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Increasing Both the Earned Income Tax Credit and the Minimum Wage Would Strengthen Wisconsin’s Families

7:57 am in Uncategorized by WI Budget Project

From www.wisconsinbudgetproject.org.

State lawmakers who want to help Wisconsin families recover from the recession should move to boost both the state’s earned income tax credit and its minimum wage. Each policy on its own helps make work pay for families struggling on low wages, but improving them at the same time goes further to putting working families on the path to economic security and opportunity, according to a new report from the Center on Budget and Policy Priorities.
Earned Income Tax Credit
Low wages make it hard for working families to afford basics like decent housing in a safe neighborhood, nutritious food, reliable transportation, quality child care, or educational opportunities that put families on a path to greater economic security.

But, state lawmakers have tools that can help address stagnant low wages. One, increase the state Earned Income Tax Credit. Two, raise the state minimum wage and make future increases automatic to keep up with inflation

These policies both are targeted to assist only those who are working, helping them to better afford basic necessities, including the things that allow them to keep working, like car repairs and child care.

Improving both Wisconsin’s EITC and minimum wage will boost the income of low-paid workers and help keep many Wisconsin workers and their families out of poverty. Doing so would reduce the widening gap between the rich and those working in low-wage jobs, which holds our economy back.

Together the EITC and minimum wage do a better job of getting low-income children on a better path. The increase in family income can mean that kids go further in school and have higher future earnings in adulthood.

Both policies mean that low-paid working households can spend a bit more at local businesses – paying for things like gas, groceries, and child care – which is good for the economy.

Boosting the EITC and the minimum wage could help large numbers of workers. In Wisconsin, an increase in the state EITC could help keep taxes low for the more than 250,000 working parents who received the credit. Increasing the minimum wage to $10.10 would give a raise to more than half a million Wisconsin workers, and improve the family incomes of 234,000 children in the state.

Unfortunately, Wisconsin lawmakers give little sign of using either of these policy tools in the near future to improve the earning power of families with low incomes. Raising the minimum wage is not an issue that breaks neatly along party lines; some prominent Republicans, including 2012 Republican presidential candidate Mitt Romney, have voiced support for increasing the wage floor.  But in Wisconsin, Governor Walker called a proposal to raise the state’s minimum wage a “misguided political stunt,” and the legislature hasn’t taken up the issue. Far from improving the state’s EITC, Wisconsin lawmakers made deep cuts to that credit in 2011, increasing the amount of taxes paid by working families with children by $114 million over the last four years.

Together, a bigger EITC and a higher minimum wage can help struggling Wisconsin families make ends meet, boost the state’s economy, and improve children’s chances in life. Wisconsin lawmakers should use these tools to help working families and individuals achieve economic security.
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New Wisconsin Figures Are a Sobering Reminder of the Need for More Prudent Budgets

6:14 am in Uncategorized by WI Budget Project

Structural Deficit in Wisconsin Calculation Jumps to Nearly $1.8 Billion

Financial charts, a calculator and a folded pair of reading glasses

Wisconsin needs better budgets.

It’s remarkable how quickly Wisconsin’s fiscal picture can turn around, even during a period when the national economy is on the mend. During the campaign season two years ago, GOP incumbents in Wisconsin were making a big deal of the fact that they had eliminated the state’s structural deficit.  Today we learned from the Legislative Fiscal Bureau (LFB) that the structural deficit has returned with a vengeance; the new figure of $1.766 billion is the third largest structural deficit estimated by the LFB since 1997 (for the 10 biennial budgets from 1997-99 through 2015-17).

Although that turnaround in Wisconsin’s fiscal picture is surprising to many people, it shouldn’t be.  Wisconsin lawmakers have a long history of banking on surpluses that are estimated during the first half of a biennium (especially in election years) and promising tax cuts and/or spending levels that aren’t sustainable and that lead to big deficits.  And this year by the time lawmakers were putting the finishing touches on the last round of tax cuts, there were already warning signs that the state’s fiscal challenges could be quite a bit larger than the LFB’s previous structural deficit calculations suggested. (See, for example, this March 3rd Budget Project Blog post.)

