Monday, July 7, 2025

Hospital assessment stuff - and how it led to Derrick Van Orden's latest idiocy

A mundane funding mechanism that involves taxing Wisconsin hospitals has led to quite a lot of crazy stuff in our state's politics over the last week. This includes our Legislature and Governor having to race through the night of July 2-3 to beat Congress in passing a budget bill, and in one of the state's members of Congress getting caught playing both sides of this issue, and then melting down when he got called out on it.

First, let's review what the state's hospital assessment is, and how it works. Fortunately, Wisconsin's Legislative Fiscal Bureau has a good explainer, and how it relates to services for state residents on Medicaid and other Medical Assistance.
For the purposes of reimbursement under the Medical Assistance [MA] program, hospitals are grouped in one of several categories. By far the largest category, by patient revenue, is the acute care hospital (ACH), which is a general medical-surgical hospital that does not meet the criteria for being designated as a critical access hospital (CAH). A CAH is also a general hospital, but has a distinct designation based on smaller size (no more than 25 inpatient beds), and being in a rural or isolated location. Outside of these two classes of general hospital, there are three types of specialty hospitals: psychiatric hospitals, rehabilitation hospitals, and long term acute care hospitals....

In addition to the standard base reimbursement payments, hospitals receive supplemental payments for providing services to MA patients, some of which are distributed broadly to all or most hospitals in a particular classification, and some of which are more narrowly targeted to specific hospitals or related to specific services. The largest hospital supplement expenditure is for hospital access payments. Access payments are fixed dollar amounts paid for each MA inpatient (upon discharge) and for each outpatient service. The program spends $654 million annually for access payments to the group of hospitals that includes acute care hospitals, long term acute care hospitals, and rehabilitation hospitals (psychiatric hospitals do not receive access payments). The program has a separate payment pool for critical access hospitals, which varies in accordance with a formula, but for 2024-25 is $8.7 million.
There’s also the matter of how much to kick back to the Critical Access and Acute Care hospitals from those funds. Under current law, around 63.67% of the state funding goes back to the hospitals, and the Feds pay more than 150% of that state amount to the hospitals for coverage. Most of the rest goes to the state’s Medical Assistance Trust Fund (MATF) for other health care needs.

The total raised by the hospital tax for ACH services to has been set at $414,507,300 since 2011. Then that money is used to pay providers for MA services, which gets federal matching funds, and it allows for extra funds generated by the tax to be used for other Medicaid services.

So Gov Evers wanted to raise the hospital assessment from 1.8% of net patient revenues to 5.7% in his budget bill. And with that higher tax would come another $346.6 million to be used for MA services, another $551.4 million to ACHs, and another $31.1 million to Critical Access Hospitals.

Everyone's a winner in this scenario, unless you don't want to see the Feds spend more money on health care. Which is where Congress and Trump/GOP come in to this debate.
The practice of using state directed payments through HMOs to increase payments up to the ACR has recently drawn scrutiny, as it can allow states to make total payments that exceed the federal payment limits that would otherwise apply, including payments that exceed the hospitals' costs attributable to Medicaid patients. On May 22, 2025, the U.S. House of Representatives passed the Budget Reconciliation Bill, which includes a provision that would prohibit state directed payments that result in total payments that exceed 100% of the payments under Medicare, or 110% of Medicare for states that have not adopted Medicaid expansion (to account for higher rate of uncompensated care in those states). However, the provision would allow state directed payments that were already in place, or that had already been submitted for approval, by the date of the passage of the federal law. If this provision were to pass prior to Wisconsin making any changes to access payments, the state would likely not be able to implement the proposed access payment increases, since they would result in payments exceeding the Medicare limits. Milliman estimates that total payments under the [Evers] Administration's proposal would be 152% of the Medicare rate for inpatient services and 137% of Medicare rate for outpatient services.
So if the Evers Administration and the Legislature didn't work out a deal to raise the hospital assessment before the Big Bunch of Bollocks got signed by Donald Trump, they'd be prevented from doing so, and wouldn't be able to pay for these added services or would have further budget crunches from paying full cost for them.

So as final passage of the bill in Congress got closer, it led to the odd scene of Joint Finance passing the budget on Tuesday of last week, both houses of the Legislature debating it all day on Wednesday before passing it late at night. Then Governor Evers signed the bill with few vetoes just after 1:30 Thursday morning.

In the budget, the state's hospital assessment ended up being raised up to around 6%, which is slated to result in over $2 billion more a year in access payments, pay for nearly $300 million in Medicaid services, and hospitals get a larger share returned to them.

As the budget was being pushed through in Madison, they were getting encouragement to speed things through from a strange place.

And here's the letter from Van Orden, sent on Wednesday, the day before the House was set to pass their bill to prevent states from increasing hospital assessments.
I cannot emphasize enough the importance of signing the proposed state budget into law without delay. As you are aware, timely enactment is especially critical this year due to the proposed increase in the state provider tax, which must be effectuated before the anticipated signing of the One, Big, Beautiful Bill on or around July 4, 2025.

This is a once in a lifetime opportunity and I implore you to put politics aside, and our neighbors first.

The One Big Beautiful Bill will have a profoundly beneficial impact on Wisconsinites from all socioeconomic backgrounds by ensuring that Badger Care, in its current form and scope, remains solvent into the future and bolstering our rural healthcare systems.

Wisconsin will immediately receive a $500,000,000 plus up for rural healthcare infrastructure, and an additional billion dollars annually for healthcare in our great state...

Delaying the state budget enactment beyond July 3rd risks losing vital opportunities for the state’s healthcare system and the Wisconsinites who rely on it. Healthcare and rural healthcare, in particular, is vital to us in Wisconsin. We cannot leave anything on the table. Please act swiftly to sign the budget and secure the provider tax increase in time to meet this critical federal deadline.
Well, Small-D, if you really think it's important to have this extra coverage for hospitals in rural Wisconsin so more don't close and BadgerCare "remains solvent into the future", maybe you should have "put politics aside" AND NOT VOTED FOR THE BILL THAT PUTS IT IN DANGER. And nice try in implying that somehow the bill you're passing in DC is the one that's funding the extra money for health care, when that bill you voted for would have taken that funding away.

Fortunately, my Congressman isn't one to let BS like this go, and set the record straight.

“It’s clear that Derrick doesn’t understand the bill or legislative procedure when he claimed that he also helped secure an additional $500 million for rural hospitals. This provision came from a Senate amendment he had nothing to do with and was only included because Republicans felt pressure to put a band-aid over the bullet wound they are inflicting on rural hospitals by this bill. Moreover, there is no guarantee that Wisconsin will receive any or all of these funds, as award amounts have yet to be determined.”

“You can’t create a problem and then claim credit for someone else's help in making it slightly less horrific. He and his Republican colleagues are the reason this legislative fix was so necessary in the first place. The legislature's actions will help lessen some of the impact, but certainly not all of the bill.”
And if you click Pocan's press release, you'll see Van Orden have a typical multi-tweet meltdown in response to Pocan's fact-giving. What a dipshit.

