Cost Growth Underscores the Value of Accepting Federal Funds for BadgerCare Expansion
The latest quarterly report Read more on the state Medicaid budget, issued this week by the Department of Health Services (DHS), reinforces our concerns about the choice of Wisconsin lawmakers to spend substantially more for BadgerCare and insure far fewer people than if the state expanded eligibility to cover additional low-income adults.The new report reveals a $24.8 million net increase in projected Medicaid and BadgerCare spending in the current fiscal year, relative to what DHS estimated just three months ago. Despite that increase in program costs, the department says the Medicaid budget remains in balance because they plan to more than double the amount of drug settlement funds allocated for the Medicaid budget. (That funding comes from payments by manufacturers to settle lawsuits alleging they improperly charged for medications used by Medicaid recipients.) The jump in Wisconsin’s Medicaid costs does not come as a big surprise – considering the rapid growth in BadgerCare enrollment of childless adults, which is now almost 60% above the level that DHS originally expected it to reach at the end of the current fiscal year.
We finally learned this week one of the major tactics being used to fill the large hole in this year’s state budget. The Governor plans to push part of the problem further into the future by delaying a $108 million debt payment that is coming due in May.
A Legislative Fiscal Bureau (LFB) memo Read more released yesterday by Reps. Hintz and Taylor explains that there are two kinds of debt restructuring – one that has the effect of reducing the total amount of interest paid on an outstanding debt, and another type that extends the life of an existing debt and increases the total cost to state taxpayers. The planned delay in the $108 million payment is the second type. Although the LFB memo doesn’t show the full impact of the revised payment schedule, it indicates that the delay will increase debt service costs by $544,900 in 2015-16 and more than $18.7 million in 2016-17.
Lawmakers Should Stop Delaying Requirement for an Increased Budget Reserve
Groundhog Day always makes me think of the Bill Murray movie, and the movie sometimes makes me think of the Wisconsin budget process. This year as I contemplate Murray’s almost endless entrapment in a Punxsutawney PA time loop, I can’t help wondering whether Wisconsin lawmakers are doomed to keep making the same fiscal policy mistakes, such as failing to set aside adequate reserves that could keep the state from having a deficit every time tax revenue falls short of the unanticipated level. We may get at least a partial answer to that question when the Governor introduces his budget Tuesday. The $283 million deficit Read more that the state must close over the next five months (in addition to the $2 billion structural deficit in the next biennium) once again makes the case that state policymakers need to budget more cautiously. A great place to start is to stop postponing a state statute that requires lawmakers to set aside a reserve or budget cushion equivalent to at least 2% of spending at the end of each fiscal year.
The Very Bad Fiscal News for this Year Offsets Improved Revenue Estimates for the Next Biennium
New budget figures Read more from the Legislative Fiscal Bureau (LFB) indicate that the state is on track to have a $283 million deficit at the end of the fiscal year. That hole is $153 million deeper than what the Department of Administration (DOA) had indicated in November.Of course, the Fiscal Bureau isn’t predicting that the state will actually finish the fiscal year with a substantial deficit; they are sizing up the amount of red ink that the Walker administration and state legislators have to eliminate in order to meet the constitutional requirement to have a balanced budget. On many occasions in 2014, we expressed concerns that state lawmakers were going to have to make painful budget cuts before the end of fiscal year 2014-15 because the tax cuts enacted early last year were based on overly optimistic revenue estimates and because the state was planning to draw down almost all of the anticipated balance.
The Department of Revenue (DOR) issued its report on December tax collections today, and at first blush the numbers look bad; however, I think they may actually suggest a modest upturn – relative to the November estimate for the current fiscal year (FY). Whether that assessment is accurate will become apparent later this week when officials release updated state revenue estimates for FY 2014-15 and for the next biennium, which begins on July 1. Read more
What the short new report reveals on its face is that tax collections were down by 2.6% in December, compared to the same month in 2013, and tax collections for the first half of the current fiscal year were down by 2.7% compared to the last six months of 2013. Individual income tax collections for the last half of 2014 were down by 6.4% or $232 million, and corporate income tax revenue was down 8.0% or $38 million.
An economic forecast issued Monday by the Department of Revenue (DOR) provides more evidence that Wisconsin will face substantial budget challenges in the current fiscal year and the next biennium. According to that document, which is the fall 2014 Wisconsin Economic Outlook, the nation’s economic growth will fall well short of what DOR assumed in its last report, which was issued in January. (These used to be known as the quarterly economic reports, but for some reason are now issued irregularly and just once or twice a year.)
The January economic report was issued in conjunction with increased state revenue projections, which helped persuade state lawmakers to enact substantial tax cuts. But over the last 10 months the estimates of the national* economy, i.e. the “gross domestic product” (GDP), have changed as follows:
- The anticipated GDP in 2014 is now $152 billion less (-0.9%) than assumed in January.
- The estimate for 2015 is $210 billion lower than previously anticipated (-1.1%).
State 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.
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.
“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.” Read more
I share the concern about the potential for a revenue shortfall.
At least 13 Wisconsin counties may include an advisory referendum on the November ballot asking voters whether Wisconsin should expand BadgerCare and take the federal funding that would cover the full cost of newly eligible childless adults. The proposed ballot measure, which has already been approved in 4 counties and enjoys broad support, has generated debate about whether the Medicaid expansion topic is an appropriate matter for an advisory referendum.
There are many strong arguments in favor of taking the federal funding (see WCCF’s “Top Ten” list); however, some people who argue against including the BadgerCare question on the November ballot contend that it’s not a concern of county government. But even if we assume for the moment that an interest in county residents’ access to affordable health care isn’t reason enough for counties to allow voters to weigh in on the issue, counties also have their own reasons to be very interested in whether the state expands BadgerCare and accepts the federal funds:
- One very important consideration for counties is they bear the financial responsibility (rather than the state) for some community-based Medicaid services.
Revenue Collections Continue to Fall, While Medicaid Deficit Takes Large Jump
The state’s fiscal situation has gradually deteriorated in 2014, and new tax collection figures released late Friday afternoon show a continuation of that trend. That fiscal problem is exacerbated by a couple of areas where spending is growing, including a substantial increase announced today in the estimated Medicaid deficit.Starting on the revenue side of the state’s budget ledger, here are some of the key figures gleaned from the Department of Revenue’s press release:
- General Fund tax collections fell $26 million in May, compared to May 2013, which is a drop of 2.5% (measured on an adjusted basis).
- Over the first 11 months of the current fiscal year, state tax revenue is down by almost $49 million or 0.4%.
- Although sales tax revenue is up by $186 million or 5.2% over the last 11 months, individual income tax collections are down by almost $290 million – a drop of 4.6%.