JFC Approves New Budget Adjustment Bill Setting Aside Revenue for Medical Malpractice Fund Debt

Friday, May 27, 2011 at 1:46 AM by

The Joint Finance Committee (JFC) voted today to advance a new budget adjustment bill that appears to be intended to establish some of the parameters for deliberations on the rest of the biennial budget. The bill, AB 148, which was unveiled just a couple of days ago, makes a few changes that affect the current budget for fiscal year 2010-11, but that doesn’t seem to be the primary purpose.

With the Finance Committee preparing to vote today on the size of cuts in state school aids, AB 148 sends the message that legislators should not entertain big ideas about how much of the recently identified $636 million increase in tax revenue could be used to reduce budget cuts. It accomplishes that by setting aside funds to be used in the next biennium to pay $235 million owed to the state’s medical malpractice fund. Despite objections to the bill from Democrats on the committee, it was ultimately approved on a unanimous vote.

As the Legislative Fiscal Bureau (LFB) explains in their May 26 memo, AB 148 would do the following: 
  1. Commit $235 million to be used in fiscal year 2011-12 for the $200 million and estimated interest that the Wisconsin Supreme Court has ordered the state to repay to the medical malpractice fund. That’s an increase of $185 million above the $50 million the Governor recommended paying in the next biennium.
  2. Move $147 million of Medicaid payments to manage care organizations into the current fiscal year, in order to capture the higher federal match rate, which will decline on July 1. This maneuver will yield a net savings of $23 million., and it appears to be the only part of the bill tht really needs to be done by the end of June.
  3. Reduce anticipated agency lapses to the General Fund by an additional $54 million because agencies haven’t been able to find the full amount they were directed to lapse.
  4. Repeal the provisions in Act 10 that would lapse $29.8 million to the General Fund from the increased state employee contributions to their health insurance and retirement benefits, since it is now too late to capture those savings.
  5. Reduce spending by $7.7 million in the current fiscal year by incorporating into the bill several cuts or spending lapses that were included in Act 10 and have been held up by the litigation over that bill.

The net efect of the bill is to reduce the projected General Fund balance at the end of the next biennium by about $208 million. (See Table 1 in the LFB paper.) That still leaves about $400 million from the newfound state revenue, which could be used to reduce the magnitude of cuts proposed by the Governor in the 2011-13 budget. Reducing those cuts by $200 million each year is reasonable fiscally because it can be done without increasing the state’s structural deficit.

In conclusion, AB148 would pay off a state debt and in doing so it might inhibit some of the ideas about how the legislature could use the $636 million in addtional tax revenue that was recently identified by the LFB.  However, the bill doesn’t change the fact that the legislature could use that revenue in a fiscally responsible manner to reduce spending cuts by $200 million per year. 
Jon Peacock

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