Bottom line is that it was Wisconsin's elected officials at the state level who kicked into action to get a state budget passed that would allow for more Federal dollars to head to the state with a higher hospital tax. I still am not sure why we couldn't have just done the hospital assessment as standalone legislation vs having it be part of the budget, and allow the budget to get the fuller debate it likely deserved.

But we got another $2 billion coming into the state to help hospitals and provide Medicaid services, and it'll help Wisconsin be in a better position to weather the damage that is sure to come from the garbage bill that Derrick Van Orden and all other GOP Wisconsin Congressmen voted for.

Saturday, July 5, 2025

Tax Scam 2.0 by the numbers

There's a lot of individual items I could go over with GOP Tax Scam 2.0 coming out of DC, and I can discuss those in other individual posts. But I wanted to take a step back, and much like I did with the state budget that became law on the morning July 3, I wanted to go over the Federal totals that are in the bill that Trump signed on July 4 (I'm going off of the CBO totals from the Senate bill, which I think is the final version, barring some last-minute giveaway that isn't recorded in these numbers).

First of all, let's note how the budget deficit blows up immediately in the first 2 years of Tax Scam 2.0. The Congressional Budget Office says the bill itself increases the deficit by more than $479 billion in the next fiscal year, and by more than $588 billion in Fiscal Year 2027. And even if you take out the tax cuts from Scam 1.0 that were continued in this bill, the deficit is still slated to go up by another $270 billion next year due to what was added in and changed in Scam 2.0.

And even more remarkable to me is that the US government is slated to INCREASE its spending under the bill for Fiscal Year 2026 and 2027, because of the big boost in money that's slated for ICE and the military. And because the larger cuts in Medicaid don't generally kick in until the later years.

But what's with that huge decrease in expenses that's in Fiscal Year 2025, which means it'll happen over the next 3 months? It's because this Trump/GOP bill is going to make it harder for students to pay for college in 2025, and makes it harder to pay back their loans if they've gotten out of college.
The bill places a new cap on the amount students can borrow in federal student loans for graduate school and how much parents can borrow to help pay students’ tuition.

There would be fewer opportunities for deferments or forbearance and new limits on lending for part-time students.

The bill also has much more limited set of repayment options, ending loan forgiveness programs that have been in place for years, as well as a Biden-era program that tailored payment requirements to the person's income. It would be replaced with a new fixed-rate program, which would disadvantage lower-income families.
Now, the huge cuts in 2025 are more of an accounting measure that shows the government won't have to write off as much student debt as we had under Biden-era policies (this swing in govt accounting also happened in 2022 and 2023 when Biden's student loan deferrals were first announced, and then reversed by the courts). But even though it improves the budget numbers for 2025, you can bet it'll be a burden for the real economy as college students and graduates try to adjust to having to pay more for their loans and likely will spend less on other items as a result.

What also will be a burden is the fact that this bill adds on to what was already slated to be sizable budget deficits over the next 10 years. When you add the bill's red ink to what the Congressional Budget Office had as its baseline assumptions back in January, our deficit reaches $2.2 trillion next year, and nears $2.5 trillion by 2028.

Now maybe that huge deficit number doesn't cause major real-world economic issues, and maybe we continue to entice investors and foreign governments to take up our debts and keep our interest rates lower. With the dollar at its lowest levels in more than 3 years, American assets are now cheaper for foreign governments to buy, while American investors have benefitted from foreign stocks becoming higher in value.

But this deficit boosting and cheaper dollars both are inflationary items, and if we don't get a recession in the wake of Tax Scam 2.0, I don't see how prices don't jump from both increased demand and higher incentives for speculation. And after an election cycle when we were told that inflation was so horrible for people to deal with, I can't think voters would take kindly to prices going up at a faster rate from a higher amount. In addition, that inflation should stop any cycle of interest rate cuts from the Federal Reserve before it even gets going, and President Trump is openly saying that rate cuts are a requirement for any of his Fed nominees.

Conversely, since there aren't a lot of new tax cuts for people with jobs, we could well end up in the recession we seemed to be heading toward before the bill passed. And if investors aren't willing to pay for all this new debt, we could well see interest rates go up, which would keep the economy on a slowing/recessionary track. Combine that with supports for health insurance and food assistance being diminished by Trump/GOP, and you have a setup for either a long recession or serious stagflation.

But hey, as long as the Trump/GOP donors and their puppet politicians get a cut, they don't care! Too bad that many of us will be forced to take on the costs for those slugs, and the crumbs of tax breaks we will get in return (if we get any at all) won't be worth it.

Friday, July 4, 2025

A new Wis budget seems good. But a lot of money in the bank will be gone.

Went on vacation up North for most of this week. Did anything happen while I was gone?

Lots to catch up on, but I'll start with the state budget going from "stalled with lots of work to do" to "done and signed" in 3 days. I'll go deeper into particular policies and changes later on, but I think the overall numbers are interesting in themselves.

For example, there was this complaint from Republican State Sen. Steve nASS, who said that the deal between Republican legislative leaders and Gov Evers left the Wisconsin budget out of balance.
“The Vos-Evers budget deal can only be described as on orgy of spending designed by two leaders that probably won’t be here to deal with the financial mess it will create in the 2027-29 biennium.

Speaker Vos and Governor Evers agreed to a 15% increase in spending over the biennium. The proposed All Funds spending will be $114.3 billion.

Remember the $4.3 billion one-time surplus that many legislators promised to return to taxpayers. Oops, those same legislators spent nearly all of that one-time money on ear-marks in their districts and funding for special interests.
Strange that Sen. nASS doesn't blame Senate GOP Leader Devin LeMahieu for this agreement, given that LeMehaieu and 13 other GOP Senators voted for this budget, and while Senate Democrats gave enough support to get the budget bill into law, it still was only backed by 5 out of 15 Dems.

But Sen. nASS does have a point. Sure, only 43% of that $114.3 billion in spending comes from the state's General Fund, while the rest reflects Federal assistance, the Transportation Fund, and other fee-paid items that don't require general state tax dollars. But the General Fund spends more than it takes in by well nearly $2.4 billion in year 1 of this budget, and $1.2 billion in year 2, which dwindles our General Fund cushion to less than $1 billion by the end of the 25-27 biennium.

Especially when you consider the additional burdens the state might have to take on as the Feds back off funding Medicaid and other programs due to Tax Scam 2.0, having a structural imbalance may make things a bit dicey in 2 years, especially if the economy is in recession and revenues start running short.

One reason there is such a spike in expenses in year 1 of the General Fund is because $565 million is being sent to the Transportation Fund to keep paying for road projects while limiting borrowing and not having to raise the gas tax. That $565 million transfer isn't repeated in the 2nd year, and which leads to there being more expenses than revenues for the Tranportation Fund in year 2, as there isn't enough "regular" DOT revenue to cover the costs.

