State spending on corrections has climbed in recent years in Wisconsin, as spending on schools and the University of Wisconsin System has plummeted, according to a new report by the Wisconsin Budget Project. The result is that the state has fewer resources to invest in our schools, communities, and health care.
State spending on corrections has increased 7% since the 2003-05 budget period, after amounts are adjusted for inflation. That stands in stark contrast to state spending on K-12 schools, which dropped by 14% over that time. State spending on the University of Wisconsin dropped by 21% over that period.
Wisconsin now spends more tax dollars on locking people up and other corrections activities than it does educating our next generation of workers at the University of Wisconsin. Back in the 2003-05 budget, Wisconsin spent about 15% less on corrections than it did on the UW System. In the current budget that has flipped, with the state spending about 15% more on corrections than on the University of Wisconsin. Read more
SJR 55 Would Enable Private Group to Set Wisconsin’s Budget Parameters
A proposed constitutional amendment that is coming up for a public hearing this week is likely to have harmful unintended consequences. Although the proposed amendment – Senate Joint Resolution (SJR) 55 and its Assembly companion, AJR 66 – has the laudable goal of making state budgeting more transparent and more fiscally responsible, it would tie the hands of future lawmakers and delegate some of the authority to set budget parameters to an unelected private organization. One potential consequence is that Wisconsin could be prevented from withdrawing money from the Rainy Day Fund when that funding is needed most.
The proposed constitutional change would prevent lawmakers from passing a budget that causes or increases a deficit, based on Generally Accepted Accounting Principles (GAAP). GAAP is a set of accounting standards developed and periodically updated by a private national organization. The constitutional amendment would also require that every year until the state has eliminated the GAAP deficit in the General Fund (and in any other fund), lawmakers would have to use at least 10 percent of that year’s growth in the revenue deposited in that fund to reduce the GAAP deficit. Read more
State lawmakers have approved borrowing an additional $350 million over the next two years for highway construction and repair. That approval will drive debt repayment costs higher, take money from a pot intended to support education and health care, and once again put off a permanent solution to paying for Wisconsin’s highways.
When the budget was passed in July, lawmakers included a provision that allowed Governor Walker to seek up to $200 million this year and $150 million next year in additional borrowing authority for highways. On November 4th, the legislature’s budget committee voted to approve the entire two-year total of $350 million in borrowing authority in one shot. The vote was unusual in that it did not fall along party lines: All four Democrats on the committee joined with six Republicans to pass the measure, with another six Republicans voting no.
Wisconsin has allocated a growing share of transportation resources towards repaying money the state has borrowed to build and repair highways, and the approval of new borrowing will drive borrowing costs up even further. Read more
Paying for Road Borrowing out of General Fund Would Reduce Resources for Important Wisconsin Priorities
Governor Walker has requested additional borrowing to pay for the construction and repair of highways. He requests that the repayment costs for the additional borrowing be paid out of the state’s main fund that supports the state’s public school system, university system, and health care system, increasing the likelihood that Wisconsin will need to make future cuts to those important priorities.
Normally, the state uses money from the gas tax, placed in the Transportation Fund, to pay for highway construction and repair. But there is not enough money in the Transportation Fund to pay for all the highway projects that lawmakers want to fund. This imbalance occurs mostly because the state’s gas tax has been frozen for many years, and as inflation slowly erodes the value of the per-gallon tax, revenues directed to the Transportation Fund shrink.
Lawmakers seem determined not to find a permanent solution to the imbalance in the Transportation Fund. Read more
Wisconsin finished the last fiscal year with a balance in the general fund of $135.6 million, according to the annual budget report issued by the Department of Administration today. Although that balance only amounts to a cushion of about 3 days of spending, it’s still relatively good news because the Legislative Fiscal Bureau (LFB) estimated back in January that the state was on track to finish the 2014-15 year with a deficit of $283 million.
One part of the turnaround was an increase in tax revenue of $71 million, relative to the more pessimistic forecast by the LFB in January. Compared to the previous fiscal year, general fund tax collections grew by $593 million or 4.3% in FY 2014-15.
