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Agency Requests Underscore Wisconsin’s Budget Challenges

2:11 pm in Uncategorized by WI Budget Project

A dollar being cut with scissors

Wisconsin agencies need more money, but the state budget faces serious shortfalls.

Most state agencies have submitted their budget requests for Wisconsin’s upcoming 2015-17 budget. These requests are worth taking a look at because they can give some insight into Governor Walker’s priorities for the next budget. The requests can be found here, on the Department of Administration’s website.

Back in July, Governor Walker told state agencies that their 2015-17 budget requests should assume that there will be zero growth in General Purpose Revenue (GPR) appropriations. (He did carve out a few exceptions to that rule.) But nearly all the major agencies that have submitted requests so far requested at least modest increases in funding. The growing tab for these requests helps illustrate the significant challenge of balance a budget at a time when the state is expected to needs almost $1.8 billion of revenue growth just to provide flat funding.

One agency, the Department of Health Services, has indicated that it will require a big boost in spending to pay for health care for people with low incomes: $760 million over two years. Part of the added cost comes from the fact that the federal government  decreases the share it pays of the state’s Medicaid program as Wisconsin’s economy improves.  It’s unclear from the DHS document whether they are seeking a $760 million increase in General Fund spending or plan to make  to make very large Medicaid cuts to offset the increased costs.

The new Medicaid cost projections make it clearer than ever why Wisconsin should accept the federal funding for expanding BadgerCare coverage, which the Fiscal Bureau estimated could save as much as $300 million in the next budget period.

Other budget requests include:

  • No increase in GPR for the Wisconsin Economic Development Corporation, the state’s lead economic development organization;
  • An increase of 1.9% GPR, or $45 million, for the Department of Corrections, with few large new initiatives proposed;
  • A 6.1% increase in GPR for the Department of Justice;
  •  $95 million in new GPR for the University of Wisconsin, to “fund a new plan to create jobs, boost graduation numbers, and deal with a tuition freeze;” and
  • A 10.1% increase in GPR for the State Public Defender Board, which includes funding for a pay raise for public defender attorneys, and an increase in the rate paid when the agency contracts with outside attorneys for services.

Not all state agencies have submitted their complete budget proposals at this point. In particular, the Department of Public Instruction has submitted a budget request that covers school safety and technology, but doesn’t plan to submit the request related to school funding until later this fall. DPI’s initial request asks for money to support a new school safety center, which would provide guidance to schools on school violence and emergency preparedness. DPI has also asked to provide additional funding directly to districts to support programs and activities that prevent school violence and protect students.

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Wisconsin Budget Compounds the Economic Challenges for Low-Wage Workers

11:46 am in Uncategorized by WI Budget Project

The underside of the Wisconsin Capitol Dome

How Wisconsin’s budget cuts hurt workers.

Workers in Wisconsin and across the U.S. must still cope with a relatively weak labor market.  That is especially challenging for low-wage workers who are struggling with the declining value of the minimum wage, reductions in employer benefits like health care, and growing inequality. Those challenges are exacerbated in Wisconsin by budget decisions made by state lawmakers.

A new Wisconsin Budget Project issue brief examines how the how state budget choices are affecting low-wage workers in Wisconsin.  It focuses primarily on the effects of the new budget bill, but also examines a few instances of how that bill continues or compounds the challenges for low-wage workers caused by the 2011-13 budget.

Some of the major effects include the following policy choices relating to health insurance, child care, taxes and unemployment insurance:

Making health insurance and care much more expensive for many parents now in BadgerCare

The 2013-15 budget bill cuts in half the income eligibility ceiling for adults participating in BadgerCare – reducing that cap from 200% of the federal poverty level to just 100%.  That change is expected to cause nearly 90,000 low-income parents and about 5,000 childless adults to lose their BadgerCare coverage, beginning in 2014.  The good news is that Wisconsin is extending coverage to about 80,000 childless adults below the poverty level, but the decision to cap eligibility at that level and turn down enhanced federal funding from the health care reform law means that a single individual with a minimum wage job is ineligible for BadgerCare if he or she is working 30 or more hours per week.