And even with that year 1 boost from the General Fund, Wisconsin's Transportation Fund ends up losing most of its already-small cushion it had going into this budget.

I still like what Wisconsin ended up with in this budget. They got a small income tax cut that is limited in size and affects taxpayers of many income levels. And while the retirement income tax cut helps richer seniors over ones who only have Social Security for income, it also may well encourage people like my Illinois-based aunt and uncle to spend more time in Vilas County. Kinda gimmicky, but could work in some circumstances.

Construction trades will like the sizable capital and highway budgets in a time when construction spending is declining in America as a whole, and the boost in Medicaid spending may well lessen the chances that Wisconsin is damaged as much as other states by the attacks on health care coverage that is coming from DC. I get why Gov Evers made the compromises he did, especially when he and the Legislature had to play "beat the clock" against Congress to increase the state's hospital assessment fee to get more Fed dollars for health coverage.

But it certainly eats into the large amount of cash that the state of Wisconsin had as the 2023-25 budget ended. And if things go bad in the next 2 years, the great fiscal times that the state has enjoyed throughout the 2020s will likely come to an end. Add in rising deficits in DC causing the spigot to be shut off from the Feds, and we may fall into a crunch to start the next term in office for Tony Evers or whoever else might be governor in 2027.

Saturday, June 28, 2025

May's lower spending, lower incomes don't mean recession. But stock market recovery is stupid

Friday featured the release of the always-important income and spending report from the Bureau of Economic Analysis. And if you look at the topline numbers, you’d swear we were heading into recession.
Consumer spending, which accounts for more than two-thirds of economic activity, dropped 0.1% last month after an unrevised 0.2% gain in April, the Commerce Department's Bureau of Economic Analysis said. That was the second decline in consumer spending this year. Economists polled by Reuters had forecast consumer spending would edge up 0.1%.

Goods spending dropped 0.8% amid a 1.8% decline in outlays of long-lasting manufactured goods, mostly motor vehicles. Spending on nondurable goods like gasoline and food also fell, with the former reflecting lower prices at the pump.

Consumer spending on services ticked up 0.1%, the smallest gain since November 2020. Services outlays were restrained by decreases in spending on hotel and motel accommodation as well as at restaurants and bars.

…[P]ersonal income dropped 0.4%, the largest decrease since September 2021, as the lift from retroactive Social Security payments to some retirees who draw public pensions - such as former police officers and firefighters - waned. The saving rate fell to 4.5% from 4.9% in April.

"The saving rate is still close in line with its average over the past few years, underlining that consumers are not pulling back sharply on their spending," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
Actually, given that the savings rate had risen from 3.5% at the end of 2024 to 4.9% in April, and only went down in May due to the drop in income, I wouldn’t say they’re not cutting back, Mike.

As the article alludes to, the decline in income wasn’t as bad as it sounds. Social Security income went down by $122.4 billion in May, which unwound a $107.6 billion gain in April and nearly $56 billion increase in March that reflected one-time payments for many public sector workers and their spouses who had been locked out of benefits.

Take that and a drop in farm income of $41.2 billion out of the equation (another unwinding, this one of increased subsidies and disaster relief payments over the previous 2 months) , and Americans still got more income from their jobs in May. And although that job income growth is slowing, it stll indicates slower growth and not recession for the real economy.

On the inflation front, the PCE Index seemed pretty good to me, only going up by 0.1% and 0.2% for core (minus food and energy). But the “experts” weren’t as happy with it.
Prices rose faster in May than forecasters had anticipated, and consumers unexpectedly lost income and pulled back on spending.

According to a report on Personal Consumption Expenditures by the Bureau of Economic Analysis Friday, "core" consumer prices, which exclude volatile prices for food and energy, rose 2.7% over the year. That is up from an upwardly revised 2.6% annual increase in April and higher than forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.

The uptick in core PCE inflation is especially significant because it's Federal Reserve officials' preferred inflation benchmark. The central bank sets the nation's monetary policy with the goal of keeping inflation running at 2% a year. Fed policymakers are currently debating whether inflation is tame enough to start cutting the central bank's influential federal funds rate, which affects borrowing costs on all kinds of loans.

PCE prices rose 2.3% over the year when factoring in food and gas, an acceleration from an upwardly revised 2.2% annual increase in April and in line with forecaster expectations. Falling gas prices helped keep PCE inflation relatively cool in May, similar to the CPI inflation measure, a separate report released earlier in the month.
And yet despite this belief that rate cuts the stock market closed at all-time highs on Friday because….I honestly don’t know why. Hopes that the Fed will cut in July anyway? Gambling on Tax Scam 2.0?

In the everyday US economy, things clearly slowed down in the first 2 months of Q2. The main source of GDP growth in our current quarter won’t be because of actual economic activity, but instead because the 1st Quarter's surge in imports is over, and we’re back near the trend in trade that we had before Trump Administration 2.0 became a thing.

Maybe the warm weather and rebound in the stock market made people want to spend more in June. But the data that we’ve seen so far would match with the type of deterioration that you’d see in a slowing economy where growth underperforms. Which is exactly what the Fed said in their economic projections last week, and remember that this is all before the worst of tariff-influenced inflation hits the store shelves.

Thursday, June 26, 2025

Vetoing vetoes and unfunded programs - more WisGOP budget bunko

In recent weeks, Republicans in the Legislature have been trying out a new tactic to try to limit what Governor Evers can do to change bills.
Senate Majority Leader Devin LeMahieu said early in [a] Senate floor debate [last week] Republicans were not attaching funding to various bills on the agenda because the caucus has “no trust” in Gov. Tony Evers’ office.

“Quite frankly there’s a trust issue between our caucus and the East Wing,” the Oostburg Republican said, accusing the governor of “arbitrarily” changing the intention of Republican legislation with his veto pen.

LeMahieu said Republicans plan to fund these bills through the budget process once they become law….

One of these bills was SB 41, which passed 18-14 along party lines. The bill would require the Department of Justice to create a program for grants to improve the safety of school buildings and provide security training for school staff. The bill had set aside $30 million to the grant program and dictates the maximum grant a school can receive is $20,000.

LeMahieu said in his remarks that bill authors wanted to wait and see if legislation worked to attach funding. The original bill had allotted funding, but the Senate passed a Republican amendment cutting the funding appropriation from the bill.
In particular, the GOP wants to start a program by turning a bill into law, but the budget bill would include actual funding numbers that Evers can only make smaller. Here’s what a typical appropriation for an already-established program looks like in a budget bill.

Rep. Karen DeSanto (D-Baraboo) pointed out that this two-step procedure allows the full Legislature to pass the buck to the GOP-dominated Joint Finance Committee, who are charged with approving the money behind initiatives that they publicly support. Or are allowed to kill it.
“Today I was put in the difficult position of voting against technically good bills that are unsound because they lacked funding. Legislative Republicans removed Governor Evers’ budget proposals and reintroduced them as unfunded bills. Republicans keep promising that we need to trust that these proposals will be funded through their budget. However, it is the function of the Legislature, not just the Joint Committee on Finance, to establish funding for bills.

