New LFB Report Has a Mixture of Good and Bad Budget News, as Newly Passed Bills Add to the Deficit

Tuesday, February 1, 2011 at 3:11 AM by

In late January of each odd-numbered year, I nervously await the release of a Legislative Fiscal Bureau (LFB) memo that contains updated spending estimates for the current fiscal year and updated revenue estimates for both the current year and the next biennium. That memo was released this afternoon, and the news is mixed.

On the positive side, the closing balance for the current fiscal year is expected to be $54 million higher than the Doyle Administration calculated in November and December reports. On the negative side, the newly calculated balance doesn’t take into account shortfalls in Medicaid and a couple of other appropriations totaling about $178 million (including a $21.7 million shortfall for the Dept. of Corrections). Nor does it include the $200 million (plus interest) that the state needs to pay back to the medical malpractice fund, or the $58.7 million (plus interest) that Wisconsin owes to Minnesota after termination to income tax reciprocity agreement.

Most of the worrisome items noted above had already come out recently, and the LFB memo fell well short of my more pessimistic expectations. Nevertheless, one new piece of bad news is that the LFB projects that the aggregate General Fund tax collection for this fiscal year and through the end of the 2011-13 biennium will be about $203-million less than was estimated in a December Department of Administration report (which had raised revenue estimates). More than half of the latest reduction is due to the fiscal impact of three special session bills approved in the last week or two, which have a combined cost of $117 million.

The LFB says the state will end the current fiscal year with a gross balance of $121.4-million, which amounts to a net balance of $56.4 million if the required statutory balance of $65-million is subtracted. However, in light of the various shortfalls or debts that weren’t subtracted from the balance yet (Medicaid, medical malpractice debt, etc.), the Governor will probably still ask the Legislature to take up a budget adjustment bill to balance the current year’s budget.

Getting back to the more positive aspects of the LFB memo, the $54 million increase in the state’s projected balance in FY 2011 comes even though the Legislative Audit Bureau recently subtracted $45.3-million from the 2009-10 closing balance because certain transfers and expenditures were incorrectly recorded in that fiscal year. That negative adjustment to available state funding was more than offset by several other factors:

   •  Sum sufficient appropriations are expected to spend $69.6 million less than reflected in the November-December reports due to a reduction in debt service payments and application of bond premiums associated with recently-issued general obligation bonds.
   •  Departmental revenues are projected to be $20.7-million above those included in the Doyle Administration reports.
   •  Estimated lapses to the General Fund are $21.9 million above those reflected in the previous reports.

The bottom line is that the state faces a deficit of well over $3 billion in the next biennium.  The Fiscal Bureau hasn’t updated that figure, but it appears that the magnitude of the problem didn’t change very much today, relative to what we were already anticipating.

Jon Peacock

Categories: Blog, Medicaid, taxes | Comments Off on New LFB Report Has a Mixture of Good and Bad Budget News, as Newly Passed Bills Add to the Deficit

Comments are closed.