The issue brief analyzes the effect of the budget for a single mother who has two children and an income of $11 per hour (and currently has now BadgerCare premiums and minimal copays).  Beginning in January, when she loses her BadgerCare coverage, she will have to buy insurance through the new Marketplace and will have to pay premiums of about $460 per year and will have significant co-pays and deductibles, which could be as much as $2,250 per year.

Charging premiums for parents in Transitional Medicaid

The state is now seeking a federal waiver that would not only restrict eligibility for BadgerCare, as described above, but would also change another form of Medicaid, known as Transitional Medical Assistance (TMA) by initiating premiums for parents between 100% and 133% of the federal poverty level. If that waiver is approved, parents who climb above the poverty level would struggle to be able to regularly pay the premiums and many are likely to lose their insurance coverage.

Additional cuts in child care subsidies – adversely affecting accessibility and affordability of care

The budget cuts an additional $31 million over the next two years from the Wisconsin Shares child care subsidy program for low-income working families (on top of large cuts in prior years).  Although that cut reflects the estimated cost of maintaining the status quo, it is likely to adversely affect many low-wage workers by causing more child care providers to drop out of the subsidy program and by indirectly increasing co-pays for parents participating in Wisconsin Shares.

Continuing last session’s tax increases for low-income households                                                         

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Ten Reasons Why Wisconsin’s Budget is “Robin Hood in Reverse”

9:14 am in Uncategorized by WI Budget Project

For more information, go to www.wisconsinbudgetproject.org.

In a long Q & A format interview in the Capital Times, I described a number of faults of Wisconsin’s 2013-15 budget bill. One of the defects I mentioned in that interview is that the bill employs a “Robin Hood in reverse” strategy for allocating resources. Because the article doesn’t provide much explanation of the reasoning behind that charge, I feel obligated to elaborate.

Actually, I think there is a very broad range of reasons for concluding that the recently enacted budget shifts resources from the poor to the rich:
March 5, 2011
1) Diverting federal block grant funds for low-income families – The bill siphons off funding from the federal block grant known as Temporary Assistance to Needy Families (TANF) and indirectly uses those funds to build up the state’s surplus, which helped lawmakers enact larger income tax cuts that primarily benefit the wealthy.

2) Cutting funding for the welfare to work program, despite a sharply rising caseload – Although the shift in TANF block grant funding assumes a one percent per month decline in participation in the welfare to work program known as Wisconsin Works, or W-2, enrollment has actually risen substantially in the first six months of 2013 and was 8% higher in June than the budget assumed.

3) Cutting $31 million from the funding for child care subsidies – The budget bill cuts the Wisconsin Shares child care subsidy program by $31 million over the next two years and squanders an opportunity to use the savings to make long overdue investments in the quality of early education.

4) Adopting a large package of tax cuts that excludes hundreds of thousands of taxpayers – One fourth of income tax filers in Wisconsin won’t benefit at all from the $651 million of income tax cuts in the budget, and over half the benefit of those cuts will go to people making over $100,000 per year.

5) Cutting taxes for the wealthy in a way that creates a deficit that will affect all Wisconsinites – Because the budget bill uses a short-term surplus for an ongoing income tax cut, it creates a budget hole or “structural deficit” of about $500 million at the outset of the 2015-17 biennium.

6) Removing more than 90,000 adults from BadgerCare – The bill cuts in half the income eligibility ceiling for adults participating in BadgerCare, which is expected to cause nearly 90,000 low-income parents and about 5,000 childless adults to lose their BadgerCare coverage.

7) Resurrecting changes that could cause 29,000 children to lose BadgerCare coverage – The budget revives proposed changes to BadgerCare that were withdrawn early in 2012 and were projected at that time to cause about 29,000 low-income children to lose their coverage if or when those policy changes are approved by federal officials.

8) Tightening eligibility for unemployment insurance benefits for jobless workers – The bill makes a number of changes in the rules relating to unemployment insurance, such as increasing the work search requirement and making it easier for employers to dismiss workers without having to pay them UI benefits.

9) Making it more difficult to qualify for federal Food Share benefits – The budget bill re-imposes a work requirement for many able-bodied adults participating in the food stamp program, known as Food Share, which is estimated to cause 31,350 Wisconsinites to lose $71.9 million of federally-funded benefits for food purchases.