Meanwhile, Joint Finance Republicans have stalled budget action and continue to propose gimmicks and vote against basic, fiscally responsible supports for Wisconsin families. When there is no dialogue, no certainty of a budget being passed on time, and no meaningful investment in our state, I can’t reasonably believe these promises are anything but empty. Wisconsin simply cannot afford unfunded mandates to state agencies and Wisconsinites certainly cannot afford these political games.
Then we had a Supreme Court ruling this week which gave the GOP Legislature a boost for these sorts of tactics.
At issue in the Supreme Court case was Evers' partial veto of Act 100, the bill aimed at funding the Act 20 literacy law. Evers' veto consolidated two funding streams into one — essentially giving the DPI more power to use the money — and also eliminated some support for private and charter schools and a 2028 spending expiration date.

A lawsuit by co-chairs of the state legislature's Joint Committee on Finance, Sen. Howard Marklein and Rep. Mark Born, said Evers' veto was unconstitutional. They argued Act 100 is not an "appropriations bill," and therefore, not subject to the governor's veto powers.

Those lawmakers also argued that because Evers had improperly issued a veto, Act 100 had become invalid. That argument deadlocked the $50 million.

Evers and DPI argued back, saying the money should be released.
After the decision, Howard Marklein and Mark Born released a statement saying they would now release the money for literacy. And indeed, there is an item in tomorrow's Joint Finance extravaganza to release the remaining $49.7 million that is in the literacy program. So this means the delay of the $50 million was a petty move by Republicans to make sure they got to decide when and how the money was released….even though they had already voted to fund the program.

It makes me wonder if Republicans will try more of this unfunded mandate BS to get around any line item vetoes by Evers in the larger budget bill. Or, Dems are worried that GOPs could pass an initiative into law, and then pass no budget at all, leaving no money available to do anything with the new program. And given the type of cynical dweebs that WisGOPs are, they’d then claim that the Evers Admin is at fault for not getting things done with this unfunded mandate of a program.

Emily Tseffos is the chair of the Outagamie County Democrats and she wrote a column this week for the Recombobulation Area website saying that Governor Evers has to vocally step up and call out these type of WisGOP games, gimmicks and unfunded mandates.
This is worse than bad-faith legislating. It’s strategic manipulation of the public. And this is exactly why coordination now matters more than ever between the governor, legislative Democrats, and grassroots leaders. Because while Republicans are staging headlines and plotting their next campaign mailer, everyday Wisconsinites are being asked to accept crumbs and confusion.

We saw this play out last cycle: Republicans touted a “historic investment in public education” — and it worked. They ran on it, they campaigned on it, and I heard about it again and again while knocking doors as a candidate. But the reality didn’t match the headline.

Yes, Governor Evers used his veto pen to lock in a $325 per-pupil increase. But the legislature included no new state aid to cover it. The only way for districts to access those dollars is by raising local property taxes… again. And even then, the amount doesn’t keep up with inflation, let alone meet our schools’ real needs. Special education is still underfunded. Mental health services are strained. And voucher schools? They got another raise, with no strings attached.

Symbolic wins don’t keep the lights on. And when Democrats take credit for half-measures, we make it easier for Republicans to keep selling false promises.
Look, if the WisGOPs have such a problem with Evers using a line-item veto in creative ways, then why aren’t they trying to pass a constitutional amendment that says you can’t pull the “take the money and cut the strings attached” maneuver that they are clearly trying keep Evers from doing? Because they are fine with the use of a line item veto to rewrite laws, they just don't like that it's foiling them instead of being used to screw over Dems.

Remarkably, tomorrow's Joint Finance agenda lists all unfinished budget business as items that could be taken up. And we'll find out if that meeting includes legislative tricks intended to give the appearance of action, without having to actually pay for it, or give the staff to do it.

Monday, June 23, 2025

Higher debts and GOP budget bunk means Tax Scam 2.0 is even more costly

Here a few updated numbers on where we are with the Big Beautiful Pile of Garbage that Trump/GOP are trying to get through Congress. First off, here's the Congressional Budget Office's release on total economic effects and interest rates on the House version of Tax Scam 2.0.
The economic effects of H.R. 1 would decrease the primary deficit by $85 billion over the 2025-2034 period, primarily reflecting an increase in economic output; and
• The bill would increase interest rates, which would boost interest payments on the baseline projection of federal debt by $441 billion....

Real (that is, adjusted to remove the effects of inflation) GDP would increase by an average of 0.5 percent over the 2025-2034 period,

• Interest rates on 10-year Treasury notes would go up by an average of 14 basis points (a basis point is one one-hundredth of a percentage point) over the period...

The effects of those rate changes on net interest outlays are large because the existing stock of debt is historically large. Because of the large stock of debt projected in the baseline, those increases in interest payments more than offset the primary deficit reductions driven by increases in economic output. The interest rate changes result from both the tax provisions analyzed by JCT [the Joint Committee on Taxation] and the remaining provisions of H.R. 1 analyzed by CBO. Because the tax provisions increase the deficit by more than the nontax provisions reduce the deficit (especially in the earlier years of the 2025-2034 period), the tax provisions are an important driver behind the higher interest rates that lead to increased net outlays for interest on the baseline projection of federal debt.
So CBO says the price tag for the bill would be even higher than what we see in just the taxing and spending part, because it'll cost more to pay off the higher amounts of debt.

But Republicans in the Senate have a plan on how to reduce the cost of the Big Beautiful Budget Buster. Force the scorekeepers into saying that the tax cuts don't cost anything at all.
Senate Republicans have directed the Joint Committee on Taxation (JCT) to score the cost of extending the 2017 Trump tax cuts as a continuation of current policy that would not add significantly to federal deficits, which would allow them to make those tax rates permanent.

The joint panel on taxation, which projects the deficit impact of all tax bills, scored the extension of 26 provisions of the 2017 Tax Cuts and Jobs Act as a continuation of “current policy” and therefore budget neutral, which dramatically lowers the projected cost of President Trump’s megabill.
But if that were true, then why would you need a literal act of Congress to pass the tax cuts? Of course, we should be judging the change in the deficit on this bill based on WHAT THIS BILL WOULD CAUSE.

Pathetic stuff, and budget expert Bobby Kogan of the Center for American Progress has the real numbers, based on what's been scored on the Senate's version of Tax Scam 2.0.

And do you really think GOPs wouldn't try to renew a lot of this regressive Scam if given the chance, no matter what the price tag would cost? Cynical stuff, but that's the way that Trump/GOPs roll.

CBO also says that the higher debt costs would cause inflation to be 0.12% above baseline in 2027, and that doesn’t count the 0.4% increase that would happen in each of the next two years if tariffs would continue at their current rates.

