Thursday night (June 25) the budget conference committee approved a comprehensive agreement that resolves the budget differences between the Assembly and the Senate. The conference committee’s revised budget bill was later approved by the Senate by a vote of 17-15, with all the Republicans and one Democrat voting against it. An Assembly vote is expected later today or tomorrow.
Most of the issues we have been following over the last six months are unchanged since the Joint Finance Committee (JFC) wrapped up its work on the budget about four weeks ago. But there are numerous fiscal and policy issues that have been changed since then, and a 129-page Legislative Fiscal Bureau summary explains those issues and how they were resolved.
The biggest change made by the committee is that the bill deletes the proposed oil company tax, which would have generated $260 million for transportation spending over the next two years. The Senate had proposed replacing that revenue by eliminating the current income tax break for capital gains. The conference committee didn’t go that far, but their compromise generates $72.3 million by reducing that tax break to an exclusion of 30 percent of capital gains (compared to 60 percent now, and 40 percent in the JFC budget).
The rest of the hole left in transportation financing is filled primarily by increasing bonding, but there’s also a reduction in the transfer of funding from the Transportation Fund to the General Fund. That necessitates a number of GPR spending cuts, including these two:
• An additional $7 million GPR per year (and $15 million/yr in federal matching funds) from spending for Medicaid and related program like SeniorCare and BadgerCare plus.
• An added $3 million per year cut from tobacco control grants.
On some of the other issues that were still unresolved, the committee took the following actions:
• Cuts start-up funding for 4-year-old kindergarten programs, by $1.5 million in 2010-11, although that restores half of the base funding level eliminated by the JFC.
• Deletes the provisions that would have eliminated the Learnfare program.
• Approves full indexing of the formula for calculating Homestead tax credits.
• Approves the Senate amendment increasing the county share of the costs at the mental health institutes.
• Rejects the proposed indexing of the minimum wage.
Monday morning we will post an updated version of our comprehensive comparative summary of the budget.
Friday, June 26, 2009
Thursday, June 25, 2009
Special Circumstances May Necessitate Special Session
The Governor has been getting worried that the budget bill won’t be passed and signed before July 1. A late budget isn’t out of the ordinary; in fact, the biennial bill is almost never signed into law before the July 1 start of the biennium. But Governor Doyle notes that the stakes are much higher this year because of the state’s huge deficit, and because the state would lose significant federal funding if it doesn’t enact certain budget measures in the next few days.
With that concern in mind, the Governor announced Tuesday that he was calling the legislature into a special session on June 24 to act on Special Session SB 1, which would make the changes added to the budget bill a month or so ago relating to the hospital assessment. According to a letter from DOA Secretary Michael Morgan, those changes have to be signed into law by Monday, June 29, for the state to be able to capture an additional $60.5 million in assessment fees and $74 million in federal Medicaid revenue. That additional revenue would be used to increase Medicaid reimbursements to hospitals by $108 million, with $26.6 million left to reduce spending from the General Fund during the current (2008-09) fiscal year.
Democrats in the Assembly and Senate haven’t rushed to action on the special session bill. They said they are committed to ensuring that WI doesn’t lose the federal dollars, but they apparently think the legislature can pass the whole budget bill by Monday.
A budget conference committee began meeting Wednesday evening, June 24, and is meeting again today to try to resolve more than 180 areas where there are differences between the Assembly and Senate versions of the biennial budget. Those differences are described in a comprehensive LFB comparative summary document. The extent of progress made today in the conference committee will probably determine whether action on a separate hospital assessment bill is necessary.
With that concern in mind, the Governor announced Tuesday that he was calling the legislature into a special session on June 24 to act on Special Session SB 1, which would make the changes added to the budget bill a month or so ago relating to the hospital assessment. According to a letter from DOA Secretary Michael Morgan, those changes have to be signed into law by Monday, June 29, for the state to be able to capture an additional $60.5 million in assessment fees and $74 million in federal Medicaid revenue. That additional revenue would be used to increase Medicaid reimbursements to hospitals by $108 million, with $26.6 million left to reduce spending from the General Fund during the current (2008-09) fiscal year.