10) Shifting K-12 education increases away from equalization aid – Because relatively little of the modest amount of new funding for K-12 education is being distributed through the equalization aid formula, the budget bill undermines the longstanding goal and constitutional requirement to equalize opportunity for all students.

Although there are also a few positive measures in the biennial budget, on balance the bill shifts resources from Wisconsin’s neediest residents to those who are well off. At a time of increased poverty and a widening gap between the rich and the poor, the new budget bill will almost certainly widen that gap even more.

Jon Peacock
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Wisconsin’s Federal Funds Conundrum: Inconsistent Approaches Undermine Arguments about Sustainability

8:00 am in Uncategorized by WI Budget Project

Short-term Federal Dollars Build up the Balance Used for Permanent Tax Cuts 

The underside of the Wisconsin Capitol Dome

More bad budget choices in Wisconsin.

I find it very puzzling how state lawmakers decide if they will accept federal dollars and how they explain their choices.   State budget writers routinely accept many sources of federal funds, such as highway dollars, yet they question the sustainability of other sources – such as the enhanced Medicaid funding that would actually save Wisconsin taxpayers $119 million during the 2013-15 biennium.  At the same time, other much less reliable sources of federal funds are being used to generate lapses to the General Fund, thereby helping increase the size of the permanent tax cuts in the budget bill.

These inconsistencies in how lawmakers decide what to do with federal funding are timely this week because the Joint Finance Committee votes tomorrow on a plan for using lapsed funds (including a couple of federal funding sources), and because of the recent news about the state’s decision not to fully utilize additional federal dollars that could bolster employment services for people with disabilities.

The Center for Investigative Journalism reported last week that the state is forgoing federal funds that would enable it to serve most of the more than 4,000 people with disabilities who are on a long waiting list for employment services.   They pointed out that a Legislative Fiscal Bureau analysis concluded that Wisconsin could get an additional $14.2 million in federal funds over the next two years if it were to come up with a $3.9 million match.  According to Mike Greco, Administrator of the Division of Vocational Rehabilitation (DVR), “If we did receive our full state match we could work with another 3,000 individuals.”

When the issue was debated in the Joint Finance Committee (JFC) in mid-May, the chief argument used against drawing down all of the federal money seemed to be very similar to the primary justification for not taking the enhanced Medicaid funds.   The Center’s article reports that Rep. Dean Knudson (R. Hudson) said the JFC decision was based on “protecting Wisconsin citizens from potential further reductions in federal funding.”

That line of reasoning hasn’t been applied to all sources of federal funds (which comprise 28% of the 2013-15 state budget).  On Thursday the JFC finally has an opportunity to vote on the Walker Administration’s plans for lapsing certain state and federal dollars to the General Fund (a couple of weeks after those lapses occurred).   The lapses include at least two short-term sources of federal funding, the largest of which is an additional transfer of federal performance bonus funds that the state earned for the success of BadgerCare in increasing the number of children participating in Medicaid.  The additional $8.36 million of bonus funding being lapsed brings the total to $47.8 million during the 2011-13 biennium (versus $8.76 million of that federal funding used to help finance Medicaid costs).

Those lapses and others have added to the General Fund balance of more that $600 million that the state estimated it would have at the close of the state fiscal year on June 30, 2013, which helped make it possible to increase the size of the income tax cuts in the recently enacted budget bill.   Keeping in mind that the federal bonus funding ends later this year, the state is essentially using a federal revenue source that it knows will soon end to help pass permanent tax cuts – even as state policy makers argue that we shouldn’t accept federal dollars that might hypothetically be reduced at some future date.

Another example of that is the way the state has been shifting federal TANF block grant funding to the Department of Revenue to free up state General Fund dollars that had been financing the Earned Income Tax Credit.  That maneuver (explained in more detail here) will eliminate all or almost all of the $80 million TANF balance – thereby using a one-time source of federal funding to build up the state General Fund balance and make the income tax cut easier to pass, despite the fact that it creates a gap between ongoing revenue and ongoing expenditures (i.e., a structural deficit).