The mistake that Wisconsin lawmakers made once again was to rely on projected revenue increases, without an adequate contingency plan for a slower rate of economic growth.  The last tax cut bill suspended a state statute that says that when tax collections increase faster than previously expected, half of the increase shall be deposited into the Rainy Day Fund.  And the 2013-15 budget bill once again postponed a statute requiring an increase in the budget balance the state must aim to have at the end of each fiscal year.

The Fiscal Bureau’s new calculations won’t be the last word on the 2015-17 structural deficit; I assume the new figures will be updated after the state has new tax and spending projections for the current fiscal year and final tax and spending numbers for FY 2013-14.  For now, the LFB is simply assuming that tax growth in the second year of the biennium will fall short of previous estimates by the same amount that growth in the first year fell short: $281 million (which is roughly the same assumption that we made in this blog post on Friday.)

What the LFB calculations mean is that if current trends continue, Wisconsin will need nearly $1.8 billion of revenue growth and/or spending cuts to balance the 2015-17 budget.  Some people who derided structural deficits in the past are now arguing that this isn’t a big deal because the state can grow its way out of this problem.  That’s true in a sense, but also very misleading.  Assuming tax collections increase as expected to about $14.4 billion in the current fiscal year, growth of 4% per year in 2015-17 would close the budget hole if total spending is frozen.  But keep in mind that the spending needed for a status quo or “cost to continue” budget typically increases almost as fast as revenue – because of inflation and population growth.  Thus, freezing spending in 2015-17 at the current level would not be a painless exercise; it would require significant cuts in areas like Medicaid, K-12 and higher education, and the corrections system budget.

It’s also important to keep in mind that the current structural deficit calculations focus only on the General Fund and assume that in 2015-17 the state will stop transferring dollars from the General Fund to the Transportation Fund.  In light of the problems in state and federal financing for transportation, there will be significant pressure to continue to make those transfers.

The other thing that is almost inevitable when the state finds itself facing a budget hole going into the next biennium is that lawmakers postpone making the long overdue increase in the state’s budget balance.  I expect that to happen again next year, which is exactly why it’s important to build budget reserves when the economy appears to be strong – rather than locking in tax cuts or spending increases before projected revenue growth actually materializes.

by Jon Peacock

From www.wisconsinbudgetproject.org.

Photo by reynermedia released under a Creative Commons license.

Despite Calling Medicaid Expansion Funds Unreliable, Wisconsin Lawmakers Rely on Other ObamaCare Funds

6:26 am in Uncategorized by WI Budget Project

In the Wisconsin debate about whether to accept federal funding for expanding BadgerCare, there has been little attention paid to a significant inconsistency used in the arguments made by many opponents of using those funds. They contend that it would be risky to pay for newly-eligible childless adults with the increased federal Medicaid funds set aside by the Affordable Care Act (ACA) for that purpose; however, their alternative plan (which is much more expensive for state taxpayers) relies on another source of ACA funds.

We learned about two weeks ago that expanding BadgerCare to 87,000 additional low-income adults and accepting federal Medicaid funding would have saved state taxpayers $206 million in this biennium, and could yield even larger savings in the next biennium. The Milwaukee Journal Sentinel used that news in a strongly worded editorial criticizing the Governor for “sacrificing good policy on the altar of expedient politics” when his budget bill turned down the increased federal Medicaid funding provided by the Affordable Care Act (ACA).

The editorial captured the most important reasons for accepting the increased federal funding (see also WCCF’s Top Ten List of reasons), and it explains the key flaws in the arguments for turning down the Medicaid funds. However, it didn’t mention the logical inconsistency that I find particularly maddening – when opponents of the expansion argue that states can’t count on the federal government.

GOP governors in many other states have realized that rejecting the increased Medicaid funds would be unwise and inconsistent. For example, last week Pennsylvania became the 27th state to expand Medicaid eligibility for adults and the 8th state with a GOP governor to do so.  In Wisconsin, the inconsistency (some might call it hypocrisy) of rejecting this particular source of funding is made clearer when one remembers that the Governor’s alternative plan relies on the federal Marketplace for insurance.