Democrats in the Assembly and Senate haven’t rushed to action on the special session bill. They said they are committed to ensuring that WI doesn’t lose the federal dollars, but they apparently think the legislature can pass the whole budget bill by Monday.
A budget conference committee began meeting Wednesday evening, June 24, and is meeting again today to try to resolve more than 180 areas where there are differences between the Assembly and Senate versions of the biennial budget. Those differences are described in a comprehensive LFB comparative summary document. The extent of progress made today in the conference committee will probably determine whether action on a separate hospital assessment bill is necessary.
Friday, June 19, 2009
Eliminating the State Tax Break on Capital Gains
A key element of the Senate’s plan to balance the state budget is the elimination of the income tax break for capital gains income. A short issue brief on the topic by the Wisconsin Budget Project notes that Wisconsin is one of just 9 states that treat capital gains income differently than other income. The other 8 states are mostly relatively small and account for just 4.6% of the total US population.
Using figures from a recent Legislative Fiscal Bureau paper, the brief notes that the top 1.9% of Wisconsin taxfilers, those with income over $200,000, receive 51% of the benefit of the capital gains exclusion.
Another good source of information on the topic is a March 2009 report by the Institute on Taxation and Economic Policy, "A Capital Idea: Repealing State Tax Breaks for Capital Gains Would Ease Budget Woes and Improve Tax Fairness."
Whereas the Senate budget bill would repeal the capital gains tax break, the Governor and Assembly recommended reducing it from a 60% exclusion to a 40% exclusion, and unlike the Senate they propose a new oil company tax. Those differences will have to be settled in negotiations between the two houses over the next week or two.
Using figures from a recent Legislative Fiscal Bureau paper, the brief notes that the top 1.9% of Wisconsin taxfilers, those with income over $200,000, receive 51% of the benefit of the capital gains exclusion.
Another good source of information on the topic is a March 2009 report by the Institute on Taxation and Economic Policy, "A Capital Idea: Repealing State Tax Breaks for Capital Gains Would Ease Budget Woes and Improve Tax Fairness."
Whereas the Senate budget bill would repeal the capital gains tax break, the Governor and Assembly recommended reducing it from a 60% exclusion to a 40% exclusion, and unlike the Senate they propose a new oil company tax. Those differences will have to be settled in negotiations between the two houses over the next week or two.
Thursday, June 18, 2009
Senate Completes Its Budget Changes
The State Senate passed its version of the budget last night on a 17-16 vote, with one Democrat, Jim Sullivan of Wauwatosa, joining the Republicans to vote against it. In general, WCCF likes what the Senate did. A couple examples of changes we support are indexing the minimum wage and eliminating the generous capital gains tax break. They also came up with a reasonable compromise to address the low-income rental housing tax exemption conundrum. We were disappointed to see that the Senate deleted some of the positive changes to W-2 put in the budget by the Joint Finance Committee. A conference committee will now be appointed to resolve the differences between the Senate and Assembly versions of the budget. For more information on the Senate's action, check out our reaction statement, our ever-evolving analysis of the budget's impact on kids and families at each stage in the process, and the Legislative Fiscal Bureau's summary of the Senate bill.
Tuesday, June 16, 2009
State Budget Update
As the sun was coming up on Saturday, June 13, the State Assembly was finishing their work on the state budget. After a full week of meetings and caucuses, the Assembly finally went to the floor late Friday night to debate the state budget bill. Now the State Senate has their turn to caucus and debate the budget bill. The Senate hopes to begin their floor debate on Wednesday, June 17.