In comparison to those federal dollars, which conservative state lawmakers are happily using for an ongoing purpose – even though we know those sources of federal funds will soon end, the additional federal funding for employment services look quite secure, and it would have a far more concrete payoff.    As I said at the outset, I find these choices very puzzling.

For more, go to www.wisconsinbudgetproject.org

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Wisconsin Budget Continues Trend of Shifting Resources to Transportation Programs

11:55 am in Uncategorized by WI Budget Project

LFB Memo Shows Budget Shifts up to $383 Million from Intended Purposes 

A Wisconsin Highway

Is Wisconsin shifting too much money to transportation?

When Scott Walker was running for office three years ago, he vowed to “end the practice of raiding segregated state funds to pay for other programs.”  Walker added, “If taxpayer revenue is collected for a specific purpose such as building and maintaining roads, it should be used for that purpose and that purpose only.”

What constitutes a “fund raid” is a subjective matter, which seems to depend in part on the beholder’s opinions about the importance of the funding being shifting or “raided” and also on how that funding source is labeled.  Putting semantics aside, the nonpartisan Legislative Fiscal Bureau prepares a summary of budget provisions that shift sources of revenue with the intent of using those funding sources “for purposes other than those for which the fund has traditionally been used.”  A Fiscal Bureau memo issued in mid-June tallied 14 such funding transfers, which authorize the shifting of up to $383 million.

Here are the biggest transfers in Wisconsin’s 2013-15 budget, which was signed by the Governor last month:

  • $133 million transfer from the General Fund to the Transportation Fund. This move is in addition to a one-time transfer of $125 million from the General Fund to the Transportation fund in the 2011-13 budget;
  • Up to $76 million in potential lapses from program revenue appropriations of state agencies to the General Fund. This lapse actually replaces a larger lapse that was passed in the last budget and was scheduled to go into effect in the 2013-15 budget;
  • Up to $50 million in interest-free loans from other funds to the Unemployment Reserve Fund. The federal government requires that employers pay additional taxes into the Unemployment Reserve Fund if the balance drops below zero. Loaning money to the Unemployment Reserve Fund from other funds would keep taxes low for employers, but also reduce future resources for the state’s jobless workers;
  • $58 million from University of Wisconsin System’s reserves to the Higher Education Aids Board, swapping out an equal amount of GPR. This move by the Legislature came as a reaction to the news that the UW System had accumulated significant reserves despite a reduction in state support. This transfer is designed to draw down the UW System’s reserves; and
  • $32 million from the Petroleum Inspection Fund to the Transportation Fund.

This Legislative Fiscal Bureau memo has more information on additional fund transfers. The memo does not include past transfers that have been established in current law. For example, the 2011-13 budget required that 0.25% of General Fund tax collections be transferred to the Transportation Fund each year, a which results in a loss of about $71 million a year for the General Fund.

One thing that stands out about these fund transfers is that the Legislature is continuing a trend begun in the 2009-11 budget of beefing up the Transportation Fund at the expense of the General Fund. This results in fewer resources for Wisconsin’s public schools, communities, and health care, and more resources for highways. (Our May 2013 blog post, “People Are Driving Less, but Wisconsin Still Emphasizes Highway Spending,” questions whether Wisconsin should continue its focus on new highway construction given changing trends in transportation.)

Some legislators justify shifting resources from the General Fund to the Transportation Fund by pointing to transfers made in the other direction in the past. But over the past 12 years, transportation programs have had a net gain of more than $300 million from transfers. That means that the Legislature has more than made up for past transfers away from transportation programs. Additional transfers move resources away from the purpose for which they were originally intended.

For more, go to www.wisconsinbudgetproject.org.

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Wisconsin Budget Becomes Law, with Minor Vetoes from Governor

11:19 am in Uncategorized by WI Budget Project

For more information, go to www.wisconsinbudgetproject.org.

The underside of the Wisconsin Capitol Dome

The Walker Budget and Vetoes revealed.

