Tuesday, July 19, 2016

Wisconsin Vets Fund teetering on the edge

A minor report on the state’s Veterans Trust Fund slipped out last week, and it seems timely to discuss a bit more in light of yesterday’s war/fear-mongering at the Republican National Convention. Particularly given that more Wisconsin GOPs are scheduled to strike a tough pose, it may prove useful to see how we actually do take care of those who served our country when they get back to Wisconsin.

The Veterans Trust Fund supports a variety of vet-related programs and reimbursements as well as the operation of the State Veterans Museum on the Capitol Square. In the Legislative Fiscal Bureau’s information paper on programs for Wisconsin veterans, it explains how the fund was set up into its current form 55 years ago, and why it’s had troubles keeping up with expenses in recent years.
The veterans trust fund was created in 1961 through the consolidation of three predecessor funds -- the soldiers rehabilitation fund, the post-war rehabilitation fund, and the veterans housing trust fund.

Initially, the predecessors to the veterans trust fund were reliant on dedicated special taxes, as well as loan repayments for revenues. Since the expiration of those dedicated taxes, the veterans trust fund (as well as its predecessors) has been principally reliant on a series of transfers or one-time appropriations from other funds. The main sources of these revenues have been transfers or appropriations from the state's general fund, transfers from the mortgage loan repayment fund, and the deposit of net proceeds from the sale of loan assets. The fund has also received loans from the general fund and the state's investment fund, although these loans have been subsequently repaid. Table 2 summarizes the one-time veterans trust fund revenues since the World War II era.

Currently, the trust fund has several sources of ongoing revenues, including loan repayments, federal grants, museum sales receipts, and interest earnings. Over the past decade, the most significant source of ongoing revenue has been loan repayments. The 1997-99 budget transferred a portfolio of $54.6 million in primary mortgage loans and $7.9 million in home improvement loans, as well as $5.6 million in excess cash reserves, from the veterans mortgage loan repayment fund to the veterans trust fund. The cash and net proceeds of this transferred portfolio provided start-up funding for the personal loan program. Repayments on the mortgage loans and, subsequently, on personal loans, generated an ongoing revenue source for the trust fund. However, those payments have declined substantially in recent years as outstanding mortgage loan principal has declined. To illustrate, loan principal repayments to the trust fund averaged $9.7 million annually between 2005-06 through 2009-10, but had declined to just $1.9 million in 2013-14.
Then add in the fact that there are quite a bit more veterans now than there were 15 years ago (thanks Dubya!) and you can see where the stresses are going to continue for the foreseeable future with revenues declining.

This led to this memo from the Department of Veterans Affairs on Veterans Trust Fund from last week, which contained the following passage which somehow contains both alarming information alongside complacency on the state of the VTF.
…Per our previous projections, the VTF became insolvent in the first quarter of FY2016. However, the department has been able to extend the life of the VTF due to the continued efforts to be fiscally responsible while ensuring that funds are being used effectively to provide the best services possible for Wisconsin veterans.

The condition report illustrates a transfer from the Homes appropriations of $12 million to alleviate any negative balances. This transfer is pursuant to s. 45.57 (1) Wis. Stats., which permits the department to transfer all or part of the unencumbered balance of any homes appropriations to the VTF. The extraordinary turnaround and success of the homes, due to a commitment to efficiencies, cost savings, maintaining census levels and optimizing federal funds has made the DVA self-sufficient for the foreseeable future.
To translate, the Veterans Trust Fund would have run out of money, but the DVA had $12 million in extra charges from the Veterans Homes (money that’s charged to aging veterans and other users of the facility, by the way), to help fill in the gap for this year. That’s kind of an “ugh,” when you think about it.

Then I looked at the future projections in that report, and I wouldn’t exactly call the Veterans Trust Fund “self-sufficient.” It bleeds out its $5.4 million cash balance in this current 2017 fiscal year, and needs major bailouts from either the homes or the general taxpayer in both FY2017 and FY 2018 to not fall further down the hole.

Transfers projected into Veterans Trust Fund
FY2017 $6.5 million
FY2018 $12.1 million

There is no explicit source as to where those $18.6 million will be coming from, but the 2015-17 budget assumed $21.1 million total to be transferred out of the Homes account, which would be enough to cover the 2017 amounts, even with $12 million taken out in FY2016. So it’s likely that this transfer of excess funds from the Homes will continue, and given the statement from DVA, it seems that this is one of the situations where the Walker Administration isn’t so concerned with grabbing more dollars from DC (funny how they change their tune on federal money when it’s not money intended to help minorities poorer people).

These figures seem a bit timely given that the 2 top elected GOPs statewide- U.S. Sen. Ron Johnson and Gov Scott Walker – are scheduled to address the Republican National Convention in the next 2 days, and it seems like their main themes will be national security (as laughable as the idea of those dopes speaking on that subject may be outside of the Bubble). It seems appropriate to note that the money the GOP-run state of Wisconsin has set aside for our veterans is endangered, and a more permanent funding source is likely to be needed in the very near future. But then again, with these guys, it’s always about putting your mouth ahead of the money necessary to truly support our vets.

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