We still don't know everything that's in the Senate version of this Robin Hood in Reverse scheme, but we're supposed to get a vote on this multi-trillion pile of debt later this week? We'll see about that one, but no matter what emerges, you can bet these GOP budget gimmicks and added red ink would be a lot more costly than what the $2.5 trillion reconcilation limits would indicate.

Saturday, June 21, 2025

Fed keeps rates same for June, but the real story is they see things getting worse

Pretty much anyone paying attention knew that the Fed wouldn’t change rates at their Open Markets Committee meeting this week. But many wanted to see if there were clues as to what they’d do for the rest of the year, and what they thought would happen with the economy in general.

So what did we find out?
Fed officials still see two rate cuts this year, the same amount projected in March, amid uncertainty of how the Trump administration’s policies from tariffs to immigration to tax policy will impact the economy.

What the central bank did change, however, was its outlook on inflation and economic growth amid those uncertainties. Fed officials now see inflation staying higher this year than previously estimated and economic growth going lower than prior predictions.

They estimate that the core Personal Consumption Expenditures (PCE) measure of inflation will be 3.1%, compared with 2.8% previously. Though they see that measure dropping back to 2.4% in 2026.

And the US economy is now projected to grow at an annualized pace of 1.4% instead of 1.7%. The unemployment rate is seen edging up to 4.5% from 4.4% previously.
Let’s note that these are annual averages, and compare them to the 2.1% annualized rate of inflation that we’ve seen in the first 5 months of 2025, and the 4.24% that our unemployment rate is at today. That would indicate an annual inflation rate of nearly 4% for the rest of 2025 and unemployment rising to something like 4.7-4.8% by the end of the year.

And the lower [real] GDP growth level isn’t a good sign either. 1.4% growth would be the worst non-COVID annual growth in America since 2008 and 2009, during the Great Recession. While the Fed isn’t predicting that we will fall into recession this year, it would more likely resemble the near-double dipper years of 2011 or 2002, where things were notably stagnating and were stuck in the overhang of a recent Bubble popping. And it would be a significant deceleration of the last 3 years of the Biden Administration, where GDP grew by 2.5%, 2.9% and 2.8%, respectively.

And if you check deeper into those economic predictions from the Fed, it’s pretty clear that the members of the Open Markets Committee are more concerned about a slowdown than the economy overheating.

I would go so far as to say that if we didn’t have new tariffs threatening to reignite inflation, that rates might well going down now. But we know that many of the tariffs are yet to formally reach store shelves, and because we don’t know how much that tariff-caused inflation would be or how the economy would react to those higher prices, the Fed is still in “wait and see” mode.

But I'm dealing with reality, and not campaigning to President Trump to replace Jerome Powell as Chair of the Open Markets Committee. Unlike one Fed Governor, who went out on his own on Friday. to
Federal Reserve Governor Christopher Waller said Friday that he doesn’t expect tariffs to boost inflation significantly so policymakers should be looking to lower interest rates as early as next month.

In a CNBC interview, the central banker said he and his colleagues should move slowly but start to ease as inflation is not posing a major economic threat, which he expects to continue.

“I think we’re in the position that we could do this as early as July,” Waller said during a “Squawk Box” interview with CNBC’s Steve Liesman. “That would be my view, whether the committee would go along with it or not.”
Except we know that a lot more of the tariff price adjustments are coming over the next 2 months, and that oil has gone up nearly 25% in June due to Trump's big mouth on Israel vs Iran stuff.

Bottom line to me, if rate cuts are truly that important to Trump and Elon and all of these other CEOs that are strung out on debt and paper gains, then Trump can back off of the tariffs, which takes much of these higher prices and related uncertainties out of the Fed’s decision-making. And then maybe Fed Governor Waller will be ahead of the curve instead of ignoring the looming reality of higher inflation and slower economic growth that most of his fellow members of the Open Market Committee are planning on.

Home building and other construction slowing down in 2025

While the stock market recovered from its April panic, we keep seeing evidence that real economy might have kept trending down. Among the latest data for this was a report from the Census Bureau this week showing that a significant decline in new homes being started.

There was a 9.8% drop in housing starts (annualized rate), ending up with the lowest non-COVID amount of starts in nearly 6 years. And the same report said May was also the first non-COVID month that had less than a (seasonally-adjusted) 1,400 annualized permits since the Summer of 2019.

You can see where the level of starts and permits blew up post-COVID as the Fed Funds interest rate stayed around 0%, and then has fallen back as interest rates went up, leading to a double-whammy of unaffordability where homes cost more, and it cost more to borrow for those homes.

The post-COVID growth in starts earlier led to a boost in houses being worked on and finished between 2022 and 2024, helping to reduce the inventory squeeze. But that’s now slowing down as well.

And residential construction’s decline in the last couple of years goes along with a general decline in overall construction spending that’s been going on over the last 12 months.

There hasn’t been many layoffs in the construction sector as a whole as of yet, but job growth has slowed to 40,000 in the last 6 months compared to 86,000 in the 6 months before then. And if construction spending and home-building numbers keeps declining, I don’t see how there won’t be job losses in the coming months.

Tuesday, June 17, 2025

US retail sales, factories slip in May, and now oil jumps in June

There were a couple of bits of not-good economic news on Tuesday, starting with a sizable drop in retail sales for May.
Retail sales dropped by 0.9% in May according to the Census Bureau, worse than the 0.6% contraction that had been estimated by economists surveyed by Dow Jones. Excluding automobiles, sales last month eased by 0.3%, underperforming the Street’s expectation for a 0.1% increase. Gas station sales slid 2% in the month, which can reflect both lower prices but possibly slower economic activity.
Autos were a big reason behind the drop in May, as they fell a seasonally-adjusted 3.5% last month, which reversed all the pre-tariff gains that happened in March and April, and dropped sales amounts back to where they were in October.

We've also seen "core" retail sales (which doesn't include gasoline or the auto sector) flatten out in the last two months as the Trump trade policies bounced around.

Then later today, we got information that industrial production went down in May, with factory output barely growing last month. That's despite a big jump in autos being built with pre-tariff components.
U.S. factory production barely rose in May as a surge in motor vehicle and aircraft output was partially offset by weakness elsewhere, and the outlook for manufacturing remains clouded by tariffs.

Manufacturing output edged up 0.1% last month after a downwardly revised 0.5% decline in April, the Federal Reserve said on Tuesday. Economists polled by Reuters had forecast production rebounding 0.2% after a previously reported 0.4% drop. Production at factories increased 0.5% on a year-over-year basis in May….

Motor vehicle and parts output accelerated 4.9% last month after declining 2.3% in April. Production of aerospace and miscellaneous transportation equipment increased 1.1%. But output of fabricated metal products, machinery and nonmetallic mineral products all posted declines of at least 1.0%.

