Wednesday, May 13, 2015

School funding- the fund-shuffling begins tomorrow

In addition to deciding whether to fully fund Milwaukee Child Welfare services at tomorrow's Joint Finance Committee meeting (click here for a rundown of that), the JFC will talk about several property tax credits tomorrow. These credits not only knock some dollars off of your property tax bill at the end of the year, but they also are the key to the Republicans' claims that they will remove the $127 million cut to K-12 education that's currently in Gov Walker's budget.

And let's talk about that provision that's intended to be traded off for K-12 funding. It deals with the School Levy Tax Credit, which is distributed to communities throughout the state of Wisconsin based loosely on property values and property tax rates, and the Legislative Fiscal Bureau's paper discusses Governor Walker's plans to increase the amount of this write-off.
Increase the distribution amount for the school levy tax credit by $105,600,000, from $747,400,000 to $853,000,000, beginning with property taxes levied in December, 2015. For the December, 2015, credit, pay the entire $853,000,000 on the fourth Monday of July in 2016. Beginning with the December, 2016, credit, pay $105,600,000 on the fourth Monday of the following June, and pay $747,400,000 on the fourth Monday of the following July. Increase the appropriation used to fund the credit by $211,200,000 GPR in 2016-17 ($105,600,000 for the increased payment in July, 2016, related to 2015 property taxes and $105,600,000 for the payment in June, 2017, related to 2016 property taxes). The effect of this provision would be to continue to defer the entire school levy tax credit to the following fiscal year for the December, 2015, credit, but then to start funding the increase in the same fiscal year as the credit is extended beginning with the December, 2016, credit. As a result of this change, the funding needed for the credit would be $958,600,000 in 2016-17, but would decrease to $853,000,000 annually beginning in 2017-18.
Note the timing of the increase, with 2016-17 taking on both years of the credit, which is the only way that the 2015-16 budget can balance in the first place (there isn't $105.6 million to spare in that fiscal year). But even after last week's revenue estimates showed there would be no extra funds to play with over the next two years, JFC Co-Chair John Nygren was insistent that there was a way to make up for that school aid cut.
Republican leaders said there are not plans to touch Walker's property tax cuts. The funding for schools will come from two places, Nygren said: savings in the general fund already accumulated by the JFC through the budgeting process and by making a single payment instead of a proposed double payment to a school levy credit. Making the single payment will free up about $106 million, Nygren said.
But there's a catch with that, and that's because there's no benefit to the 2015-16 budget by turning that double payment into a single one- the money saved is in 2016-17. So the trick is getting an additional $127 million to districts for the 2015-16 school year, without the money being paid in the 2015-16 state fiscal year.

Looking at the LFB alternatives, here's what it looks like WisGOP would do if they wanted to fill the K-12 cut.
Modify the Governor's proposal by deleting the creation of a payment on the fourth Monday of June, beginning in 2017. Delete the provision setting the distribution at $958,600,000 in 2016-17 and $853,000,000 in 2017-18 and thereafter. Instead, set the distribution at $853,000,000 in 2016-17 and thereafter. Delete the provisions related to the settlement of the credits.
This still has the $105.6 million increase in each year for homeowners, with the payments coming out in July 2016 and July 2017. Then they could turn around and give the $105.6 million in extra aid to the schools in July, and not have to charge those funds to 2015-16. But the problem with this is that it either sets up another "double payment" for schools (which raises the base amount for K-12 aid in future years and drives up the structural deficit), or it would also drive up the state's GAAP deficit, which increases the chances for a bond downgrade.

Maybe they don't want to have these delayed payments cause cash flow problems for schools, and risk having their structural and GAAP deficits rise by over $200 million in the next budget, so maybe they'll keep the numbers the same, but change where the money's going to.
Delete the Governor's proposal and, instead, increase the general school aids appropriation for school districts by $211,200,000 GPR in 2016-17. In addition, increase the distribution for general school aid from $4,475,960,500 to $4,581,560,500 in the 2015-16 school year and from $4,584,098,000 to $4,689,698,000 in the 2016-17 school year. Relative to the 2015-16 school year distribution, specify that $105,600,000 be distributed on July 25, 2016, in addition to the $75,000,000 scheduled for distribution on that date under current law provisions. Beginning in the 2016-17 school year, the additional $105,600,000 would be distributed under the payment procedures established under current law.
So instead of the school levy credit, they'd pull the same accounting trick by "double paying" $105.6 million in increased school aids in fiscal year 2015-16. But that also takes away the property tax cut, and raises the structural deficit due to the higher base payments to schools, so maybe that's not what they have in mind.

Anyway, let's see what kind of shifting goes on at tomorrow's meeting with the School Levy Credit, because it'll be the "tell" as to what the GOPs on the JFC and the rest of the Legislature want to do with funding K-12 education. Just make sure you keep your head on a swivel, because this deficit-ridden budget is requiring a whole lot of sleight-of-hand to make the numbers anything near workable.


  1. The hypocrisy is amazing with those that said they hated the budget games when Doyle was the gov.

  2. By the way, the JFC is skipping discussion on this today, and will wait till they discuss K-12 funding later in the budget process.

    And yes, ippons, the hypocrisy of the GOP's act is very obvious. Remember when Walker ran as a guy promising honest budgeting, no more shifting of money, and balancing the budget via GAAP numbers? HILARIOUS!