1. The first major bills from the polar vortex winter are coming due, and as a result, the JFC will consider adding another $27 million to the DOT budget to handle these unexpected expenses. The money will go to counties to pay them back for plowing and maintaining state highways, as well as take care of the costs of all the extra salt that was needed. These funds are available in the 2013-15 budget, but it leaves almost no breathing room for the next 14 months.
The Department indicates that cold temperatures and frequent storm events during the 2013-14 winter season required county crews to incur costs significantly in excess of budgeted amounts. Based on the five-year winter cost average, the Department had budgeted $44.7 million in county work for the 2013-14 winter season (excluding salt costs). Although not all winter invoices have been submitted, the Department estimates that winter reimbursements will exceed the amount budgeted by $16,007,800. The Department has requested that the routine maintenance SEG appropriation be increased by that amount to account for the higher county costs.So they're looking at $36.7 million at most to carry over into the next year if the JFC decides to pay the bills, which is even lower than what was figured earlier this year, and it makes the unmet Transportation needs for the next budget grow to $1.09 billion. We'll see if that part of the DOT budget comes up at the meeting tomorrow.
In addition to higher county routine maintenance costs, the Department incurred costs for additional salt purchases during the winter season. The Department's long-standing policy is to have a salt inventory on hand going into the winter season equal to at least 120% of the five-year average usage. In addition, the Department includes in the purchase contract the option to purchase an additional supply equal to about 30% of the average season use, at the same price per ton (known as the "vendor reserve"). Prior to the start of the 2013-14 winter, the Department had an inventory of 625 thousand tons of salt, which slightly exceeded the 120% of five-year average use standard. During the winter months, counties had used salt at a pace that was thought would exhaust supplies well before the end of winter. The very low temperatures experienced in much of the state during January required counties to increase use, since salt becomes less efficient at melting ice as the temperature drops. In response, the Department exercised the "vendor reserve" clause in the state's salt contract, which allowed the Department to purchase 150 thousand tons at the same unit price as the original purchase ($61 per ton). However, because ice buildup on the Great Lakes blocked the normal delivery routes, the Department had to purchase approximately 10 thousand tons of salt on a separate contract to maintain sufficient inventory in all counties. Because this salt was purchased during a period of high demand, and because it had to be delivered by truck rather than by water shipment, the cost per ton was over three times the original purchase ($221 per ton). In total, the Department purchased 160 thousand additional tons of salt at a total cost of $11,363,700. The Department has requested an appropriation supplement of this amount in the SEG appropriation for highway system management and operations to cover the cost of this additional purchase....
The supplemental appropriations would be made from the unappropriated balance in the transportation fund. Based on a review of transportation fund revenue collections and projections completed in January, the 2013-15 biennium-ending balance of the transportation fund was estimated at $84.6 million. Since that time, the Legislature passed a bill (signed as 2013 Act 141) that increased the SEG appropriation for the state highway rehabilitation program by $43.0 million, thereby reducing the estimated balance to $41.6 million. The approval of both parts of the Department's request would further reduce the estimated, biennium-ending balance to $14.2 million. [This estimate does not reflect the $1.5 million payment from the salt vendor [because they couldn't deliver some of the salt in February as promised], since the payment has not yet been received]. Assuming that this payment is received, the biennium-ending balance in the fund would be $15.7 million. Since the January revenue reestimate, the Department has been reevaluating both revenues and expenditures in preparation for beginning work on its 2015-17 budget request. Although there are individual revenue and expenditure changes that would move the balance in both directions, in total, the Department's preliminary reevaluation suggests that the biennium ending balance could be $16 million to $21 million higher than under the January estimates.
2. Another budget shortfall will be dealt with at this meeting, the multi-million one in Human Services. The Walker Administration used one-time fixes for services related to the Temporary Aid to Needy Families (TANF) program (as part of our "balanced" budget), and now they're going to take advantage of some added federal aid to fill some of the holes that have opened up since. This money wasn't budgeted for because the Walker Administration figured Wisconsin wouldn't be classified as an especially "needy" state. But we are, and therefore, we get the funds.
