Tuesday, February 7, 2017

The super duper 2017-19 buget preview!

Here are a few items that come to my mind when we look ahead to tomorrow's release of Scott Walker's proposed 2017-19 budget for Wisconsin. Obviously, there's a lot in a document that is well over 1,000 pages, but a few specific items have been revealed, and let's look at a couple of those. And just as importantly, let's go into what hasn't been revealed.

1. Public education- I discussed this in detail yesterday, but there's more coverage today on how the $509 million in added funding will be in the form of per-pupil aid instead being put into the general equalization aid formula. This definitely seems to indicate more of a "haves and have-nots" scenario for state funding than State Superintendent Tony Evers was looking for, and I'll be interested in seeing how this is balanced with the tight revenue limits that have prevented schools from investing over the last 6 years. Given that Walker mentioned into today's Journal-Sentinel article that he still plans to trick the rubes stick with "lower property taxes on schools" as a 2018 talking point, it still looks like a lot of Wisconsin's public schools will be struggling to get by, and let's see what gets modified out of this proposal.

2. DHS and Children's Services- Walker today promised to add tens of millions of dollars to eliminate the wait list for long-term care in Children's Services at the Department of Health Services. In addition, Walker told the Wisconsin Counties Association that payments would be raised for providers in nursing homes, as well as foster care services and other caregivers.

This is great news if true, but I'm wondering where it's coming from. Is it "cashing in" savings from lower-than-expected Medicaid expenses for this year (projected to be $312.5 million for the 2015-17 biennium)? Or is it counting on some kind of huge savings from new poor-bashing "pee-in-a-cup and look for nonexistent/crappy jobs" restrictions on FoodShare? Or is he counting on some kind of bailout from Congress with higher funding from Medicaid block grants? Seems like a lot of moving parts here.

3. Transportation- Walker hasn't said a thing in the last week about how he will handle the $880 million deficit in the Transportation Fund, other than insisting on this fantasy.

If we believe that the boosts to K-12 education and Health Services are coming from the increased revenues in the General Fund, then there's no source of General Fund money to pay for the roads. The DOT budget request already contained sizable cuts and multi-year delays to major projects, and it still included an additional $500 million in borrowing. Now combine that with the brutal Legislative Audit Bureau report which showed billions in cost overruns and a lack of budgeting for inflation in projects, and it is likely that the DOT deficit is well over $1 billion in the real world of we want to complete these projects as listed in the budget request.

So does this budget have more cuts to projects? Some magic fee/tax increase that Walker will insist isn't a fee or tax increase (and therefore stay on the good side of DC lobbyist Grover Norquist)? Or will there be some kind of ability for local communities to raise their own revenues, which would take the state off the hook from giving more state aid to help pay for those street repairs? Or again, will this budget count on a bailout from DC in the form of some kind of large Trump infrastructure package financed by deficit spending?

4. UW System- Nico Savidge had an update this afternoon in the Wisconsin State Journal, and it looks like Walker's going to throw additional money in here as well, both in possible funding, and in cutting tuition for in-state students in 2018.
With $42.5 million in performance funding, $11.6 million in new money for UW employee pay and the restoration of $50 million that was lapsed from the System's funding in the last budget, Walker's proposal would increase state funding for higher education by more than $100 million.

“Our investment today ensures student success by making college even more affordable, providing greater opportunities for students to earn their degree, and helping to bridge the gap between higher education and our workforce," Walker said in a statement. "We want our students to fuel the growth of our economy.”

The governor's budget calls for keeping UW tuition frozen in the first year of the budget, then cutting it by 5 percent for the 2018-19 academic year, a spokesman said. The proposal includes $35 million in new funding to pay for the tuition cut.

Walker estimates the cut for Wisconsin undergraduates would save UW students $360 per year on average; at UW-Madison, it would reduce tuition by about $500.
The tuition and pay incentives sound great- if we have the money to do it. Color me skeptical on that one, and this level of funding would still put the UW below the amount of state funding it was at in 2013, which isn't really the way to stay competitive in the 2010s, now is it?

