A Preliminary Overview of the Governor’s 2015-17 Budget

Tuesday, February 3, 2015 at 9:09 PM by

Now that the Governor’s budget bill has been introduced, we can begin to see the painful consequences of policy choices that state lawmakers made last session, such as enacting large tax cuts on the basis of overly optimistic revenue projections.  But the deep cuts in areas such as the UW System budget aren’t inevitable if the state reconsiders the rejection of federal Medicaid funds, stops digging the budget hole deeper by passing more tax cuts, and closes tax loopholes.

It will take quite a while to carefully dissect and analyze the Governor’s budget bill, but here are some initial comments relating to major items in his plan – to the best of my abilities in the very brief time I’ve had to study the Dept. of Administration (DOA) documents.  [NOTE:  After reviewing the bill more carefully, I’ve added an update in the portion about school funding, because the blow to public schools is much greater than I initially thought.]  

To begin this overview, it’s important to note that the Governor’s recommendations dig a deeper hole for lawmakers to climb out of as they attempt to balance the budget.  That is done by allocating $105.6 million per year for the school levy credit.  While increasing that credit has often enjoyed support from legislators on both sides of the aisle, committing that funding for tax relief is much more problematic at a time when the state is faced with a large deficit and making substantial cuts.

The following items are a few of the ways that the budget deficit is closed:

Putting a squeeze on public schools – The changes the Governor is proposing for school financing are complicated, but seem to keep public schools in a very difficult fiscal bind.  In addition to maintaining current revenue caps for schools, the bill cuts total funding for the Dept. of Public Instruction by 0.1% in the first year of the biennium (and cuts General Fund support by 2%), before increasing total funds by 4.2% in the second year.  But even in the second year it appears to me that schools will only be able to increase spending by about half of the increase, based on the amount of the increase that is outside of the revenue caps.  In addition, the bill lifts the cap on school choice vouchers, and the growth in spending for those vouchers will apparently be siphoned out of the funding for public schools.  By holding support for public schools well below the inflation rate and diverting funding for vouchers, my preliminary reading of the Governor’s plan is that it would force many school districts to make additional cuts in their budgets.

UPDATE: After studying the budget documents more carefully, it’s clear that the negative impact for schools is considerably worse than I initially thought – particularly in the first year of the biennium, when most schools will have to cut spending by $150 per student.  My preliminary calculations missed that effect because one of the DOA documents creates the impression that schools are getting an increase of about $103 million per year in federal funds, which is not actually the case.  In addition, I didn’t originally realize that schools aren’t able to raise property taxes to offset a $127 million cut in state categorical aid during the first year of the biennium.  (Read our more current 2-page summary of the K-12 education budget.)

Cutting $300 million from the University System – A lot has already been written about the deep cut of $150 million per year (13%) in state tax support for the University System, even as the state freezes tuition for another two years.  We’ll take a closer look at that issue later in the budget process. 

Cuts to BadgerCare, SeniorCare and Family Care – As DHS requested, the budget bill significantly increases state support for Medicaid and BadgerCare, in order to pay for the caseload growth stemming from last year’s expansion of coverage to childless adults, as well as health care inflation and a decline in the federal match rate.  To offset some of that growth, the Governor is proposing “reforms” to cut spending for BadgerCare, SeniorCare and Family Care.  The BadgerCare changes include a directive to DHS to seek federal approval to require drug testing for childless adults, to impose premiums on all childless adults, and to limit their eligibility to 4 years.  The SeniorCare “reforms” are expected to reduce spending (relative to the “cost to continue” level) by $15.6 million of state funds and by about $81 million from federal funds and drug rebates.  Of course, the proposed health care cuts could be avoided very simply by expanding BadgerCare to all low-income adults up to 138% of the poverty level, which would save the state upwards of $300 million between January 2016 and June 2017.

There are also some things in the budget that I’m glad to see, and I’ll elaborate on that as we get into particular areas of the budget over the next couple of weeks.  But at the top of that list is something we have advocated for many years — an overdue increase in auditing positions at DOR, which is expected to generate an increase of $113.5 million over the biennium. 

We will follow up with much more careful summaries and analyses of many portions of the budget over the next several weeks.  Stay tuned. 

Jon Peacock

3 Responses to “A Preliminary Overview of the Governor’s 2015-17 Budget”

  1. Joanne Brown says:

    Thanks for taking this initial look at the budget, Jon. While I know it’s not in the purview of WCCF, I see DNR capability particularly hard hit as well. One might think that the governor expects the world to come to an end sometime soon, so there is no need to protect natural resources for future generations.

    • Jon Peacock says:

      You make a good point. When we write a more detailed summary of the budget bill and how it is being balanced, we will at least briefly touch on the amount being cut from the DNR budget and related areas of spending for natural resources.

  2. I really wish not paying taxes would work.
    Government borrowing gives those who buy bonds a return on investment, while the rest of us pay now, and pay later.