In lieu of taking federal Medicaid funds that would pay the full cost of childless adults in BadgerCare, the budget bill offsets some of the cost of covering newly-eligible childless adults by cutting in half the eligibility ceiling for parents, with the goal of moving them into subsidized coverage provided through the new insurance Marketplace.  The existence of federal subsidies for private plans provided through the Marketplace is a key part of the Governor’s rationale for capping BadgerCare eligibility for parents and childless adults at 100% of the poverty level – while nonetheless striving to cut in half the number of uninsured state residents.

Those choices make it ironic that supporters of the Governor’s budget would justify their far more expensive BadgerCare plan on the basis that we can’t necessarily count on continuation of the increased federal Medicaid funding, particularly when we consider the following factors:

  1. The risk of the increased Medicaid funding being repealed or reduced is very small, as the Center on Budget and Policies recently demonstrated (and that risk is essentially nil while Obama is in office).
  2. Legislation proposed by House Republicans to repeal the ACA would end the Marketplace subsidies as well as the increased Medicaid funding.
  3. It now appears that the federal subsidies for Marketplace coverage are probably at greater risk than the Medicaid funding because of the pending litigation that challenges the use of subsidies in states like Wisconsin that aren’t operating their own health insurance exchanges. (See this Capital Times article about that litigation.)

The bottom line is that Wisconsin is counting on ACA funding to help adults above the poverty level get access to health insurance.  State lawmakers chose to accomplish that objective with the Marketplace subsidies rather than the increased Medicaid funding.  I think we need to ask those lawmakers what, if anything, they will do to protect the parents formerly covered by BadgerCare, in the event that the ACA is repealed or pending litigation blocks the Marketplace subsidies. Read the rest of this entry →

Wisconsin State Tax Collections Fall Far Short of Projections

12:14 pm in Uncategorized by WI Budget Project

$281 Million Revenue Shortfall in 2013-14 Will Mean a Big Jump in the Structural Deficit

A dollar bill cut into shreds, with a calculator

New revenue figues show a major shortfall in Wisconsin.

Wisconsin lawmakers got bad budget news today, when the Legislative Fiscal Bureau (LFB) released state tax collection figures showing that revenue collections fell $281 million (2.0%) short of projections during the fiscal year that ended on June 30. Rather than growing by 1% as anticipated, state tax collections fell by 1%, and that will cause a substantial jump in the state’s structural deficit.

State lawmakers banked on revenue growth when they wrote Wisconsin’s two-year budget and followed up with additional tax cuts. It’s not clear at this point what will result from a substantial revenue shortfall, but one potential outcome is the state could face a new round of damaging budget cuts. What makes the state’s new budget challenge very disappointing is that it could have been easily avoided if lawmakers hadn’t rushed early this year to use every bit of increased revenue projections for another round of tax cuts, without setting funds aside for an adequate budget cushion.

Although sales tax revenue nearly met expectations – falling short by $11 million, or 0.2% – individual income tax revenue was almost $179 million below the anticipated level (a 2.5% shortfall), and corporate income tax collections came in $97.7 million (9.2%) less than expected.

The $281 million shortfall is very worrisome for a number of reasons:

  • The budget provided very little margin of error because it left a closing balance of only $165 million at the end of the biennium (which is just $100 million more than the $65 million required minimum balance). Each of the last several budget bills has postponed the statutory requirement that would significantly increase the minimum annual cushion (known as the “statutory balance”) that legislators are required to set aside.
  • The state was expecting 3.5% revenue growth in the second half of this biennium (i.e., the 2014-15 fiscal year); and now that the 2013-14 base level is 2% lower than anticipated, it will take 5.6% growth in tax 2014-15 collections to hit this year’s target of $14.7 billion (without even closing the 2013-14 shortfall).
  • If tax collections do grow by 3.5% in 2014-15, as previously anticipated, the shortfall will grow by about $291 million this fiscal year, for a total shortfall of about $572 million (or $472 million after subtracting the budget bill’s $100 million “net balance”).
  • On top of these problems, the Dept. of Health Services has projected a $93 million GPR shortfall in the Medicaid budget for 2013-15; and the gaming revenue being withheld by the Potawatomi tribe may also exacerbate the state’s fiscal challenges.

