this proposal could result in payments of up to $10 million. The sum sufficient appropriation estimate in AB 40 ($1,000,000 annually) does not reflect this potential cost, but that estimate is not limiting. Any aid paid in excess of the AB 40 estimate would further reduce the transportation fund balance.

So that's at least another $9 million down the drain, and more probably to follow.

But there's a way out for Walker and the WisGOPs, and they showed their hand with that dog and pony show this week where Republican after Republican deingrated UW System President Kevin Reilly for the large surplus the System had in its Program Revenue account. I went over earlier that this alleged "surplus" comes from non-tax funds such as tuition and people buying beers at the Union, and that much of it is set aside for items such as financial aid, the new "flexible option" program and future building needs. It also is worth noting that $165 million in tuition hikes are figured into the UW System budget. With legislators from both parties and Gov Walker now calling for a tuition freeze, there goes that $165 million, unless the universities greatly increase enrollment these next 2 years.

I also mentioned that GPR tax revenue toward the UW system has basically been flat for the last 11 years, and has dropped from 1st to 3rd in leading sources of UW System funds. Gov. Walker's latest budget actually was slated to give a boost of $181 million in GPR to the UW System, or a little over 8% over the next 2 years. It doesn't take a math major to figure out that WisGOPs in the Legislature would be more than willing to continue their misdirection play, take that added money slated for the UW System, and dump it into the Transportation Fund to clear this large and growing deficit. Walker's Transportation budget already takes tens of millions from the General Fund and dumps it into highways, so any UW System raid would be on top of these numbers.

Transfers from General Fund to Transportation Fund, Walker 2013-15 budget
2013-14 $58.1 million
2014-15 $36.3 million
TOTAL FOR BUDGET $94.4 million

Raiding the UW System budget would have the double-bonus of calming fears from some GOP legislators about the increase of over $300 million in borrowing for roads and related purposes in Walker's budget. By raiding the UW System of GPR and the PR surplus, this enables this borrowing to be drastically reduced.

Lastly, right-wing media may say "Well, Jim Doyle raided Transportation funds and sent it to fill gaps in the General Fund, so this is just payback." Except there's a flaw in this argument. Doyle (and GOP legislators in most of these years, by the way) agreed to these shifts because there was a surplus in the Transportation Fund, much like there is currently a surplus in the PR fund for the UW System. So why is the GOP all up in arms about Doyle moving funds out of the Transportation Fund when they chose not to spend money in it, but when the UW System DOESN'T spend their extra money and saves it, they have a cow? Couldn't have anything to do with the GOP playing to get donations from the Road Builders vs. trying to dump on the smarty-pants intellectuals at the UW, could it? Especially how the smarty-pants types see through Republican BS and usually back Dems.

And THAT'S where these two items come together. The GOP is playing partisan politics with the UW System surplus, and want to move funds away from education and into highway-building in order to grab political gain, and the opportunity to raid the UW System's budget to help their buddies at the Road Builders would be a great way to kill two birds with one stone. It should make for an interesting sidelight when Joint Finance takes up the Transportation Fund budget on Tuesday.