DCF received notice that the state will receive $29,974,589 in TANF contingency funds in FFY 2014. DCF has received formal award notices totaling $25,154,875 of this amount. The Governor's request would allocate $19,830,000 of the FFY 2014 TANF contingency award ($280,000 in 2013-14 and $19,550,000 in 2014-15). The remaining unallocated TANF contingency funds would be added to the TANF balance and be available to appropriate during the 2015-17 biennial budget process, through separate legislation, or with approval of the Joint Committee on Finance.The reason the Walker Admin wants to carry over some of the funds is because they need to offset a $47.7 million structural deficit in TANF programs in the next budget.
The rest of the funds will deal with a large W-2 shortfall that I mentioned earlier this year. It's gone down some since then, but we're still slated to need extra money from somewhere, so the Walker Admin decides they'll use these funds from DC to do it.
[W-2] Benefit expenditures peaked in December, 2013, at $8.6 million. In March, 2014, benefit expenditures totaled $7.9 million, a decrease of approximately 7.5%. Assuming expenditures remain at $7.9 million each month until June, 2015, $22.4 million would be needed to fully fund W-2 benefits in 2014-15. Assuming the monthly benefit amount remains at $7.9 million until June, 2014, and then decreases at the rate of 1% per month until June, 2015, $16.5 million would be needed to fully fund W-2 benefits in 2014-15. The Governor is requesting $18.1 million from TANF contingency funds to address the W-2 benefit shortfall in 2014-15, which falls within this range ($16.5 million to $22.4 million).I always love the selectiveness the Walker folks have when it comes to taking federal money. Apparently plugging their own budget holes is the good type, as opposed to Obamacare's expanded Medicaid funding. They're also moving around $3.9 million in federal funds in the Department of Children and Families to cover some other shortfalls in those programs with excess funds from elsewhere, and upgrading to electronic fingerprinting for some child care providers (not a bad thing).
3. The last item I want to bring up relates to the practice of contracting out, and how it doesn't always save taxpayers money. The JFC will consider whether to add a few jobs and reorganize some staff at State Fair Park in West Allis to take care of some needs, and the Legislative Fiscal Bureau gave a complete analysis of these positions. This included hiring a full-time box office manager instead of relying on a few part-time workers, changing a couple of other limited-term managerial positions into full-time jobs, and hiring a mechanic for vehicles on the grounds instead of paying for contractors to fix things on an as-needed basis. What they found was the following.
Cost of State Fair Park positions
Current configuration, (part-timers, contractors): $301,500
Making positions full-time and taking in-house: $238,100
On the flip side, a buildings and grounds worker and plumber is cheaper to keep in the present configuration, and a Youth Events Coordinator also is cheaper as a non-permanent position, so these 3 positions are not recommended.
Also interesting is the rundown of State Fair Park's finances, which have taken a turn for the better in recent years.
State Fair Park's operations account, which reached a deficit position of -$11.5 million at the close of the 2006-07 fiscal year, has realized a surplus in each year since and emerged to a positive cash position in the 2011-12 fiscal year. By statute, unencumbered amounts in the Park's operations appropriation are transferred to the Park's capital reserve account at the close of each fiscal year; the closing balances in Table 2, therefore, represent the Park's capital reserve. The Park expects to continue generating annual operational surpluses in the future, including a projected surplus of perhaps $1.5 million in 2013-14 on the basis of a strong performance of the 2013 Fair and onetime revenue from a land sale to the Department of Transportation for the Interstate 94 (Zoo Interchange) redevelopment. However, the Park's annual performance is highly dependent on the Wisconsin State Fair, which can be negatively impacted by factors such as inclement weather....With more people taking in events at State Fair Park, the Park's Operations expects to be sitting on $3.2 million in cash by the end of the 2014-15 fiscal year. This can allow for more maintenance projects or extra amenities to be added, or the money to be sent to the General Fund, or it can even be used to keep ticket prices down for State Fair Park events- much like how a lot of UW System operations work, when you think about it.
State Fair Park's recent strength in revenues may owe in part to continued growth in attendance for the Wisconsin State Fair. Fair attendance has increased from a recent low of 801,000 fairgoers in 2007 to slightly more than 1 million persons in 2013, which the Fair reports was the highest attendance since at least 1969.
So while I expect the UW System's finances to be a main media focus at tomorrow's Joint Finance Committee meeting, keep your eye on these three topics as well. They might be every bit as relevant to the state's fiscal health, and continued ability to provide services and transportation.