Need more money for defenders and DERP in Wisconsin

In what is starting to become an ongoing series, here are two more recent examples of what seems to be insignificant state reports showing an underlying problem that will likely result in more budget troubles for Wisconsin.

The first involves what the state’s Office of Public Defender, and the amount of money that has to be paid to help people be adequately represented in court. As the “Private Bar Report,” mentions in a little over 40% of appointments, the state will contract with private public defenders instead of using its own OPD staff. Not a big deal on its own, but the problem results from the fact that the state didn’t set aside enough funds for the caseload.

Costs for Private Bar defenders, FY 2016
Budgeted $22,887,400
Actual costs $27,020,146
DIFFERENCE $4,136,746

All of the $27 million in claims from last fiscal year were paid, because the Private Bar appropriations are biennial, meaning it has a combined 2-year budget. But that also means that overspending in year 1 means that there are fewer funds available for year 2. And given that the report says the Office of the Public Defender “is currently paying (and expects to continue paying) over $1.75 million per month through the end of the biennium,” there’s a looming shortfall.

Costs for Private Bar defenders, FY 2017
Remaining Funds $17,077,654
Projected costs at $1.75 mil per month $21,000,000
SHORTFALL $3,922,356

That’s not good in itself, but theoretically it could be covered by reducing other sources within the Public Defender’s Office. Problem is that the Public Defender’s Office is also running low on funds from the large number of cases they handle. That same report shows that the staff expenses for FY 2016 went slightly over the $57.8 million set aside for representation at trials and appeals, and the OPD lawyers are expected to take on slightly more cases in the next year, while somehow only increasing expenses by less than 0.3% (well below the rate of inflation).

So it seems likely that at least $4 million is going to have to be found in the next 6 months to pay for these added caseloads, or some kind of rights-limiting “savings” are going to have to be found. And given the revenue picture in this Fiscal Year, it may be difficult to find $4 million to send over to take care of this.

Another place that seems to be in need of added money and/or changes in law is the Dry Cleaning Environmental Response Program (or DERP). The Dry Cleaner Environmental Response Council (yes, there is such a thing) sent a report to the Joint Finance Committee on Wednesday laying out their situation and their difficulties, and it involves issues in being able to clean up contamination from dry cleaning operations.

The 5-year Program Evaluation addresses current and future funding of the program. Over the last 17 years, the Fund has provided more than $20 million to begin investigation and cleanup at 230 dry cleaner facilities. More than 100 of those facilities have completed cleanup and are now closed.

Currently, DERP is experiencing a revenue shortfall due to the contraction of the dry cleaning industry. Revenues no longer cover cleanup expenses and there is a backlog of more than three years to pay current claims. This backlog is expected to worsen in the future.

In fact, the Dry Cleaners’ Council says that the number of licensed dry cleaners in Wisconsin have declined by 55% since DERP began in 1999, with “societal changes in personal lifestyle, professional work attire, and clothing perferences,” combining with a slower economy to lessen the need for these services. As a result, revenues for the DERP went down from $1.36 million in Fiscal Year 2000 to $732,161 in FY 2016, but the needs to pay dry cleaners for the work they’ve done hasn’t gone away.

So in 2009, the State Legislature allowed the DNR’s Environmental Improvement Fund to loan up to $6.2 million to the DERP to stabilize it. Those funds were loaned out between 2010 and 2014, and allowed for over $9 million of reimbursements to dry cleaners in those years. But annual revenues to the DERP fund have fallen by 30% since 2009 because of the “societal changes” mentioned above, and the backlog of payments has gotten to the point that 20% of the remaining 130 sites haven’t even started work on clean up.

The DERP Fund is supposed to go through 2032, but the Dry Cleaning Council says they’ll need to come up with more money to get all of the cleanup finished in the next 16 years.

…The revenues to the Fund are projected to be $600,000 per year to pay on claims and $300,000 per year to administer DERP. An estimated $1.1 million per year is needed to cleanup contaimination on the 130 open sites. At this rate, by the June 30, 2032 sunset date, DERP will owe $12.6 million in reimbursements to dry cleaner owner/operators.

In addition to the projected shortfall in revenue to pay reimbursement claims, DERP will also owe money to [the Environmental Improvement Fund]. The Memorandum of Agreement between DOA and DNR requires that the $6.2 million plus accrued interest be repaid to EIF by the DERP sunset date. Based on current projections, the Fund will be unable to pay the loan.

Put the $12.6 million together with $6.2 million loan, then add the interest, and the total tab will likely exceed $20 million by 2032.

The Dry Cleaning Council floats options such as making extra effort to make sure all cleaners are paying their license fees (and not allowing them to get materials if they aren’t) and having the Legislature write off the loan. But it also seems likely that there will need to be some kind of bailout required to continue to clean up these facilities, and it’ll probably be discussed in this next Legislative session.

Combine these two deficits with other expense headaches, growing revenue shortfalls, and pressure to stop using extra money from the State’s Veterans Homes to plug budget holes, to actually improve the unacceptable conditions the vets are dealing with, and you can see where the state’s budget crunch is worse than the topline numbers suggest.

These problems have lurked for years, with action deferred to give away tax cuts and make Walker's and WisGOP's numbers add up in previous years, and now some of the reckoning will be part of this next budget.