Tuesday, October 23, 2012

Think Wisconsin has a budget surplus? HAH!

Last week, Scott Walker tried another installment of his game of "sneak a PR event out, and hope no one remembers things or notices details." This time it was timed along with the state's annual financial report which came out on October 15, which on its face showed a $342 million budget surplus for Walker's first fiscal year and allowed for a transfer into the state's "rainy day" fund of just under $109 million. Walker and his DOA staff predictably used the news to claim his policies were working, and just as predictably, they're covering up that the news isn't close to as good as Walker's folks are making it out to be.

In fact, the budget "surplus" is based on accounting gimmicks, unnecessary cuts, and by tealing federal money intended to help people. If you take a look inside the Annual Fiscal Report's pages, you'll see where these games are played, and how it hides what looks to be an even bigger deficit looming in the near future.

The first tip-off comes on Page 12, where it shows revenues being basically the same vs. what was in the FY2012 budget- the actual numbers came in $18 million above the budget, or barely more than 0.1%. It also illustrates a Walker budgeting failure, as they counted on $118 million in departmental revenues that never showed up(things like fees and tuition and other non-tax revenues that help departments).

So how do you pull a $342 million surplus out of that? $113.6 million in additional, unbudgeted lapses, which turned out to be totally unnecessary given the budgetary circumstances. And even then, that only allowed the FY2012 to come in with a surplus $50 million more than what was in the regular budget, since the approved budget built in a FY 2012 surplus of $291.5 million.

But wait, there's more! Go ahead to Page 15 and Page 24, and you see an interesting line item:


These are transfers from other sources that went into the General Fund and added funds to the revenue side, and led to the "surplus". One of the spots is in the Medicaid fund, which Jon Peacock at the Wisconsin Budget Project exposed last week, where he noted the Walker Administration used federal Medicaid incentives to add to the surplus instead of using the money for treatment programs like....Medicaid. The scheme was shown last February in an LFB document explaining where the state's lapses were coming from, and the Walker Administration plans to do the same thing over the next 12 months.
On December 28, 2011, DHS announced that 23 states, including Wisconsin, would receive FFY 2010-11 CHIPRA performance bonus awards. Wisconsin's performance bonus payment for this year is $24,541,778. This amount was based on a FFY 2010-11 monthly average number of unduplicated qualifying children of 467,963.

The MA budget established for the 2011-13 biennium under Act 32 did not assume that the state would receive any CHIPRA bonus payments for FFYs 2010-11 through FFY 2012-13 to offset the state's share of MA program costs. The administration's intent is to use the CHIPRA bonus funding to replace $24.5 million of GPR funding currently budgeted for MA benefits costs in 2011-12, and lapse $24.5 million from the GPR MA appropriation to partially satisfy agency lapse requirements for 2011-12. Of the $24.5 million the administration expects to lapse to the general fund in 2011-12, $18,561,982 is part of the DOA-allocated lapse plan that is currently before the Committee. The remaining amount ($5,938,018) has been allocated to meet agency specific lapse requirements in Act 32 [the state budget].

The state may qualify for additional bonus payments in FFY 2011-12 and 2012-13. DHS anticipates using any FFY 2011-12 performance bonus award to satisfy 2012-13 lapse requirements authorized in Act 32.
Now, if the Walker folks had all needs covered in Medicaid, maybe this could be OK. But this is not the case, as Walker's DHS has continued to cut the amount paid to BadgerCare Plus providers, putting the program in major turmoil.
Three of the four organizations that manage Wisconsin’s BadgerCare Plus say they’re losing money on the state Medicaid program, and two of those are at least considering pulling out.

The state has cut its payment rate by 11 percent over the past two years as it struggles to balance its budget, and the state Department of Health Services says it’s working to develop rates for next year to make sure adequate options are available.

Nonetheless, UnitedHealthCare is dropping its contract with the state within weeks, and Molina Healthcare Inc. has warned that it may need to do the same, the Milwaukee Journal Sentinel reported. Both say they’re losing millions of dollars on the program because the state isn’t paying nearly enough to cover the claims filed by its BadgerCare Plus patients.
Think using that $24.5 million bonus payment could have helped solve this problem and made the providers happy?

It's shades of this Spring, when the Walker Administration used more than $25 million in federal foreclosure aid to pad the surplus further, instead of using the money to help underwater homeowners and assist in bringing back property values in distressed areas. Between this and the Medicaid bonus money, these 2 moves account for the entire $50 million in above-budget surplus, with nothing gained in return for the vast majority of Wisconsinites. And that doesn't count another $187 million in unanticipated transfers in, nor does it mention the $558 million in debt refinancing that the Walker Administration pulled this year, which will cost taxpayers an exctra $156 million in extra interest costs down the road.

Lastly, this fiscal year isn't off to such a great fiscal start in Wisconsin. This shouldn't surprise you, as the state added a piddling 1,300 private sector jobs for July, August and September combined, and state unemployment rose to 7.3%. The Department of Revenue released its first 3 months of revenue numbers for FY2013 last Friday, the numbers were disappointing.

Income taxes held up, at a 4.9% increase year-over-year, but all other taxes lagged. Sales taxes were up only 0.6% year-over-year. Corporate taxes DOWN 8.7%. Excise taxes down 2.7%, and total taxes only up 2.1%. This is worth noting because the sales, corporate and excise taxes are all below budget, and it'll only take a small leveling off in income taxes for this gap to appear more. The FY2013 already has nearly $600 million in lapses as well as $137 million getting thrown into the Transportation Fund as a gift to the Road Builders for the FY2013 budget. Any revenue gap will quickly make that $342 million "surplus" turn to deficit in the 2-year budget.

So don't be fooled. Even with the Walker Administration's green eyeshade budgeting, which avoids needed services at the expense of better numbers on paper, it still isn't a fiscally responsible budget. And when that becomes apparent early in the next legislative session, watch for the implosion of whatever might be left of the age of Fitzwalkerstan. I just hope there'll be something able to be saved and redeemed by 2014.

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