Governor Walker signed the 2013-15 Wisconsin budget into law yesterday, using his veto power to make mostly small changes to the budget. His 57 vetoes included deleting the following provisions from the next two-year budget:

  • A measure that would allow a limited number of schools participating in the school voucher program to accept students who would not have counted against enrollment limits for the statewide school voucher expansion. Governor Walker said he vetoed this provision because “permitting private schools in some districts to accept pupils outside of the cap is beyond the scope of the expansion and may have unintended consequences.” Still included in the budget is a statewide expansion of school vouchers. The expansion limits the number of students who can participate in the program outside of the Milwaukee and Racine districts, which already had the voucher program. Advocates for public education have pointed out that limits on participation in Wisconsin’s school voucher program have been short-lived in the past, as the Legislature has gradually lifted the restrictions and expanded the program.

 

  • A measure that would extend the tuition freeze at the University of Wisconsin to fees paid by students, but exempt differential tuition, which is tuition assessed above the overall tuition rate to support institutional or program initiatives. Governor Walker said he is allowing students fees to increase because he supports “vesting responsibility for the disposition of fees that support student activities with the students at each University of Wisconsin institution or college campus.” He is extending the tuition freeze to differential tuition because he “supports the goal of keeping higher education affordable.”

 

  • A requirement that if the state sells property, the proceeds from the sale should first be used to redeem debt supported by the same funding source as the property being sold. In his veto message, Governor Walker said he opposes limiting the discretion state agencies would have in deciding which public debt to retire. His veto means that the state could sell property purchased with dollars from the General Fund, and use the proceeds to retire debt backed by the Transportation Fund.

 

  • A $250 million reduction in general obligation issuance. Although he vetoed this measure, Governor Walker said he agrees in principal with the reduction in bonding, and has directed the state Department of Administration to make such a reduction. However, his veto means that the reduction will not be written into statute.

You can read the Governor’s veto message and more about his vetoes here.

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Wisconsin’s Diversion of Funding for Low-Income Families Is Based on Faulty Assumptions

10:52 am in Uncategorized by WI Budget Project

New Stats on W-2 Participation Contradict Rosy Assumptions in JFC Budget

The underside of the Wisconsin Capitol Dome

Will Wisconsin legislators help the people or the wealthy?

When legislators take floor votes this week, they will decide whether and how much to cut spending for the Wisconsin Works (W-2) program, which aids unemployed low-income families, and whether they divert the savings to use for things like tax cuts for the wealthy.  The arguments that state budget writers have used to support a W-2 cut are running up against some very inconvenient facts that contradict the Joint Finance Committee’s assumptions.

As I’ve written on other occasions (such as this blog post), the budget bill’s cut in W-2 spending is part of a strategy that siphons off money intended for low-income families – in order to free up General Fund dollars to use for other purposes, such as the proposed income tax cut.

The spending cut was based on the assumption that W-2 participation would decline steadily, beginning well before the start of the new biennium.  Sometime in the last few days, DCF posted data online that contradict the rosy assumptions about declining W-2 participation.  When the Joint Finance Committee (JFC) acted, we only had W-2 data through March.  Now we have two more months of data, and here’s a synopsis of the gap between the rosy assumptions and reality:

  • The budget proposed by the Governor assumed that W-2 participation would decline by 1% every month, starting in January 2013.
  • By the time JFC reviewed the funding for W-2 and other TANF-funded parts of the budget, W-2 participation had climbed by 7.2% relative to the December 2012 level, and the average cost per case was also higher.
  • Those facts prompted JFC to reduce the cut in TANF funding for W-2 to $13.4 million, instead of the $31.7 million cut recommended by the Governor.  However, the reduced cut is based on the very optimistic assumption that the number of families receiving W-2 benefits would decline by 1% every month, starting in April.
  • New data for April and May show that W-2 participation did not decline by 2% during that period, it rose by more than 6% – putting the May W-2 participation 8.4% higher than the level that the JFC budget assumes!