Even more concerning is what this "performance funding" is going to be based on? Is it going to be on shoving through underprepared students? Turning the System into UW-Tech where producing medicore drones for business needs come first, and research and critical thought come second? And who decides on what those performance measures? Academics or WMC/Koch/DeVos types? That's why I am always skeptical of "performance funding" for public colleges, because it's frequently from people who don't value higher education other than as a diploma mill.

5. The most important question of all- Where IS the money coming from to pay for all of this? Sure, we got a nice upside surprise on revenues from the Legislative Fiscal Bureau 3 weeks ago, but even if I plug those figures in, we still barely have enough to pay for all funds that were originally requested from state agencies.

2017-19 budget, proj revenues, expense requests
2017-18 Starting balance $427.2 million

2017-18 taxes $16,033.4 million
Gaming, other revs $475.2 million

2017-18 net appropriations $16,613.9 million

2018-19 taxes $16,616.0 million
2018-19 Gaming, other revs $443.5 million

2018-19 net appropriations $17,257.0 million
Required Reserves $75.0 million

And remember, many state agencies followed Walker's orders for "0% increase" budgets over the next 2 years, despite projections that prices will rise by nearly 5% between now and 2019. Are those places going to suffer as a result? Let's also not forget that departments like Corrections and Public Defenders asked for sizable increases to pay for their expected increase in needs and workloads in the coming years. Is Walker going to pay for that as well? Or is he going to continue to underfund these places and set up the next Lincoln Hills or King Veterans Home scandal (haven't heard Scotty talk about that recently, have we)?

Or will we see some kind of "special savings" related to tomorrow's meeting of the Group Insurance Board where a new health plan for state employees could be agreed to for 2018 a couple of hours before Walker's budget address. This would set up a typical Walker "divide and conquer" cynicism move where state employees will be asked to take another cut to their take-home pay and benefits, and Walker then trying to set up the state employees as the bad guys that prevent corrections of past Walker mistakes added funding from occurring.

That's the shot I am calling tonight- I bet this magic money will come the same way Walker "saved" money when he first came to office- by stealing it from the pockets of state employees. Sure, reinvesting those savings into more funding for K-12 schools and other services beats blowing it on tax cuts for the rich. But this is pretty much the only way that these magic funds can appear. Get ready for it folks.


  1. I'm expecting a change in the health plan for state employees as well. Those outstate are the ones that will really feel the pinch, I bet, but there will be plenty of market disruption even here in Dane County. Oh, but that's not something that will affect the legislators. Or Walker. Look for savings in road construction and repair costs, too, as substandard work becomes the norm without PLAs.

    1. The health care plans and phantom savings are right out of Walker's Milwaukee County playbook- a pose that won't become reality. And the loss of jobs in the health care industry would be a massive problem for the state's finances, likely more trouble than its worth.

      They'll try PLAs as a gimmick, but I somehow don't think they'll save much, and the long-term costs in lower wages and substandard roads won't even make it fiscally worthwhile.

      But when has stupid fiscal moves stopped the WisGOPs before? Especially when it can cut wages of workers, right!

  2. Our debt service is considerably higher and getting higher still. Our revenues seem to be built on some squishy numbers. And our Governor says we have lots of money. hmmm

    A 0% budget simply isn't reasonable for state agencies without significant cuts to GPR programs. A decade ago near the end of the Doyle Administration, there was fat to cut. Agencies had open positions they could drop - things like that. Those margins are long gone.

    And we can't just cut across the board. Dropping services which are self-supporting doesn't reduce the tax burden, and some of those programs are funded with grants. Dropping them would actually amount to a loss of money coming into the state.

    I suppose with the baby boom retiring and being replaced by younger, cheaper workers who will most likely not stay around long enough to get vested in the WRS, there might be some wiggle room opening up there.

    I'm not entirely sure how that dynamic might impact the WRS long term.

    I don't know what to think of the insurance situation. I'm sure they could force the costs down some by jacking up the copays and cutting back on covered services, but I'm unclear how that would impact areas where the insurers and providers are under the same company. Dean, GHC and others.