Wednesday, January 20, 2016

Follow-up from yesterday's events- more budget deficits, and more DOT funding?

I ignored the silliness of Gov Walker's State of the State speech last night (Twitter is always a better source than putting up with that guy's voice). But the real headline from state politics yesterday was revealed in the Journal-Sentinel’s rundown of the State of the State. And it didn’t come from Walker, but instead came from the GOP's Senate Leader hinting that an already-bad state budget situation is likely to get worse after the Legislative Fiscal Bureau releases new revenue figures next month.
The state budget remains relatively tight — and Senate Majority Leader Scott Fitzgerald (R-Juneau) said Tuesday that new estimates on tax revenues would leave it still tighter.

"It sounds like the projections are going to be far shorter than what we anticipated, although we don't know what the number is going to be yet," Fitzgerald told reporters after the speech. "It's not going to be the $150, $160 million (surplus for the two-year budget) that we thought we'd be working with."

So Walker focused his address more on past accomplishments than costly future plans. The governor said he would invest future state savings on education, but gave no figures and limited his new proposals to addressing student loan debt and modestly funding partnerships between high schools and technical colleges.
Speaking of the governor’s band-aid bills on higher education (I’ve earlier explained why I think it doesn’t go nearly far enough to solve the crisis past Walker/WisGOP cuts have caused), those bills were formally published today, and an Assembly Committee hearing is scheduled on them Thursday morning. Seems odd to be in such a hurry, especially since we don’t know if there is going to be any money available for these initiatives after the revenue numbers hit. But maybe that's the point (don't bet against it with this crew).

Tere was one item of good news on the budgetary front, and this is something else I hinted at in my post yesterday. The Joint Finance Committee just received information from the Department of Transportation that includes plans to spend an additional $37.6 million heading to Wisconsin as part of the recently-passed Congressional budget bill (the one that’s increasing the federal deficit for the first time in the last 5 years). This includes additional bridge work, state highway projects, and some freeway resurfacing.

In addition, the DOT says those federal highway funding levels will be elevated for the next year, allowing for more projects to be done. This is a good thing, mostly because state taxpayers aren't putting up the brunt of these funds, but I also think this extra boost of federal aid allows for another option. This seems like a good opportunity for the Joint Finance Committee to go back on their plans to borrow $850 million in the next 2 years, and use this funding along with the $140 million that was carried over from the last year to drop the future debt costs in the General Fund that is set to happen as a result of the careless DOT policy of “borrow and spend.” Oddly, the upside in revenue that we will likely see will be enough to offset the borrowing in the Transportation Fund, but it probably won't do that for the General Fund money that was borrowed in this budget (more in a second why this is an important difference).

In addition, there should be cost savings in the Transportation Fund coming from lower gas prices reducing costs for the State Patrol, highway maintenance vehicles, and other parts of the sizable DOT fleet of cars. Which is another reason that there should be extra funds left over in the Transportation Fund that could well reduce the massive borrowing that is in the current budget, and allow the state to catch up on some of its large backlog of projects. But here's the problem- because of the 2014 Road Builders' Amendment to the State Constitution, this extra money can't be used to fill in the looming General Fund budget. So the state seems likely to have to cut more General Fund services like school aids, health, and the DNR in the next 1 1/2 years due to that deficit, but can't do anything with the one-time surplus of funds in Transportation other than fixing more roads (and note than none of these surplus funds are going to transit).

When the LFB officially reveals later this month how much of a revenue crater the state is in, it'll be interesting to see if immediate action is required to fix that problem. It would have to be an overall revenue shortfall of around $300 million in year 1 or $200 million in year 2 to officially go into the red, and if that $300 million doesn't show up for this year, it would likely allow Assembly Speaker Robbin' Vos and Senate Leader Fitzgerald to stay on track to end this legislative session by March. That move would allow more time for WisGOPs "independent" supporters to run campaign ads trying to convince the public that they haven't totally messed things up in Wisconsin during their reign of error (good luck), and kick the can on a potential budget repair bill till after the November elections.

But delaying the inevitable budget repair bill doesn't mean Wisconsin's General Fund budget situation is any good, or that there is any money out there that can fulfill Gov Walker's half-measures on college affordability. And it still doesn't reduce the $1.1 billion in unspecified lapses that are baked into this budget, an important fact to remember as any budget deficit comes on top of that absurd gimmick, which means that worker furloughs and other in-budget cost reductions seem to be a certainty for the State of Wisconsin starting on July 1, if not sooner.

Stay tuned, it's gonna get frantic at the Capitol soon enough, and likely very messy and ugly.

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