The Fiscal Bureau had calculated in May that the state was facing a “structural imbalance” or structural deficit of $642 million GPR in the next biennium (2015-17), and the reduced revenue estimates will probably add substantially to that problem. That figure represents the amount of revenue growth that would be needed in the next biennium simply to freeze spending – without factoring in any of the increased costs from factors such as inflation and rising numbers of people needing state services.

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On Pins and Needles Waiting for New Tax Figures in Wisconsin

10:55 am in Uncategorized by WI Budget Project

Financial charts, a calculator and a folded pair of reading glasses

Is Wisconsin’s Department of Revenue delaying bad news?

For the past month or so I’ve been scratching my head wondering when we would get an update from the WI Department of Revenue on state tax collections during the fiscal year that ended on June 30th. I’m not the only one who has been anxiously awaiting those numbers; four Democrats in the state Senate sent a letter yesterday to Secretary Huebsch asking when the FY 2013-14 revenue numbers will be released.

The letter signed by Senators Larson, Hansen, Shilling and Wirch notes that “last year the June numbers were released on August 23rd.” (You can see that DOR press release here.) The letter adds:

Given the numbers we’ve seen to date, the delay is already fueling concern that they will show a revenue shortfall. How significant that shortfall is could have a wide ranging impact not only on future budgets but the current budget as well.

I share the concern about the potential for a revenue shortfall. A Budget Project Blog post I wrote in June about the reduced tax collections from January through May explains why the downward trend in tax collections has been worrisome, and why the June numbers have taken on increased importance:

If the current trends continue over the last month of the fiscal year ….we will come up short for the current fiscal year by roughly $200 million. And since the budget assumes about $500 million of tax growth in the second year of the biennium, we can ill afford to begin that fiscal year at a level that is $200 million below the anticipated starting point.

Although the Senators’ letter was correct that the tax collection figures for FY 2012-13 were released sooner last year, that hasn’t been the case every year. For example, the FY 2011-12 numbers were released on September 5, 2012. For me, the bigger disappointment this year was that DOR didn’t release tax collection numbers specifically for June, as it did the prior year (in this July 12, 2012 press release). Although DOR hasn’t always issued a comparable set of June tax figures, the revenue trends this year have made it frustrating not to have any update since the May tax collection numbers.

That said, I think any questions about the timing of the revenue numbers for the last fiscal year will soon be inconsequential – once those numbers are released. I applaud the Senators for drawing attention to the fact that these are important figures to be watching for, and for asking the DOA Secretary what the state will do if there is indeed a revenue shortfall.

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Breaking with Tradition in Wisconsin: What it All Means

12:24 pm in Uncategorized by WI Budget Project

The underside of the Wisconsin Capitol Dome

Legislators are making life harder for Wisconsin families.

Over the past week, the Wisconsin Budget Project has highlighted a piece each day from our larger publication Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future. You can access the full report on our website. This is the conclusion to the report.

Breaking with Tradition in Wisconsin

Over the last three and a half years elected officials have made dramatic changes to how Wisconsin supports its schools, communities and workforce. Lawmakers have reduced investments in public schools and higher education, despite the role education plays in individual financial success and building a strong economy. They have cut taxes for Wisconsin taxpayers with the highest incomes, but raised taxes on seniors with low incomes and on working families. They decided to provide health insurance to fewer people at higher cost. And lawmakers also made it harder to obtain important safety-net benefits like unemployment benefits and food stamps, during a period when families continue to struggle to emerge from the deepest recession in 80 years.

Lawmakers claimed that many of these changes would give the Wisconsin economy a boost and create jobs. But instead, job growth in Wisconsin has lagged both the region and the nation as a whole. We believe that these changes will have long-term negative effects on our state, that they are not in the best interests of our children and families, and that they are not in keeping with Wisconsin’s values of opportunity, responsibility, and community.

