Minnesota releases updated revenue and spending projections in early December of each year, and the new figures released today are very positive – a net gain in the Minnesota budget balance of about $1 billion. Let’s hope that Wisconsin can come close to matching that when our new tax and spending estimates are released in late January or February.
As we noted in a blog post about two weeks ago, many people across the country are watching Minnesota and Wisconsin carefully because of the very different directions that the two states have gone in fiscal and health care policy over the last couple of years. Because of the many demographic similarities between the two states, the divergent choices by policymakers set up an interesting experiment. In that context, today’s budget news from our neighbor to the west could be an early point in their favor, but we won’t have any basis of comparison in Wisconsin for another month or two. Read more
$900,000 per Month Increase in DOC Costs Is One of Several Unintended Effects
Rather than accepting enhanced federal Medicaid funds, the Governor proposes to pay for a 3-month delay in BadgerCare eligibility reductions by also delaying positive aspects of the budget bill, including the expansion of coverage for adults who don’t have dependent children. Obviously, the most disappointing aspect of financing the bill in that way is that the Governor is breaking his promise not to create a coverage gap for low-income childless adults. Another smaller and much less obvious problem is that the Special Session bill being considered by the Joint Finance Committee on December 2nd creates a $2.8 million GPR hole in the Department of Corrections budget.
The expansion of coverage to include adults without dependent children is projected to save the DOC about $900,000 per month by picking up a significant portion of the cost of hospitalizing inmates. Read more
Wisconsin has been reducing investments that give families access to high-quality child care, a move that will hurt children’s school-readiness and success in later life.
The state legislature’s freeze on child care payments – payments that help make it possible for parents who work at low-wage jobs to work – has taken a negative toll on parents, children, and child care providers, according to a new report from the Wisconsin Council on Children and Families. The legislature has frozen payment rates for the past seven years, with the effect that providers are dropping out of the program, and parents are having difficulty finding the child care they need in order to work.
The reduced investments in child care stand in stark contrast with Wisconsin’s past approach to helping low-wage parents get the child care they need. In 2006, before the rate freeze, the maximum payment rate covered 75% of child care slots statewide, according to the report. Read more
There are a lot of ways in which America’s free market health care system boosts cost to levels far in excess of the costs anywhere else in the world, even though Americans aren’t healthier, and don’t appear to be getting the best health care. Most of those ways are perfectly legal; others not so much.
Once in a while a health care corporation that is exploiting the opportunities to maximize profit in unethical or illegal ways is called on the carpet and forced to pay restitution for their shady exploits. There have been two examples of that in the last week or so, and both could help Wisconsin fill a hole in the state’s Medicaid budget.
Last week the U.S. Department of Justice announced that Johnson and Johnson will pay $2.2 billion to settle a lawsuit related to deceptive marketing and distribution of two antipsychotic drugs, Risperdal and Invega. The drug company misrepresented what the drugs should be allowed for, and allegedly paid kickbacks to doctors and agencies to make sure their drugs were prescribed for certain off-brand purposes. Read more
Governor Signs Property Tax Relief Bill; Assembly Shelves Dem Amendment with Much More Relief for Most Homeowners
Today Governor Walker signed a bill that provides $100 million of property tax relief over the next two years. The bill will do the following:
- Reduce property taxes by an average of $13 this year and $20 next year for people owning median value homes.
- Increase to $725 million the fiscal hole or structural imbalance in the next biennium (which means that first $725 million of new revenue is needed just to maintain flat funding).
- Reduce the projected balance at the end of the current biennium to $125 million, which is enough to cover three days of state spending.
The bill was approved by a lopsided vote in each house of the legislature. In the Assembly, all but 12 Democrats voted for passage of the bill, but not before they offered a substitute amendment that would have provide substantially more property tax relief and would have targeted much more of that relief to residential property owners. Read more
One of the factors contributing to a larger-than-anticipated state budget surplus is a decline of about $11 million in spending for the Homestead tax credit in fiscal year 2012-13. Considering how the surplus was bolstered by that spending reduction, and also by a sharp cut in state General Fund support for the Earned Income Tax Credit, it’s very disappointing that the large tax cuts enacted this year have done little if anything to help low-income households.
The Dept. of Administration released the Annual Fiscal Report today for fiscal year 2012-13, and the news is mostly positive. However, I think some of the spin about a “$760 million surplus” is a bit misleading.
One example of that spin is that the DOA letter to the Governor notes that the $759.2 million balance at the end of June is $274.5 million higher than the balance of $485 million projected by the Legislative Fiscal Bureau (LFB) in January. That’s true, but I think the more relevant comparison is to the estimate made by the LFB in June, because that’s what the budget was based on. That’s important because the budget bill has already used the previous revenue increase to help pay for the increased tax cuts that were enacted.
Compared to the estimates made by the LFB in the budget bill, the $759 million balance that was carried over into the current fiscal year represents an increase of $90 million (after taking into account an increase to the Rainy Day Fund). Read more
Governor Walker proposed a $100 million property tax cut at a hastily-called press conference today. The tax relief would be delivered through the school aid formula – by adding $40 million this year and $60 million next year. Because the school spending caps aren’t being raised, schools will have to reduce property taxes to offset the increased state aid. The Governor is calling a special session for next week to expedite legislative action on the plan.
According to a story on Channel 3000.com, Assembly Speaker Robin Vos said the bill will be introduced tomorrow, and he would like the legislature to pass it by the end of next week. The Governor is pushing for fast action on the proposal so the tax cut would be in effect when property tax bills are being calculated later this year.
Walker said that the funding for the property tax cut would come from the state budget surplus. Read more
Growth in Per Capita Income Is Expected to Cause $52 Million Increase in Wisconsin’s Share of Medicaid Spending
Wisconsin Share and Fluctuations in Cost-sharing Would be Reduced if State Took Enhanced Medicaid Funding
Wisconsin Health News reported this morning that our state will probably have to spend $52 million more from state General Purpose Revenue (GPR) because of a drop in the federal share of Medicaid spending (known as the Federal Medical Assistance Percentage, or FMAP). A Legislative Fiscal Bureau (LFB) memo issued yesterday estimated the increase in the Wisconsin share, based on a reestimate of the FMAP in FY 2015 by an organization called Federal Funds Information for States (FFIS). The reduced federal share results from per capita income growth in our state.
It will be interesting to see if state officials use the reduction in federal funds to argue that it’s perilous to take Medicaid dollars, so it was wise not to accept the enhanced federal funding under the Affordable Care Act (ACA). However, I would argue just the opposite. Read more
Since late spring we’ve been raising concerns that the biennial budget bill cuts funding for the welfare-to-work program known as Wisconsin Works (W-2) based on faulty assumptions. This June 17 paper examines the problem and explains how reducing W-2 spending and shifting federal block grant funds made it easier to cut state taxes in the budget bill.
This week the Walker Administration acknowledged the W-2 shortfall and submitted a plan to the Joint Finance Committee (JFC) to narrow the funding gap by $9.6 million. The plan submitted to JFC by the Dept. of Children and Families (DCF) and Dept. of Health Services (DHS) closes part of the gap by using unallocated federal funding known as “income augmentation” revenues. These funds are received by the state as the federal share of state and local spending for things like Targeted Case Management and the Medicaid HealthCheck program.