Although some of the news in the annual report is positive, a careful analysis of the report casts a more worrisome light on the state’s fiscal situation. In particular, the report reveals that net spending from the general fund surpassed revenue by more than $503 million last year – even though spending was suppressed by postponing $108 million of debt payments and by cutting compensation reserves by $98 million. Read more
Governor Walker’s proposal to overhaul the state’s civil service system for state employees has been in the news recently, but missing from the conversation is the fact that Wisconsin has significantly fewer state employees and smaller payrolls than most states. If one of the goals of making changes to Wisconsin’s civil service system is to ensure that Wisconsin’s state government runs efficiently, advocates for the changes should know that Wisconsin already has a lean state government with relatively low costs.
The proposed changes to the state’s civil service system would loosen hiring and firing requirements for state employees, lengthen the probation period for new state employees, and eliminate bumping rights for more senior employees. The Milwaukee Journal Sentinel describes some of the changes:
“The changes include dropping the exams that job candidates for state government are often required to take in favor of a résumé system and better defining the “just cause” definition of fireable offense such as stealing from the state or showing up to work drunk.
Wisconsin got some good budget news this week, but our state may once again squander an opportunity to use an upturn in revenue to shore up its meager budget reserves. That’s very disappointing because states should set aside funding when revenue exceeds expectations, in order to have stronger reserves to weather economic downturns.
The good news this week was that the preliminary estimate of Wisconsin’s actual 2014-15 tax revenue is $71 million (0.5%) more than the last projection, which probably has a lot to do with the fact that national economic growth was stronger than previously estimated in the second quarter of 2015. Although Wisconsin’s individual income tax revenue fell below the projected level by about $24 million, corporate income tax collections are almost $70 million higher than expected, and sales and excise taxes are about $29 million above the anticipated amounts. The total is 4.3% above the amount in the prior year, though it falls about $100 million short of the optimistic Department of Revenue projection in November of last year. Read more
If you look at a new memo from the Legislative Fiscal Bureau (LFB) that itemizes the tax and fee changes in the biennial budget bill, you wouldn’t know that the net effect of the bill is to cut taxes. The fact that the budget bill does cut taxes isn’t obvious in the latest LFB document for a couple of reasons:
- First, the LFB memo summarizes the state-level tax changes and doesn’t examine the reductions in local property taxes that result from increases in state spending for property tax relief and restrictions on local spending.
- Second, the bill uses short-term tax increases to provide a temporary offset to larger long-term tax cuts (and the latter are beyond the two-year time horizon of the LFB analysis).
Wisconsin had a razor-thin budget balance at the close of the fiscal year that ended in June, barely meeting the constitutional requirement for a balanced budget. Even this very narrow margin was possible only because Wisconsin had already taken several steps to reduce spending in that year, including pushing costs off into the future. The very small budget balance underscores the need for lawmakers to budget in a way that leaves a larger budget cushion and hedges against changing economic conditions or unexpected costs.
At the end of fiscal year 2015, the state had just $254,000 in its main fund, new documents show. The state plans to spend nearly $16 billion this year from that account in support of important state priorities like K-12 schools, the University of Wisconsin System, and access to health care. That means the state had a budget cushion of less than 0.002% at the end of the fiscal year. Read more
The Magnitude of Future Fiscal Challenges Is Masked by Unrealistic Assumptions about Funding Lapses
An updated analysis released today by the Legislative Fiscal Bureau (LFB) calculates that the recently enacted Wisconsin budget creates a $210 million budget shortfall or “structural deficit” that state lawmakers will have to close in 2017 when they write the 2017-19 budget. That’s a smaller shortfall than the LFB calculated a few weeks ago, but it confirms that Wisconsin isn’t on track to have the substantial “structural surplus” that Governor Walker was promising several months ago.
While the Governor was in South Carolina earlier this year, seeking support for his anticipated presidential campaign, he said: “At the end of the budget we’re debating right now for our next two years in my state, we will end with a structural surplus of $499 million.” The latest LFB figures indicate that the new budget bill puts the state on a track to miss that mark by more than $700 million. Read more