To construct a strong economy in Wisconsin, we need to create opportunities for everyone to thrive. Lawmakers should build on our long history of making the kind of investments in our schools and communities that create broad-based prosperity and help make Wisconsin a good place to do business and raise families. We should build on Wisconsin’s legacy of investing in the state’s future, rather than turning away from it.

You can access the rest of the report here.

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Breaking with Tradition in Wisconsin: Nutritional Assistance

12:22 pm in Uncategorized by WI Budget Project

Shopping Cart rushing through the aisles

More hunger in Wisconsin due to FoodShare cuts.

Over the next week, the Wisconsin Budget Project will be highlighting a different piece each day from our larger publication Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future. You can access the full report on our website.

NEW OBSTACLES FOR NUTRITIONAL ASSISTANCE IN WISCONSIN

Over the last four years, lawmakers have limited the number of people who could receive FoodShare assistance, also known as food stamps, by:

  • Prohibiting legal immigrants who have been in the U.S. for less than five years from receiving FoodShare. This move saved the state $380,000 a year, or about 0.003% of the state’s General Fund budget, and eliminated FoodShare benefits for 1,400 low-income residents;19 and
  • Requiring able-bodied adults who are not parents to work or participate in a work program in order to receive FoodShare benefits. This requirement is expected to reduce the number of people receiving FoodShare in Wisconsin by about 31,000. This move will reduce the amount of federal dollars coming into the state, and will actually cost Wisconsin an additional $8 million per year, due to the additional resources needed to administer the work program.20

You can access the rest of the report here.

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Breaking with Tradition in Wisconsin: BadgerCare

12:17 pm in Uncategorized by WI Budget Project

Over the next week, the Wisconsin Budget Project will be highlighting a different piece each day from our larger publication Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future. You can access the full report on our website.

BADGERCARE

In the last four years, state lawmakers have made substantial changes to the BadgerCare program, which provides health care coverage to low-income individuals and families. The most dramatic change, which took effect in April 2014, was to cut the income eligibility limit for adults in half, to the federal poverty level (FPL), or $19,790 for a single parent with two children.

The cut in eligibility yields savings that offset part of the cost of extending coverage to at least 100,000 childless adults below the poverty level, many of whom had been on a BadgerCare waiting list. But the cut – which knocked more than 60,000 parents off BadgerCare – could have been avoided if the state had accepted federal funding that would finance the cost of covering newly eligible adults with incomes up to 138% of the federal poverty level ($27,130 for a family of three).

A decline in the number of parents enrolled in BadgerCare and Transitional Medical Assistance (TMA) began earlier, after the 2011-13 budget bill granted the Department of Health Services (DHS) sweeping authority to make cost-cutting changes, even if those changes conflict with state law or administrative rules. In July 2012, DHS used that power to make a number of changes affecting adults, including raising BadgerCare premiums and expanding them to more parents. Although most adults above 100% of FPL lost their BadgerCare eligibility in April 2014, Transitional Medicaid serves a dwindling number (14,753 in June 2014) of parents above that income level.

Despite the sharp drop in enrollment of parents in BadgerCare, the net result of the state policy changes and indirect effects of the federal Affordable Care Act (ACA) has been an increase in total BadgerCare enrollment. And because about a third of the parents who lost BadgerCare coverage were able to purchase subsidized insurance plans through the health insurance Marketplace, there should be a decrease in the number of uninsured Wisconsinites. Nevertheless, the decision to reject the federal funding and only partially expand childless adult coverage has many drawbacks, including:

Accepting the full federal funding and covering adults up to 138% FPL would yield BadgerCare coverage for about 85,000 more adults than the Governor’s plan, yet was projected to save state taxpayers $119 million during the current biennial budget period.

Since Marketplace coverage is significantly more expensive for low-income adults than BadgerCare, the restrictions on eligibility will be a financial hardship for thousands of families, and many of the affected adults are likely to go uninsured; and

Because the enrollment of childless adults has exceeded expectations, the state Department of Health Services projects a much larger shortfall in Medicaid funding, and more than $200 million in cuts to state and federal Medicaid spending will be necessary if lawmakers continue to refuse the federal funds for Medicaid expansion.