A new Wisconsin Budget Project issue brief explains the widening gap between budget reality and the overly optimistic assumptions about W-2 participation.  It analyzes the very substantial fiscal consequences of several somewhat less optimistic scenarios.  Here are two of those alternative scenarios, which might still overestimate the change in the current upward trend:

  • Even if W-2 spending drops by 1% per month – but that decline starts in July from the current, increased level – W-2 spending would be almost $15 million higher in 2013-15 than the JFC budgeted for W-2.
  • In the more likely event that the participation is essentially flat (or gradually levels off before eventually declining to a point where the 2013-15 average is equivalent to the May figure), W-2 spending would be nearly $37 million higher in 2013-15 than the committee proposed.

The fiscal problem this creates could be resolved very easily by not siphoning off TANF block grant funding to free up General Fund dollars for purposes such as tax cuts.  The budget increases that diversion of TANF funding by almost $19 million per year (on top of a $27 million per year increase in the previous biennium).

Legislators have a fundamental choice to make.  Are they going to use TANF funding for the purposes for which that block grant is intended, or are they going to divert as much as possible to maximize the size of income tax cuts that predominately benefit people making more than $100,000 per year?

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In Wisconsin, Budget Maneuvers Mask the Size of the State’s Future Budget Challenges

8:18 am in Uncategorized by WI Budget Project

Wisconsin is expected to begin the 2013-15 budget period with a solid General Fund surplus, estimated to be about $670 million; however, new figures from the Legislative Fiscal Bureau (LFB) indicate that the biennial budget recommended by the Joint Finance Committee would leave the state with a potential deficit of $505 million in the following biennium.  And that calculation doesn’t include several budget maneuvers that make the state’s deferred fiscal challenges more difficult than the LFB analysis suggests.

The underside of the Wisconsin Capitol Dome

Will Wisconsin follow its own rules for fiscal responsibility?

The effect of what the LFB often refers to as a “structural imbalance” is that state policymakers will need to use the first $505 million of revenue growth in the 2015-17 budget simply to provide flat funding for existing programs, before addressing any spending needs relating to inflation, increased numbers of people served, or filling gaps in services.  In short, the budget hole helps illustrate that the magnitude of the proposed income tax cuts undermines the state’s future by making it much harder to invest in public services, such as neighborhood schools, which are critical to the state’s economic growth.

Although the LFB memo indicates that the state has regularly faced larger deficits over the last decade or two, that doesn’t provide much comfort – considering that the state has also had to make many very difficult budget cuts and enact tax increases during that period.

Two years ago, when Governor Walker pushed through deep budget cuts, he argued that those tough choices were needed to get the state’s fiscal situation back into the black and put an end to structural deficits.   Regardless of whether you like the strategies the Governor used to get the state out of the red, there’s no denying that the large cuts in spending had the effect that state policymakers weren’t facing a structural deficit as they tackled the state’s 2013-15 budget.

The proposed budget contains several measures that affect the projected structural deficit in 2015-17 – superficially making the state’s fiscal challenges appear smaller.  As I noted in a March blog post, one maneuver that holds down the structural deficit is that the state once again postpones the implementation of a statutory requirement to increase the minimum reserve that state budget writers are required to set aside as cushion, in the event of unanticipated revenue reductions or spending increases.

The current requirement for setting aside a minimum of $65 million was supposed to increase to 2% of General Fund spending in 2017.  That would require setting aside more than $300 million in the 2017-19 budget – an increase of at least $240 million compared to the current minimum reserve.  However, for the second straight budget Governor Walker proposed postponing that long overdue progress toward responsible fiscal policy.  Delaying that increase until the 2019-21 budget seems to be motivated by a desire to avoid a $240 million addition to the Fiscal Bureau’s structural deficit calculation.

The apparent structural deficit was also reduced by what was little more than an accounting maneuver contained in the omnibus motion unveiled and approved in the wee hours of last Wednesday morning.  One of the elements of that motion moves mass transit aid back into the Transportation Fund (instead of shifting it into the General Fund budget), yet the bill makes a two-year commitment to finance it with $108 per year from General Purpose Revenue (GPR).

Those changes mean that maintaining flat funding for transit aid would require a $216 million increase in Transportation Fund spending in the 2015-17, and the LFB has now reduced the projected General Fund structural deficit by that same amount.  Of course, in the next session there will be tremendous pressure to again use General Fund dollars. In short, the last minute change relating to financing of transit aid might have had other motives, but it served as a clever and deceptive way of masking the size of the structural deficit – which without those accounting changes would have been $216 million higher.