Durable manufacturing production rose 0.4%. Nondurable manufacturing production dropped 0.2%, pulled down by decreases in the output of printing and support, petroleum and coal as well as food, beverage and tobacco products.
Not only is it bad that overall industrial production continues to slowly deteriorate, with durable goods production down 0.2% outside of autos and auto parts, but what happens next month when the pre-tariff auto products and related items have rolled off the factory floor? It seems unlikely there would be continued demand to keep these products moving, especially with purchases already being pulled forward earlier this year and sloughing off now, so that indicates a strong chance of a Q3 slowdown in the auto sector to me.

The bad overall spending and output data puts a damper on last week’s good news of low inflation for May, both for consumers and producers (+0.1% for both). Those inflation figures seem likely to rise in the near future, as the tariffed products are assembled in factories and the higher costs are attempted to be passed onto consumers.

And now we have further inflationary pressures looming, give that oil price futures have jumped by 23% in June, with tensions rising again in the Middle East and Trump shooting his mouth off.

So watch for prices to rise at the pump sooner than later, and you’ve probably already seen some of that in your neighborhood. That's not going to help the economy in a time when most American consumers were already gloomy, and have been slowing their spending over the last 2 months.

Saturday, June 14, 2025

WisGOP moves mean they're raising K-12 property taxes to pay for income tax cut

Thursday night, the GOP_led Joint Finance Committee held their most important budget meeting yet. It included a 10-figure income tax cut, and I wanted to discuss the two main parts of that reduction.
1. Expand 2nd Individual Income Tax Bracket (Paper #325). Beginning in tax year 2025, increase the amount of taxable income subject to tax at the second marginal rate (4.40%) by: (a) $28,150 for married-joint filers (to $67,300); (b) $21,110 for single/head-of-household filers (to $50,480); and (c) $14,070 for married-separate filers (to $33,650). Estimate reduced individual income tax collections of $323,000,000 in 2025-26 and $320,000,000 in 2026-27.

2. Retirement Income Exclusion. Beginning in tax year 2025, create an individual income tax exclusion for the first $24,000 of retirement income currently subject to state tax received by each individual who is at least 67 years of age before the close of the taxable year. For married-joint filers where both spouses have attained age 67, specify that the maximum exclusion equals $48,000. Prohibit a taxpayer who claims this exclusion from claiming any state income tax credits provided under current law in the same tax year. Prohibit nonresidents from claiming the exclusion, and specify that part-year residents may claim the exclusion only for the portion of their income which is sourced to Wisconsin. Define retirement income to include payments or distributions received each year by an individual from a qualified retirement plan under the Internal Revenue Code or from an individual retirement account established under 26 USC 408. Specify that the exclusion does not apply to any retirement income which is already exempt under current law. Estimate reduced individual income tax collections of $395,000,000 in 2025-26 and $300,000,000 in 2026-27.
The income tax cut is pretty straightforward – everyone with a taxable income above that level would get a similar-sized tax cut, since the lower tax rate cuts off for every dollar of income above the levels shown.

But I want to give a reminder about the retirement income tax cut, because a lot of income that retirees get is already tax-exempt in Wisconsin, as we saw in the LFB’s analysis of the GOP’s 2024 attempts to have this type of exclusion put in place.
Under current law, the following retirement income categories are excluded from Wisconsin AGI: (a) Social Security benefits; (b) payments from the U.S. military employee retirement system and U.S. government retirement payments received by members of the U.S. Coast Guard, the Commissioned Corps of the National Oceanic and Atmospheric Administration, and the Commissioned Corps of the Public Health Service; (c) income from certain public retirement systems if the individual was a member of, or retired from, that system prior to 1964; and (d) up to $5,000 of retirement income for taxpayers aged 65 or over with federal AGI of less than $15,000 per filer, or less than $30,000 for married-joint filers. Together, these provisions [were] estimated to reduce individual income tax revenues by nearly $950 million in tax year 2024 under current law (the exclusion for Social Security benefits accounts for an estimated $900 million [95%] of this total).
So this “retirement income” tax cut is really a lot of investment and pension income from non-military jobs, something that a lot of seniors don’t have a lot to draw from. Back in 2024, the GOP’s tax cut for seniors would have written off up to $75,000 per person in addition to Social Security , and that would have cost $1.13 billion in the first 2 years alone.

It was too rich for Governor Evers’ blood as a separate bill, and in addition to being nearly $450 million cheaper for the first 2 years, the new retirement tax cut is now included in the 2025-27 State Budget. So maybe that combination makes it more likely to go through this time?

Because of the lowered price tag of these tax cuts, there won’t be as big of a hole blown in future budgets vs what we saw the GOPs ask for in 2021-23 and 2023-25. But it still would erode all fiscal cushion we would have if we fully funded what Governor Evers wanted in this budget.

With that in mind, JFC also used Thursday night's meeting to take up the biggest expense of state tax dollars in the budget - K-12 education. I'll likely speak a bit more on where K-12 expenses are going in a later time, but there is also a key part that affects property taxes for Wisconsinites. That relates to general school aids and the total revenue limits, which combine the total amount of general aids and property taxes that can go into a public school district.

The GOPs on Finance added $229 million for regular special education aids and another $54.6 million for high-cost special education aids. That'll help public districts a bit, but the state funding still would only cover an estimated 37.5% of special ed costs for school districts, instead of the 60% that Governor Evers wanted.

And my State Rep Lisa Subeck got to what should be the bigger headline of the Republicans' K-12 motion. This is quoted from Rep. Subeck's email newsletter.
...They provided no general school aids, including no per pupil aid. This is the first time general school aids have not been included since the first Walker budget....
That's right, ZERO in added General School Aids. And in fact, this motion ends up losing General Aids for communtiy schools because $24 million more in this is being taken from public school districts in the next 2 years to fund vouchers for kids in private schools, to match up with the higher special ed reimbursments.

Put it all together with the earlier moves on sum-sufficients to uphold current laws (which gave automatic per-student increases to vouchers), and my crude estimation is that WisGOP has cut $2.88 billion out of the proposed $3.4 billion increase to K-12 schools for 2025-27. Which will pay for the $1.3 billion tax cut and then some.

However, there are a lot of other big-expense things to deal with in this budget, including prisons, the UW System, and Medicaid. Especially given the erraticness and idiocy coming out of DC, we may need all of that $1.4 billion that is in the bank to pay for everything else in the state, and maybe more than that.

Back to K-12. When you add in the $325-per-student increases in resources to K-12 schools that Evers locked in with his creative veto in the last budget, and Wispolitics notes that the GOP has essentially voted for higher property taxes for Wisconsin homeowners.
According to the Legislative Fiscal Bureau, the GOP motion would mean a higher property tax bill on a mythical median-valued home compared to the plan that Dem committee members had proposed. That plan largely followed what Evers put into his budget. According to LFB, the bill would be $160 higher on the bills that go out in December and $276 on the ones that will be sent to homeowners in December 2026 compared to the Dem motion [which would have restored Evers' K-12 plans to the budget]
The Wispolitics article quotes JFC Co-Chair Mark Born as saying the GOPs will still do something to lower the looming property tax increase they're currently allowing in this budget, and perhaps that'll be through a higher School Levy Credit or related thing. But make no mistake about it, WisGOP said on Thursday that they are trading relatively small income tax cuts for higher property taxes, and I don't think a lot of Wisconsinites would be happy with that decision.