DHS tried to use the authority it was granted in the 2011-13 budget bill to make changes that it estimated would cause at least 29,000 children to lose their BadgerCare coverage; however, the Obama Administration rejected those changes because they conflict with “maintenance of effort” provisions of the federal health care law that require states to protect coverage of kids until 2019. Nevertheless, the 2013-15 budget bill codified the BadgerCare changes for kids, enabling those measures to go into effect once the maintenance of effort requirements no longer protect children’s coverage.

Although most of the proposals that would directly affect BadgerCare for children have been delayed by federal law, the changes that are affecting parents seem to be indirectly reducing kid’s coverage.   Over the first six months of 2014, the number of children over the poverty level who are enrolled in BadgerCare has dropped by more than 24,000 – a decrease of 13.6%.

On a more positive note, state lawmakers passed a number of worthwhile measures relating to mental health care during the 2013-14 session. For example, the 2013-15 budget bill appropriated $29 million in new state funds for mental health programs and created an Office of Children’s Mental Health to improve the integration of mental health services provided to children and monitor performance.

You can access the rest of the report here.

Breaking with Tradition in Wisconsin: Higher Education

12:10 pm in Uncategorized by WI Budget Project

Over the next week, the Wisconsin Budget Project will be highlighting a different piece each day from our larger publication Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future. You can access the full report on our website.

HIGHER EDUCATION

Wisconsin can create jobs and build a better economy for everyone by investing in our state’s higher education system and increasing the number of people in Wisconsin who have college degrees. Right now, only 26% of Wisconsin adults have a four-year college degree, compared with 29% nationally, according to the Census Bureau. Some neighboring states like Minnesota (32%) and Illinois (31%) also have higher shares of their population with college degrees than Wisconsin.

Despite the growing importance of higher education to economic success, the Legislature has cut investments in our university system over the last four years. This contributed to tuition hikes of 5.5% in 2012 and again in 2013. Since then, tuition has been frozen as the state spends down university system reserve funds.

In 2011, the Legislature eliminated in-state tuition for undocumented immigrants who are otherwise qualified Wisconsin students. This move saved very little public money, but made it much harder for undocumented students to attend college. In Wisconsin, in-state undergraduate students pay about $10,000 per year to attend UW-Madison, while out-of-state students – and now undocumented students who grew up in Wisconsin – pay $27,000 per year.

The Legislature also made deep cuts to the technical college system at a time of rising enrollments. Lawmakers reduced support for students by about $45 million a year between 2010 and 2014, based on amounts budgeted for the technical college system in the state’s two-year budget bill.

You can access the rest of the report here.

Breaking with Tradition in Wisconsin: Public Schools

11:58 am in Uncategorized by WI Budget Project

Over the next week, the Wisconsin Budget Project will be highlighting a different piece each day from our larger publication Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future. You can access the full report on our website.

Public Schools in Wisconsin

Investments in Wisconsin public schools lay a foundation for the state’s economic growth. By ensuring that Wisconsin students have access

to a high quality education, we can create a future workforce that is well-qualified and globally competitive.

Since 2011, Wisconsin has made deep cuts in state support for public schools, while at the same time placing strict limits on the degree to which districts can raise their own money through property taxes. The result is that there are far fewer resources for students in Wisconsin public schools than there were before 2011.

Changes to the state retirement system and collective bargaining rules have allowed districts to cut compensation for teachers and other school employees, and some have done so to avoid scaling back academic programs. Other school districts have been forced to eliminate courses in core subject areas.

Cuts in state support of education among the largest in the country

Wisconsin’s public education cuts are among the deepest in the country. The state budget provided 15% less resources for public schools per student in 2014 than in 2008, according to the Center on Budget and Policy Priorities, a nonpartisan research organization. Only six states, mostly in the South and West, made deeper cuts over this period, measured as a percentage change in spending per student. When measured as dollars lost per student, Wisconsin’s cuts to public education were second only to Alabama.13

The budget cuts were more severe for school districts with high numbers of students living in poverty. Those districts had their state support reduced by $703 per student in the 2011-12 school year, while the lowest-poverty districts lost just $319 per student.14 The cuts to poorer districts were larger because high-poverty districts receive a bigger share of their total revenue from the state.