The Governor and Legislature are dealing with a very large budget deficit of $6.5 billion and trying to maintain core programs that are needed for children and families. So far, WCCF is very pleased to see that the cut to Youth Aids funding has been restored, BadgerCare Plus and the Wisconsin Shares child care program funding levels maintained from Joint Finance, and improvements made to the W-2 program.
We are disappointed that federal stimulus funds were not used to improve the quality of child care by creating a Quality Rating System, and were sorry to see that a plan to return 17-year-olds to the Juvenile Justice System was not adopted. Please review our memos (WCCF's and the Early Learning Coalition's) to the legislature as they continue their work on the state budget.
http://www.wccf.org/pdf/AB75_memo_060809.pdf
http://www.wccf.org/pdf/memo_elc_jfc_060909.pdf
We still hope that legislators can reconsider these policies. You can visit the State Legislature's website and Wispolitics.com to follow along on the state budget debate. And of course, check the "Budget Essentials" page of the WCCF website regularly for ongoing analysis of the state budget and its impact on kids and families as the process continues to unfold.
The Governor and Legislature are dealing with a very large budget deficit of $6.5 billion and trying to maintain core programs that are needed for children and families. So far, WCCF is very pleased to see that the cut to Youth Aids funding has been restored, BadgerCare Plus and the Wisconsin Shares child care program funding levels maintained from Joint Finance, and improvements made to the W-2 program.
We are disappointed that federal stimulus funds were not used to improve the quality of child care by creating a Quality Rating System, and were sorry to see that a plan to return 17-year-olds to the Juvenile Justice System was not adopted. Please review our memos (WCCF's and the Early Learning Coalition's) to the legislature as they continue their work on the state budget.
http://www.wccf.org/pdf/AB75_memo_060809.pdf
http://www.wccf.org/pdf/memo_elc_jfc_060909.pdf
We still hope that legislators can reconsider these policies. You can visit the State Legislature's website and Wispolitics.com to follow along on the state budget debate. And of course, check the "Budget Essentials" page of the WCCF website regularly for ongoing analysis of the state budget and its impact on kids and families as the process continues to unfold.
Friday, June 12, 2009
Assembly Amendment Improves Homestead Tax Credit Program
Among the amendments to the budget package being taken up by the Assembly today is one that makes a long overdue change to the Homestead Tax Credit program.
The Homestead Credit is a critical program in making property taxes less burdensome for low-income households in Wisconsin. In most respects, it is a very well targeted and well designed form of property tax relief. However, unlike most other portions of the Wisconsin tax code, it is not indexed for inflation.
Most components of the Homestead formula have not been changed since 1991 (with the exception of the upper income limit, which was last increased in tax year 2001). As the chart below indicates, inflation has been eroding the value of the program:
• The inflation-adjusted value of the maximum credit has declined by 37 percent since 1991.
• The real value of the average credit has fallen by $178, or 26 percent.
The Governor’s budget bill and Finance Committee version recommended indexing the income eligibility ceiling for inflation. (See LFB paper # 707 for more info.) That’s a very significant step forward, but wouldn’t fully address the problem. Anyone who has property taxes of $1,450 or more and annual income of $8,000 or less would see no benefit from that change.
Assembly Democrats approved a change offered by Rep. Krusick to index the full Homestead formula, which has long been a priority of WCCF. (See, for example, our January 2009 analysis. ) That amendment won’t change the credit in the next year or two, but will prevent future erosion of the credit for all low-income households.
We are optimistic that full indexing will be approved by the Assembly. The fate of that amendment will then be in the hands of the Senate and ultimately the Governor.
(Source: Wisconsin Budget Project analysis of DOR data)
The Homestead Credit is a critical program in making property taxes less burdensome for low-income households in Wisconsin. In most respects, it is a very well targeted and well designed form of property tax relief. However, unlike most other portions of the Wisconsin tax code, it is not indexed for inflation.
Most components of the Homestead formula have not been changed since 1991 (with the exception of the upper income limit, which was last increased in tax year 2001). As the chart below indicates, inflation has been eroding the value of the program:
• The inflation-adjusted value of the maximum credit has declined by 37 percent since 1991.
