Thursday, October 13, 2016

A preview of tomorrow's Year-End Wisconsin budget release

Mid-October is a big time for those of us geeks who follow the state budget, because October 15 is the mandated release of the state’s Annual Fiscal Report (AFR). Here’s what last year’s looks like, and the AFR is a big deal because it not only gives bottom line information on the state’s budget situation at the end of the June 30 fiscal year, but it also has statistics on all of these state’s departments and funds as to how many revenues and expenses were accumulated. That information is then used to figure out policy and future budget projections (well, it's supposed to, anyway).

Let’s discuss what components of the Annual Fiscal Report that we’ve seen so far, and put it together with the bigger budget picture.

1.Fiscal Year 2015-16 will start at +$135.5 million, based on FY 2015’s AFR. This gave a bit of space in a 2015-17 budget that was anticipating a near-zero balance when it was passed in July 2015.

2.Total General Fund tax revenues will be just over $15.090 billion, as revealed by the Department of Revenue last month. That’s $117 million less than what was projected in the state budget when it was passed in July 2015, while other state revenues (for the General Fund) are projected to be near the budgeted amount of $539.5 million.

3.Total expenses are expected to be $15.464 billion, nearly $122 million below what was projected in the state budget. Much of this difference is due to the Walker Administration skipping a $101 million debt payment in May (a move which seems to have been unnecessary, as I’ll explain below in item 5).

4.The expense figure assumes over $334 million in lapses, which would be similar to FY 2014’s lapses of $345 million (a fair comparison, since it’s the first year of a budget cycle, without the previous lapses built in). A good chunk of that lapse goal might be met from the Medicaid budget, which is projected to come in nearly $176 million under budget for FY 2016 according to numbers revealed last week (I’ll leave it up to you to determine why that might be).

5.If total expenses after those lapses are accounted for ends up in line with budgeted amounts, the General Fund balance at the end of Fiscal Year 2016 would be $305.5 million. This would be a “surplus” of nearly $170 million for the year, but remember that $101 million of that is because of the skipped debt payment (which we will be paying back plus interest over the next 9 years).

I bet that the Walker Administration will try to spin that the budget is in “great shape” because of this large year-end balance, but remember that not only did we skip a debt payment in FY 2016, we also skipped another $108 million in debt payments in FY2015, so the General Fund balance is inflated by more than $200 million. In addition, this final figure was only made possible due to the massive cuts to the UW System, and a delay in aid payments to K-12 public schools that wasn’t paid until July 2016 (so it falls in the next fiscal year).

Partly because Fiscal Year 2016-17 has that “double payment” to schools, FY 2017 is projected to run a deficit of over $151 million, and we only have around $154 million of breathing room in case of another revenue shortfall for this year (which seems likely given the lower base and the slowing we’ve seen in the Wisconsin and US jobs market).

The AFR also has information about the state’s accounts that aren’t in the General Fund, the biggest of which is the much-discussed Transportation Fund.

6.We will find out how much money was left over in the Transportation Fund at the start of FY 2016, and it’s important to mention the Transportation Fund was nearly $140 million ahead of projections as FY 2015-16 started. The 2015-17 budget assuming a starting point of +$63.8 million, but the 2015 AFR said it was $203.8 million (see page 7 of the Appendix) .

7.Related to that, we will see if the Transportation Fund’s revenues in FY 2016 exceeded the budget’s projections. If so, it would reduce up to $150 million in borrowing for this coming year on a dollar-for-dollar basis, based on a motion passed by the Joint Finance Committee last November.

8.We also get to see the updated figures of other individual funds, and one which will likely receive extra attention is the Veterans Trust Fund, given the articles written last month describing how excess revenues from the Veterans’ Homes were used to plug budget deficits instead of pay for services and repairs at those homes.

I’m sure there will be a few other tidbits to grab from the upcoming AFR, but hopefully this primer helps you be ready for what the media and politicians might say, and what they DON’T say. And maybe you can be able to call BS in real time when the spin starts flying in these last 3 ½ weeks before the election. After all, being able to say “BULLSHIT” in real time is what a lot of this blog is for, right?


  1. Jake, thanks for this background info. It will be very helpful as we review the annual report and consider the spin that comes with that report.
    For what it's worth (and this is an inconsequential matter compared to the other points you made), I'm not convinced the $176 million figure you cited as a Medicaid lapse is the right amount for FY 2016. That was the BIENNIAL estimate as of June of this year, but the DHS budget request increased the estimated under-spending to $260 million for the biennium. If I'm interpreting that document correctly, $154 million of that amount is from FY 2016 and $104 million from FY 2017 (though that's not spelled out clearly).

    1. Jon- you're right, now that I look at it. It is a change in projection, largely due to lower-than-expected health care costs and less use of nursing homes.

      So that probably means the lapse won't be that big, but it'll still likely be quite a bit.

      Keep up the great work at the Wisconsin Budget Project (a great resource if the rest of you 5-6 readers don't already use it).

  2. Well, actually it looks like it'll be coming out on Monday, because of the 15th falling on Saturday. Stay tuned...