A tight lid on local support for public schools

In addition to making deep cuts to state support for education, lawmakers restricted the degree to which districts can raise property taxes to make up for the loss in state support.

Before 2011, school districts were typically allowed to increase their budgets by between $200 and $300 per student each year. School district budgets are mostly made up of support from the state combined with local property tax revenue. Starting in the 2011-12 school year, the Legislature put strict limits on school district budgets, which limited property tax increases. The Legislature required most school districts to cut their budgets by 5.5% per student in 2012, and has allowed only small increases since then.

Act 10 brought pay cuts for teachers and other school employees

In 2011, lawmakers limited collective bargaining rights for public employees and increased the amount that public employees must contribute to health and retirement benefit costs. The result was that teachers and other school district employees received significant pay cuts, and school districts saved on personnel costs.

For some districts, the pay cuts to teachers were big enough to counteract the reduction in state support. Other districts had to make cuts to core academic subjects to balance their budgets. According to a 2011 survey of school districts:

  • Public school staff was reduced by 5.7% in high-poverty districts in the 2011-12 school year, compared to 1.1% in low-poverty districts;15
  • Eighty-seven percent of students attended districts that cut staff;
  • Sixty-seven percent of students attended a school that reduced the number of teachers in classrooms to make ends meet;
  • Nearly half of students attended districts that cut core academics in the wake of the state budget cuts; and
  • More than 4 out of 10 students attended districts that increased class size.16
  • Budget cuts to schools slowed job growth in Wisconsin. The state lost 3,600 jobs in public K-12 education between 2010 and 2012, according to the Quarterly Census of Employment and Wages.

Expanded resources for private schools

At the same time it was decreasing support for public schools, the Legislature significantly expanded the state’s private school choice program, also known as school vouchers. This program allows students from low- and moderate-income families to attend private school with the state paying the tuition.

Prior to the 2010-11 school year, only students attending Milwaukee Public Schools were eligible for tuition vouchers. The Legislature expanded the voucher program in a number of ways since 2011, including:

  • Removing enrollment limits in Milwaukee and raising the family income threshold for Milwaukee students to 300% of the poverty level – about $72,000 for a family of four;
  • Adding vouchers in the Racine Unified School District, for students with family incomes under 300% of the poverty level;
  • Allowing students in other parts of the state to receive vouchers, if they have family incomes below 185% of the poverty level. For the 2014-15 school year, participation in the rest of the state is capped at 1,000 students. Nearly three-quarters of students who received vouchers from the statewide expansion previously attended private schools.17

The Legislature funds the Milwaukee Parental Choice Program in part by cutting the amount of public support for Milwaukee Public Schools.

Lawmakers raised the dollar amount of tuition vouchers to keep up with inflation. This is in marked contrast to the public school system, for which the state is now providing 15% less in support per student than in 2008.

A generous new tax break for private school tuition

The Legislature has given a new tax break to the families of other private school students, separate from the expansion of the private school choice programs.

Parents of students in private school may deduct up to $10,000 in tuition expenses from their income, starting in 2014. The total cost of the new tax break is $30 million a year, according to the Legislative Fiscal Bureau, and there are no income limits on who may claim the benefit. On average, private school students come from families with higher incomes than those of public school students. Wisconsin’s tax break for private school tuition is among one of the most generous tax breaks of this type in the country.18

 


You can access the rest of the report here.
13“Most States Funding Schools Less Than Before the Recession,” Center on Budget and Policy Priorities, May 20, 2014.
14“Making Matters Worse: School Funding, Achievement Gaps and Poverty under Wisconsin Act 32,” University of Wisconsin ELPA Policy Brief, May 2012.
15ibid.
16“Falling Support for Schools Threatens Wisconsin’s Future,” Wisconsin Budget Project, January 9, 2012.
17“DPI: 73 Percent of Statewide Voucher Students Already Enrolled in Private Schools,” Wisconsin State Journal, October 30, 2013.
18“Wisconsin’s New Private School Tax Break Most Generous in U.S., State Schools Superintendent Says,” Milwaukee Journal Sentinel, June 27, 2013.