• The real value of the average credit has fallen by $178, or 26 percent.
The Governor’s budget bill and Finance Committee version recommended indexing the income eligibility ceiling for inflation. (See LFB paper # 707 for more info.) That’s a very significant step forward, but wouldn’t fully address the problem. Anyone who has property taxes of $1,450 or more and annual income of $8,000 or less would see no benefit from that change.Assembly Democrats approved a change offered by Rep. Krusick to index the full Homestead formula, which has long been a priority of WCCF. (See, for example, our January 2009 analysis. ) That amendment won’t change the credit in the next year or two, but will prevent future erosion of the credit for all low-income households.
We are optimistic that full indexing will be approved by the Assembly. The fate of that amendment will then be in the hands of the Senate and ultimately the Governor.
(Source: Wisconsin Budget Project analysis of DOR data)
Thursday, June 11, 2009
WCCF Analysis of Joint Finance Committee Budget
Earlier this week, WCCF released its analysis of the impact of the Joint Finance Committee’s budget on children and families. The WCCF analysis is updated with each step of the budget process.
Although the Joint Finance budget does include more than $300 million in additional revenue compared to the Governor’s bill, that figure is dwarfed by a further decline of $1.6 billion in projected state tax collections. To help close the larger deficit, the Joint Finance budget cuts almost $944 million more over the next biennium than the Governor proposed. These cuts include almost $341 million from school aids and $251 million more from state agencies, which increases the cuts for most agencies to 3.5%. The 3.5% cuts to agencies are on top of the $222 million cut from the budget by furloughing state workers and rolling back pay increases.
For a rundown of highlights and lowlights in the JFC budget, see the analysis on our website and our press release about it (from which much of the text you just read is lifted).
Although the Joint Finance budget does include more than $300 million in additional revenue compared to the Governor’s bill, that figure is dwarfed by a further decline of $1.6 billion in projected state tax collections. To help close the larger deficit, the Joint Finance budget cuts almost $944 million more over the next biennium than the Governor proposed. These cuts include almost $341 million from school aids and $251 million more from state agencies, which increases the cuts for most agencies to 3.5%. The 3.5% cuts to agencies are on top of the $222 million cut from the budget by furloughing state workers and rolling back pay increases.
For a rundown of highlights and lowlights in the JFC budget, see the analysis on our website and our press release about it (from which much of the text you just read is lifted).
Wednesday, June 10, 2009
Janesville Council Resolves to End Child Poverty
On Monday night, the Janesville City Council passed a resolution in support of the goals of our Vision 2020 Campaign to End Child Poverty. The text of the resolution does not seem to be online yet, but according to the Janesville Gazette report (you can save time by skipping to the very last line of the story), a task force will be formed by August, and a report outlining action steps produced within six months. Janesville joins La Crosse and Dane Counties as public bodies officially proclaiming their support for the notion of obliterating child poverty in Wisconsin.
Thursday, June 4, 2009
BadgerCare Plus Coverage for Childless Adults Starting Up
In the coming weeks, Wisconsin will begin for the first time to offer a statewide health insurance plan for low-income adults who don’t have dependent children. Statewide implementation of this new coverage, know as the BadgerCare Plus Core Plan, will be a major step forward in Wisconsin’s efforts to reach the Governor’s goal of ensuring that 98 percent of state residents have access to health insurance.
The Department of Health Services will begin taking applications on June 15, and coverage will begin after July 15. The new plan is available for childless adults with incomes below 200 percent of the federal poverty level ($21,660 per year for a single person or $29,140 for a married couple). To qualify for coverage, the individual must not currently have access to insurance from an employer and cannot have had private insurance in the previous 12 months. However, there are several “good cause” exceptions, such as being laid off or fired from a job through no fault of one’s own.