I think a similar but smaller problem is created by the changes to the UW System budget, which rely on reserve funds instead of the increased GPR support that the Governor had initially proposed.  I presume that at some point in the not-too-distant future it won’t be feasible to keep tapping reserves for those purposes, and the UW system will then have holes to close in its budget.  I’m sure the LFB is correct that this short-term solution to the UW System budget doesn’t technically count toward the 2015-17 structural deficit, but at some future date it will add to the fiscal challenges faced by state budget writers.

The structural deficit that the state will face in the 2015-17 isn’t nearly as bad as some others created by state policymakers and/or unanticipated slowdowns in revenue.  However, the combination of that budget hole and promises some lawmakers have made to keep cutting taxes could result in very austere times ahead for education and other important state investments.

For more information, go to www.wisconsinbudgetproject.org 

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Should We Keep the Sausage-making out of Sight in Wisconsin?

9:36 am in Uncategorized by WI Budget Project

Marathon Back-room Negotiations Minimize Legislative Debate and Public Input  

Sausage grinding

Keep that unsightly lawmaking to yourself!

It is sometimes said that people who like laws and sausages shouldn’t watch either being made.  If that’s true, I suppose an argument could be made that GOP leaders were doing us a favor by spending the bulk of the day Tuesday in behind-closed-doors budget negotiations, before resuming the Finance Committee deliberations long after most Wisconsinites had gone to bed.  (Before I elaborate, I hope that any producers of quality sausages will forgive me for the comparison to lawmaking.)

The back-room negotiations Tuesday and in the preceding days weren’t simply about the major unfinished areas of the budget, such as K-12 education issues and tax policy.  As is all-too-frequently the case, the majority party also put together an omnibus catch-all motion that takes items from the wish lists of many legislators.

This sort of motion significantly reduces transparency in the budget process, especially since these measures often appear out of nowhere in the last hour of the Finance Committee’s work, and sometimes receive little public or legislative scrutiny over the remainder of the budget process.  And in some cases we don’t even learn who submitted these items for inclusion in the broad, catch-all motion.  In addition, many of them are non-fiscal policy items that have gotten little or no debate and have no business being in a budget bill.

To some extent this wrap-up motion, which has become a regular Christmas tree tradition at the end of the Finance Committee’s deliberations, serves as a way to get recalcitrant legislators on board the budget and to minimize the possibility that the majority party needs to allow passage of any amendments later in the process.  However, the wrap-up motion also appears to be used by legislative leaders as an easy way to make non-fiscal policy changes that are on their own legislative agendas, without the bother of introducing and passing separate legislation.

In the wee hours of Wednesday morning, JFC members received a 12-page “budget modification” motion, with 37 different items.  It was approved a little before 6:00 a.m., apparently with little debate among the exhausted committee members.  By that point the package had grown to 40 items after Democrats tacked on three relatively trivial measures of their own (such as making kringle the official state pastry), before voting against the motion.  As is typically the case, the motion was approved on a party-line, 12-4 vote.

In a WCCF blog post today I summarize many of the non-fiscal policy measures that were added by the wrap-up motion.  It’s a very diverse list of legislative proposals.  I think only a couple of them had even been floated prior to Wednesday, such as the very controversial proposal for authorizing bail bond agents, which has been widely criticized by criminal justice experts.  Many of the others came out of the blue, such as requiring UW to sever ties with the Center for Investigative Journalism, establishing a much shorter period for a payday loan to be overdue before it is considered to be in default, making retroactive changes in product liability laws to restrict litigation, defining the location of the former Lake Michigan shoreline in Milwaukee, and removing a restriction on when cable companies can disconnect service.

When the bill gets to the floor of the legislature, there will be lots of complaints from Democrats about some of the non-fiscal policy measures, citing both substantive concerns and the procedural ones I raised here.  However, they don’t have the moral authority to argue persuasively about the procedural concerns because both parties have been guilty of this practice over many sessions.  That’s one of the reasons why members of the public have to demand an end to this misuse of the budget process, because we’re the ones who get left out and who will have to raise our voices collectively to make reforms.

