Budget Repair Bill Fails to Repair Budget; Debt Restructuring Still Under Consideration

Saturday, March 19, 2011 at 11:02 PM by

A new Budget Project brief compares how the fiscal and non-fiscal items in the final version of the “budget repair” bill (2011 Act 10) compare with the versions recommended by the Governor and then by the Joint Finance Committee. It condenses into two pages the highlights of the Legislative Fiscal Bureau’s 48-page comparative summary of the bill.

The bottom line is that bill signed by Governor Walker on March 11 includes almost all of the Governor’s proposals that were judged to be non-fiscal policy items by the Legislative Fiscal Bureau . (See our Feb. 23 blog post.)  However, because the Senate didn’t have a quorum, it couldn’t vote on spending increases, so none of the increases proposed by the Governor to fill projected shortfalls could be included.

Although it appeared that a deal could have been reached that included all of the budget items that make changes relating to the current fiscal year, while putting non-fiscal measures on a somewhat slower track, Republicans essentially decided to do the opposite. As a result, the budget repair bill fails to resolve the looming budget shortfall that was the original rationale for trying to rush a bill through the Legislature in mid-February.

Our short paper and the comprehensive LFB summary show that the final bill (Act 10) leaves the state with a projected balance of $158.9 million at the end of the current fiscal year (June 30). However, that figure doesn’t include projected shortfalls in the Medicaid and Department of Corrections portions of the budget, totaling $174 million. Taking that into consideration, the budget is about $15 million in the red, and $80 million below the amount required to maintain the $65 million statutory reserve.

Although the Senate Democrats have now returned, there has been little discussion this week of how or when the Governor will try to address the looming shortfalls. The Governor’s primary strategy in his original bill was to restructure some state debt, but we are well past the date that was initially cited as the deadline (see our Feb. 26 blog post).  However, the Walker Administration subsequently said there might be a way to extend that deadline into early April, and bond counsel is now reviewing that option.  (See the LFB’s March 9 explanation.)

If debt restructuring is still a possibility, perhaps the Legislature will be able in a couple of weeks to pass a budget repair bill that actually addresses the looming Medicaid and Corrections shortfalls that were cited as the reasons why action on the previous bill was so urgent.

Jon Peacock

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