A new paper on the WCCF website summarizes the BadgerCare Plus Core Plan and examines the gap in existing insurance coverage that it will help fill. The paper also discusses some of the factors that enable the state to proceed with implementation of the plan in spite of the recession. Those factors include the substantial federal Medicaid funding provided in the economic stimulus plan and the agreement by Wisconsin Hospitals Association to a new hospital assessment, enacted in February 2009, with a portion of that new revenue and the federal matching funds being using for the childless adult coverage.
A key consideration in the Governor’s decision to move ahead with the Core Plan and in the Wisconsin Hospital Association endorsement of the hospital assessment is the importance of reducing the “hidden tax” – i.e., the cost shifted onto other health care consumers because of uncompensated care provided to the uninsured. By allowing the new childless adult coverage to proceed and by protecting gains made in covering children and parents, the budget repair bill and biennial budget bill create a health care system that is more focused on cost-effective preventive care, while also capturing federal matching funds that are not available to the state and to providers when uncompensated care is provided to the uninsured.
The Department of Health Services will begin taking applications on June 15, and coverage will begin after July 15. The new plan is available for childless adults with incomes below 200 percent of the federal poverty level ($21,660 per year for a single person or $29,140 for a married couple). To qualify for coverage, the individual must not currently have access to insurance from an employer and cannot have had private insurance in the previous 12 months. However, there are several “good cause” exceptions, such as being laid off or fired from a job through no fault of one’s own.
A new paper on the WCCF website summarizes the BadgerCare Plus Core Plan and examines the gap in existing insurance coverage that it will help fill. The paper also discusses some of the factors that enable the state to proceed with implementation of the plan in spite of the recession. Those factors include the substantial federal Medicaid funding provided in the economic stimulus plan and the agreement by Wisconsin Hospitals Association to a new hospital assessment, enacted in February 2009, with a portion of that new revenue and the federal matching funds being using for the childless adult coverage.
A key consideration in the Governor’s decision to move ahead with the Core Plan and in the Wisconsin Hospital Association endorsement of the hospital assessment is the importance of reducing the “hidden tax” – i.e., the cost shifted onto other health care consumers because of uncompensated care provided to the uninsured. By allowing the new childless adult coverage to proceed and by protecting gains made in covering children and parents, the budget repair bill and biennial budget bill create a health care system that is more focused on cost-effective preventive care, while also capturing federal matching funds that are not available to the state and to providers when uncompensated care is provided to the uninsured.
Monday, June 1, 2009
Youth Aids Restored and other Juvenile Corrections Budget Items
Under the corrections omnibus motion (motion #670), Youth Aids was restored to its current law amount of $100,790,200. The Governor had recommended a 1% and then 5% cut to the Youth Aids allocation, for a total cut of$5.9 million. The Motion creates a FED appropriation for the $5.9 million for this biennium, and returning the funding to the $100.8 million level.
The juvenile corrections daily rate was kept at the Governor’s recommended level of $270 per day in 2009-2010, and then $275 in 2010 – 2011. Joint Finance revised downward their estimate down of the number of juveniles who would be in institutions, from 605 in 2009 and 610 in 2010 to 587 annually. Typically a projected reduction in population would lead to a greater daily rate, but instead Division of Juvenile Corrections funding was reduced by $1.8 M in 2009-2010 and $2.3 M in 2010-2011 to reflect lower levels of salaries and fringe benefits for vacant positions and reduced population-related costs.
Finally, the motion directs DOA and DOC and any other relevant state agencies to conduct a "comprehensive review of juvenile corrections funding and services." Also included in the review are: an inventory of all the juvenile correctional services provided by counties and nonprofits and a description of mental health and AODA services available at the JCIs and Mendota. The review must include the participation of youth counselors from the institutions, and is due to Joint Finance by January 4, 2010.