The admonition that we might not want to watch laws or sausages being made isn’t relevant if we’re using high quality standards or, alternatively, if we find the end product distasteful.  When the end result of the budget process includes an unsavory collection of special interest measures that reflects poorly on our state, it’s time to pay attention and demand reforms in this sausage-making.  A great place to start would be to keep non-fiscal policy out of the budget – at all stages of the process.  And I think almost all of us can agree that not taking votes between bar time and breakfast would also be a major improvement.

For more information, go to www.wisconsinbudgetproject.org.

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State Lawmakers Should Match Their Rhetoric by Making the Tax Cuts Help More People

11:53 am in Uncategorized by WI Budget Project

Gov Scott Walker

Does Scott Walker really want to help low income families?

I was surprised to read the following statement in a message that Governor Walker recently distributed via e-mail and tweet:   “Including a tax cut in the 2013-15 budget will help those hit hardest by economic difficulties get back on their feet.

It’s a great sentiment and I’d like to applaud the Governor for expressing it, but unless he’s working on a new tax cut plan that he hasn’t unveiled yet, it’s far off the mark.  I think that if you took the Governor’s statement and changed “will” to “should,” there would probably be broad agreement in the goal of helping those hit hardest by the recession.  And if lawmakers can agree on that goal, they should start working on passing a budget that will achieve it.

As it stands now, the Governor’s tax plan does little or nothing to help Wisconsin workers who are unemployed, working in minimum wage jobs, or working sharply reduced hours because of the deep recession and Wisconsin’s anemic recovery.  According to statistics from the Department of Revenue, more than three-quarters of a million tax filers in our state would not benefit at all from the $343 million tax cut recommended by the Governor.   And keep in mind that low-income Wisconsinites generally pay a higher percentage of their income in state and local taxes than the highest income state residents.

Whenever progressives draw attention to the fact the proposed tax cuts don’t help low-income households, someone inevitably accuses us of being too dense to understand that income tax cuts shouldn’t be expected to help people who pay little or no income taxes.  Of course, they are right in arguing that high income Wisconsinites pay a significantly larger percentage of income taxes than the low and middle income residents of our state, so the wealthy will benefit much more by cutting income tax rates.  But why do the people who make that point so often argue erroneously that the proposed income tax cut will help “all taxpayers” and that there aren’t alternatives that could help more people?

In short, a major part of the debate over the shape of the proposed tax cuts comes down to a basic question of whether the goal should be to lower taxes just for those who have an income tax liability (and especially those who pay the most income taxes) or to help all taxpayers, including those “hit hardest by economic difficulties.”  Here are the major reasons why I think it would be unfair and unwise to adopt a tax plan that leaves out so many Wisconsinites (including 27% of those who file tax returns with the Department of Revenue):

  • Lower-income households who don’t owe income taxes nevertheless pay other taxes; in fact, they typically pay a higher percentage of their earnings in state and local taxes than the richest 5% of Wisconsinites. (See Table 6 on p.7 of Fiscal Bureau paper # 280.)
  • Reducing taxes for low-income people generally stimulates the economy more, because they are much more likely to spend their savings locally and keep that money circulating in the Wisconsin economy, whereas much of the tax cuts enjoyed by wealthy people is saved and has less of a multiplier effect.
  • There is already a growing gap between the rich and the poor, and the proposed income tax cuts would widen that gap.
  • The last biennial budget raised taxes on low-income working parents and the elderly by cutting the Earned Income Tax Credit (EITC) and ending the annual adjustments to the Homestead tax credit.
  • Part of the funding that is being used for tax cuts comes from cutting or lapsing funds for programs intended to help low-income and disadvantaged families – including the funds siphoned off from the Temporary Assistance to Needy Families block grant, the foreclosure settlement funds, and the federal bonus funds earned by Wisconsin for the success of BadgerCare.
  • Because the tax cuts are partially funded with one-time savings, they are likely to create a hole (“structural deficit”) in the 2015-17 biennial budget, and the spending cuts or tax increases needed to close that hole could adversely affect all Wisconsinites.

For more information, go to www.wisconsinbudgetproject.org

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