Thursday, June 12, 2025

Tax Scam 2.0 blows up the deficit, robs from the poor + gives to the rich.

The US Senate is still working on its changes to Big Beautiful Tax Scam 2.0, which passed the US House 3 weeks ago. And the Congressional Budget Office has recently been releasing their updated estimates of what the bill would do, both in total numbers, and in who would be helped or hurt by the bill's many changes to taxing and spending.

We'd already seen that the bill would increase deficits by large amounts, and they'd especially blow up in the next few years.

And that's not all for the increased deficits, as CBO notes higher deficits require higher amounts of borrowing, and higher interest rates to pay off that debt.
The Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) estimate that enacting the bill would increase deficits over the2025–2034 period by $2.4 trillion, excluding any macroeconomic or debt‑service effects. That change stems from a reduction in revenues of $3.7 trillion and a reduction in outlays of $1.3 trillion over the 2025–2034 period.

CBO estimates that the additional debt-service costs under the bill would total $551 billion over the 10-year period. That change would increase the cumulative effect on the deficit to $3.0 trillion. CBO estimates that the debt-service increase from the change in revenues would amount to $716 billion. Other provisions would, on net, result in a decrease in debt-service costs of $166 billion.

As a result, and net of any changes in borrowing for federal credit programs, the agency estimates that debt held by the public at the end of 2034 would increase from CBO’s January 2025 baseline projection of 117.1 percent to 123.8 percent of gross domestic product.
So we're really talking about a total of $3 trillion in added deficits, not $2.4 trillion, because of the added debt costs.

Then the CBO released their analysis of the "distributional effects" of Big Beuatiful Tax Scam 2.0 today. Bobby Kogan of the Center for American Progress gives the rundown of what CBO had to say on who gets hurt or helped by Tax Scam 2.0.

UGH! Let's look at the analysis ourselves and see how the CBO got there.
Resources for households in the lowest decile of the income distribution would decrease by about $1,600 per year (in 2025 dollars) compared with their projected income in CBO’s baseline projections (see Figure 1).5 That amounts to 3.9 percent of their income (see Figure 2). Those projected decreases are mainly attributable to reductions in in-kind transfers, such as Medicaid and SNAP.

Households in the fifth and sixth deciles (that is, in the middle of the income distribution) would see their resources increase by $500 (or 0.5 percent of projected income) and $1,000 (or 0.8 percent of projected income), respectively.

Resources would increase, on average, over the projection period by about $12,000 for households in the highest decile, amounting to 2.3 percent of their projected income. Those projected increases are mainly attributable to reductions in the taxes households in that decile owe.
Clear Robin Hood in reverse, and I wouldn’t count on the super-rich doing much positive for the rest of the country with that windfall (they sure haven’t over the last 45 years).

I also want to add one more layer onto the budgetary and economic changes that Trump/GOP are trying to put through. Upon request from Dem members of Congress, the CBO also gave their estimates of the effects that new Trump tariffs would have over the next year. That includes the amount of money that would go into the US government's coffers, and what would happen to the economy as a whole.
Before accounting for effects on the size of the economy, CBO projects that the increases in tariffs implemented between January 6 and May 13, 2025, would decrease primary deficits over the 2025–2035 period by $2.5 trillion relative to the agency’s baseline projections from January 2025. (Unless otherwise indicated, all years referred to in this letter are fiscal years.) Roughly half of that decrease stems from the increases in tariff rates on imports from countries other than China, Canada, or Mexico. Lower net outlays for interest resulting from the decrease in primary deficits would reduce total deficits by an additional $50 billion. As a result, total deficits over the 2025–2035 period would be $3.0 trillion lower than projected in CBO’s January 2025 baseline.
However, CBO says the total reduction in deficits would be a bit less than $2.8 trillion, because the economy will be slower in the coming decade.
CBO’s assessment is that the changes in tariffs will reduce the size of the U.S. economy. That effect would differ year by year; on average, from 2025 to 2035, the tariff changes would reduce the rate of real growth in gross domestic product (GDP) by 0.06 percentage points per year. By 2035, CBO estimates, the level of real GDP will be 0.6 percent lower than it was in CBO’s economic forecast from January 2025. That reduction in output reflects both negative and positive effects: the negative effects of higher tariffs through channels such as reduced investment and productivity, and the positive effects of additional revenues from tariffs, which would reduce federal borrowing and increase the funds available for private investment.
In addition to the slower economy, the CBO says prices will jump due to the tariffs, and stay at those higher levels as long as the tariffs are in place.
The increases in tariffs will make consumer goods and capital goods (the physical assets that businesses use to produce goods and services) more expensive, which will reduce the purchasing power of U.S. consumers and businesses. Those increases in costs will put temporary upward pressure on inflation. In CBO’s estimation, the policies analyzed here will increase the average annual rate of inflation, as measured by the price index for personal consumption expenditures, by roughly 0.4 percentage points over 2025 and 2026 relative to index will be 0.9 percent higher. After 2026, the tariffs will not have additional significant effects on prices.
The CBO doesn’t go into detail as to whether poorer or richer Americans will bear the brunt of those price increases and slower economies, because they couldn’t break down exactly which industries might grow or decline, and which products will have the largest price effects.

But would tariffs really be able to pay for the price tag of Big Beautiful Tax Scam 2.0? Let's look at how much the US government is bringing in for "customs duties" over the last 6 months, after May's Treasury statement was released this week.

So tariff revenue has basically tripled since Tariff Man got going. That would come out to around $15 billion a month in added taxes on products revenue, so maybe $180 billion a year? Then add in some inflation for the later years and could that $180 billion get to $250 billion a year on average? Seems unlikely, but not impossible.

So if we kept all these tariffs on, the already-large deficits wouldn't rise as much (although they'd still go up, especially for the rest of the 2020s). But I have a hard time believing that amount of tariff revenue would lead to an economic outcome most people would want – higher prices and a slower economy. In fact, if you put it together with Big Beautiful Tax Scam 2.0, and most us end up making less!

The worst effects on the economy from tariffs would hit in the next 2 years, while there would be tax hikes and more severe budget cuts coming in the later years of Big Beautiful Tax Scam 2.0....unless Congress and the 2030s president want to make even larger deficits by continuing with Tax Scam 3.0.

This is the other item that is hiding in plain sight - Big Beautiful Tax Scam 2.0 relies on accounting gimmicks to stay within the 10-year budget limits that would allow for 50 Senators to pass it through. But it cynically lays bombs of future tax increases and higher budget cuts that future Congresses would have to deal with. And if they don't want to deal with it and not cause more economic hardship for Americans with real jobs and real-life budget constraints, our deficits go up by even more.