The juvenile corrections daily rate was kept at the Governor’s recommended level of $270 per day in 2009-2010, and then $275 in 2010 – 2011. Joint Finance revised downward their estimate down of the number of juveniles who would be in institutions, from 605 in 2009 and 610 in 2010 to 587 annually. Typically a projected reduction in population would lead to a greater daily rate, but instead Division of Juvenile Corrections funding was reduced by $1.8 M in 2009-2010 and $2.3 M in 2010-2011 to reflect lower levels of salaries and fringe benefits for vacant positions and reduced population-related costs.
Finally, the motion directs DOA and DOC and any other relevant state agencies to conduct a "comprehensive review of juvenile corrections funding and services." Also included in the review are: an inventory of all the juvenile correctional services provided by counties and nonprofits and a description of mental health and AODA services available at the JCIs and Mendota. The review must include the participation of youth counselors from the institutions, and is due to Joint Finance by January 4, 2010.
Joint Finance Budget Includes W-2 Improvements
The Joint Finance Committee's version of the 2009-2011 state budget, approved early Friday morning, includes a number of improvements to the state’s W-2 program. The omnibus motion which contains those parts of the budget – and others – can be accessed at http://www.legis.state.wi.us/lfb/2009-11Budget/JFC/Motions/744.pdf.
Here’s a short summary of what was approved related to W-2:
1. The committee voted to use caseload projections for W-2 that are based on current levels and the recent upward trend, something the Governor’s budget failed to do as it assumed flat caseloads throughout the next biennium. Not only have caseloads already risen due to the recession, but they may go higher yet. JFC assumed higher caseloads and allocated additional federal TANF dollars to pay for benefits for the increased number of participants ($5.3 million in federal funds in 2009-10, and $6.9 million in 2010-11).
2. $3 million more in federal funds were allocated for W-2 services for each year of the biennium.
3. The JFC budget includes a provision stating that in the next round of W-2 contracts, the Department of Children and Families must prohibit W-2 agencies from requiring “up-front” job search” requirements, something that may have been keeping many eligible residents from participating in the program.
4. The JFC budget modifies the current law surrounding pregnant women who currently have no children and what they are eligible for within W-2. Currently, they may receive case management and job search assistance, but no cash benefit. The budget allows that for those in a medically-verifiable at-risk pregnancy, they may receive a cash benefit for that period of time. The change simply takes account of the fact that some women in at-risk pregnancies may not physically be able to search for work at that time.
Also in the area of TANF funding, the state’s Emergency Assistance allocation will be increased from its base level of $6 million per year by another $500,000 in 2009-10, and will return to base level in the second year of the biennium. The governor had requested an additional $1 million in 2009-10.
Here’s a short summary of what was approved related to W-2:
1. The committee voted to use caseload projections for W-2 that are based on current levels and the recent upward trend, something the Governor’s budget failed to do as it assumed flat caseloads throughout the next biennium. Not only have caseloads already risen due to the recession, but they may go higher yet. JFC assumed higher caseloads and allocated additional federal TANF dollars to pay for benefits for the increased number of participants ($5.3 million in federal funds in 2009-10, and $6.9 million in 2010-11).
2. $3 million more in federal funds were allocated for W-2 services for each year of the biennium.
3. The JFC budget includes a provision stating that in the next round of W-2 contracts, the Department of Children and Families must prohibit W-2 agencies from requiring “up-front” job search” requirements, something that may have been keeping many eligible residents from participating in the program.
4. The JFC budget modifies the current law surrounding pregnant women who currently have no children and what they are eligible for within W-2. Currently, they may receive case management and job search assistance, but no cash benefit. The budget allows that for those in a medically-verifiable at-risk pregnancy, they may receive a cash benefit for that period of time. The change simply takes account of the fact that some women in at-risk pregnancies may not physically be able to search for work at that time.
Also in the area of TANF funding, the state’s Emergency Assistance allocation will be increased from its base level of $6 million per year by another $500,000 in 2009-10, and will return to base level in the second year of the biennium. The governor had requested an additional $1 million in 2009-10.
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