Oh, but I'm sure the Koched-up GOPs in the Senate won't allow these exploding deficits and will put together a taxing and spending plan that doesn't handcuff our future and helps normal Americans over the donor class and.....HAHAHAHA!!! Do you think those MAGAts care about that, or you?

Now, Tax Scam 2.0 having 2/3 of Americans with opinions disapprove of it, which could make a whole lot of red states become purple for 2026, and their stocks and other investments tanking? That might cause them to deal a little bit with the reality of this budget-busting Scam.

Monday, June 9, 2025

Not just health insurance, but REinsurance

Looks like we're finally seeing the state budget process pick up this week. Among a list of items that the Joint Finance Committee will take up will be a modification to the state's reinsurance program, which is a subsidy to insurance companies to try to give Wisconsinites more choices on the Obamacare exchanges. The Legislative Fiscal Bureau broke down the program and the changes Governor Evers wants to put in.
The Office of the Commissioner of Insurance (OCI) administers the Wisconsin healthcare stability plan (WHSP), a state-operated reinsurance program that is intended to reduce premiums for health insurance policies sold in the individual market (for non-group insurance coverage, not sponsored by an employer). Reinsurance payments reimburse insurers for a portion of the total annual claims for individuals with high costs. Payments are made in accordance with parameters that are set each year based on the total reinsurance program spending target. Currently, the target is $230,000,000, an amount specified by statute.

Like most state reinsurance programs, WHSP pays a certain percentage (the "coinsurance rate") of the total cost of all covered services for an individual claimed in a year that exceed a minimum threshold (the "attachment point"), subject to a maximum threshold (the "reinsurance cap"). For instance, in 2019, the program had a coinsurance rate of 50%, an attachment point of $50,000, and a reinsurance cap of $250,000. If an insurer paid a total of $150,000 in medical claims in that year for a particular enrollee, the program would make a reinsurance payment to the insurer for that individual of $50,000, which is 50% of the difference between the total claim and the attachment point. The maximum reinsurance payment made on behalf of any individual in that year was $100,000, which is 50% of the difference between the maximum cap and the attachment point.
As you can see, the $230 million target/limit on payments to insurers means that the state wasn't able to pay the full 50% of costs in each of the last 2 years.

The Feds are currently taking up a sizable portion of this $230 million payment, as they give the state “pass-through” savings from the money that the Feds don’t have to pay in tax credits, which a large amount of Americans can receive for buying policies on the Obamacare exchanges.

The GPR share of the reinsurance payments has been lower since plan year 2021. For 2019 and 2020, about one-quarter of the total cost of reinsurance payments was supported from the GPR appropriation, while the state's share has ranged from 0% to 13% in the four years since then. This reduction can be largely attributed to a more generous premium tax credit formula enacted under the American Rescue Plan Act of 2021 and the Inflation Reduction Act of 2022 for plan years 2021 to 2025. If Congress does not extend the enhanced credits, the standard formula will be used again in 2026, which will also likely increase the state's cost of the reinsurance program. If, for instance, the state had to again contribute one-quarter of the $230.0 million payment total, the GPR cost would increase to $57.5 million, beginning in 2027-28, up from $30.9 million in 2025-26 and $6.7 million in 2026-27.

As shown in Table 3, reinsurance payments as a percentage of total insurance revenue reached a maximum in 2022, the year the target was increased to $230 million, but this percentage has declined since that time. With a fixed reinsurance target, and with growth in individual market enrollment or in premium collections, this percentage will naturally decline. In 2024, both enrollment and premium revenues increased by 25% from the prior year, which is a major reason for why the proportion of revenue that insurers collected from reinsurance payments declined. Although comparable data for the 2025 plan year will not be available until 2026, the reinsurance payments as a percentage of all insurer revenue will decrease further, given that enrollment in exchange plans increased by 18% over 2024 (based on the open enrollment periods).

Federal pass-through funding has gone up for reinsurance, since the Feds would have paid a lot more in tax credits in recent years due to 2 developments.

1. The higher income levels that were allowed to get credits for Obamacare in the last few years, and

2. More people getting insured from the Obamacare policies in general.

But as mentioned, the state couldn’t reinsure the full 50% associated with high-cost individuals in the last 2 years, as the total costs went over the $230 million limits in the last 2 years. So Governor Evers put in a budget provision to allow more payments (and a higher percentage of costs) to go to insurers.
In recognition of the growth in the individual market, Senate Bill 45/Assembly Bill 50 [the State Budget bill] would increase the reinsurance target from $230,000,000 to $250,000,000, beginning with plan year 2026, an increase of 8.7%. This would increase the share of total insurance revenue received from reinsurance payments, but would not restore the program to the same proportionate size as it was in 2022, the last time the target was increased (assuming that enrollment does not decrease substantially from current levels). To put this proposed increase into context, if the $250 million target had been in effect in 2024, reinsurance payments would have been 10.1% of total insurer revenues in that year, instead of 9.3%.
Interestingly, the LFB says that many Wisconsinites may not get any personal benefit from the reinsurance plan, because the lessening of premiums doesn’t end up reducing what the individuals end up paying in total, as they already get the difference back in higher tax credits from the Feds.
Although the reinsurance program reduces premiums, consumers who receive premium tax credits (PTCs) either do not realize any direct benefit from the reduced price, or realize a comparatively small reduction. This is because credits are calculated to equal to the difference between a percentage of the consumer's income (the "applicable percentage," which varying by income level) and the premium of the benchmark plan (second-lowest silver level plan). Thus, if the premium of the benchmark plan is reduced as the result of the reinsurance program, the amount of the premium tax credit is reduced, but the net cost to the consumer who purchases the benchmark plan will remain unchanged. To illustrate this, Table 5 shows the net premium owed by a consumer with a household income at 200% of the 2025 federal poverty level ($31,300 annually, or $2,608 per month, for a single-person household) under two scenarios. Under one scenario, the monthly premium is assumed to be $500, while in the other scenario, a reinsurance program reduces the premium for the same plan by 10%, to $450. This illustration uses the ACA's standard premium tax credit formula (with an applicable percentage of 6.5% of income), rather than the enhanced subsidies in effect for 2021 to 2025.

On the flip side of that, if Congress doesn’t continue the expanded tax credits for people going on Obamacare (and Big Beautiful Tax Scam 2.0 isn't continuing it), then any lower premiums resulting from reinsurance would help more Wisconsinites afford these insurance policies, since they wouldn't get as much from the tax credits to help them out.

So this reinsurance system is yet another example of where the Trump/GOPs can end up raising health care costs for the State of Wisconsin, as refusing to keep the expanded tax credits would mean the Feds will take up less of the cost reductions from reinsurance, and the state will pay more. And given that we don't know the outcome of the bill, it makes this reinsurance discussion all the more relevant for tomorrow's JFC session.