Looking at the Budget “Repair” Bill

Well, the budget repair bill is out.  As expected, it’s a heaping pile of irresponsible crap that uses borrowing and accounting tricks.  It also includes additional spending.  That’s right.  Only in Wisconsin could the politicians manage to craft a bill to fix a budget deficit that includes additional spending.  Here’s the LFB memo. 

Any self-respecting Conservative should reject this out of hand.  There isn’t even enough in there to work with.  Let’s go through it one item at a time.  I have grouped them into convenient categories.  If you want to jump to the bottom for a few quick comments, I won’t be offended. 

Borrowing

Specify that not more than $50,000,000 may be lapsed or transferred to the general fund in the 2007-09 biennium from the Department of Transportation appropriations under a provision of Act 20 that requires total lapses and transfers to the general fund of $200,000,000 from executive branch agencies during the 2007-09 biennium.

[...]

Under this provision, the $50,000,000 that could be transferred to the general fund would be replaced with $50,000,000 in general obligation bonds.

Technically, this one could be both an accounting trick AND borrowing.  Basically, it’s a fund raid that allows the Transportation Fund to borrow the money to fill the hole created by the raid.  The taxpayers will then have the priveledge of paying back the debt with interest. 

Reduce funding by $28,000,000 SEG in 2008-09 for the major highway development program and provide a corresponding increase of $28,000,000 SEG-S (from currently-authorized transportation revenue bonds) in 2008-09 for the program.

[...]

The one-time reduction in SEG funding is intended to eliminate a projected transportation fund deficit of $27.5 million, leaving an estimated fund balance of $0.5 million. Currently-authorized transportation revenue bonds would be used to keep the major highway development program at the same overall funding level.

In other words, borrow to fill the deficit left in the transportation fund. 

Spending Increases

Provide increases of $20,000,000 in 2007-08 for the major highway development program and $56,967,500 in 2007-08 for the state highway rehabilitation program.

I’ll just let that one speak for itself.  

Modify the 2007 Wisconsin Act 20 changes to the utility aid component of the shared revenue program that will take effect in 2009 by creating a hold-harmless payment for qualifying municipalities. Provide that any municipality containing a production plant that began operating before 2004 shall receive the greater of the payment based on the combined aid amounts for production plant, substation, and general structure property in the municipality under the Act 20 provisions or the combined aid amounts based on that same property’s value as used to calculate the municipality’s payment in 1990, reduced to reflect the value of property no longer in use.

[…]

No fiscal effect is reflected for the 2007-09 biennium because the provision will first effect payments in 2009 (2009-10). Therefore, the increased expenditures are delayed until the first year of the 2009-11 biennium.

This is actually a spending increase for the next budget.  Apparently they weren’t content using this bill to increase spending in this budget.  They wanted a head start on the next budget too. 

Authorize the Department of Employee Trust Funds (ETF) to pay the premiums for any health care coverage or long-term care coverage for a Wisconsin Retirement System (WRS) annuitant who is a “public safety officer” from the individual’s retirement annuity or deferred compensation account.

[…]

Provide $307,100 SEG and 3.2 SEG positions (1.1 FTE permanent and 2.1 FTE two-year project positions) in 2008-09 for the implementation and operational costs of the provisions.

This is an item that I’d probably be OK with in the abstract, but in the face of a budget deficit, why are we adding spending?

Specify that, if a school board establishes a four-year-old kindergarten (K4) program, the program must be available to all eligible pupils. Provide that a school board that is operating a K4 program in the 2007-08 school year that did not comply with this requirement would need to be in compliance by the beginning of the 2013-14 school year. Specify that a K4 pupil enrolled in such a program would be included in the definition of membership for revenue limit and general school aid purposes.

This is the gift to WEAC.  Current law counts the K4 kids as 0.5 or 0.6 pupils for the purpose of revenue limits and two-thirds funding.  This would include them as full pupils – thus guaranteeing a spending increase for every district in Wisconsin that operates a K4 program.  It also forces districts who want to implement K4 to do it district wide.  For a large city, this means that they can’t just open up a program or two to try it out.  They have to make facilities and teachers available to every 4 year old in the district within five years of startup. 

Increase funding for tobacco use control grants by $250,000 in 2008-09. Current base funding for these grants is $15,000,000 annually.

This looks like a way to alleviate someone’s guilt for messing with the tobacco settlement funds again. 

Provide $18,600,000 in 2007-08 for direct child care subsidies under the Wisconsin Shares program, including funding for child care subsidies, local administration, on-site child care at job centers and counties, and migrant child care. The additional funds would address an anticipated shortfall in the Wisconsin Shares program.

 

Accounting Tricks

Require the Secretary of DOA to lapse or transfer $69,000,000 biennially to the general fund from the unencumbered balances of appropriations of executive branch state agencies, other than sum sufficient appropriations and federal appropriations, during each of the 2007-09 and 2009-11 fiscal biennia. This $69,000,000 lapse or transfer requirement would be in addition to the similar $200,000,000 biennial lapse or transfer requirement under 2007 Act 20.

Theoretically, this is money that is supposed to result of spending cuts in the agencies.  Unfortunately, this isn’t happening.  We found out a couple of weeks ago that Doyle’s previous attempt at saving $200 million HAS BEEN ABANDONED.  Explain to me how Doyle’s going to find another $69 million in spending cuts on top of $200 million in spending cuts that he was unable to do.  He can’t even get to $200 million.  He’s not going to get to $269 million.  This item is just fiction.

Prohibit the Joint Committee on Finance from providing an appropriation supplement to the Department of Transportation for the cost of implementing provisions of the federal Real ID Act.

This looks like a spending cut, but it really isn’t.  It cuts $21,989,300 for implementing the Real ID Act and transfers the money to the general fund.  But implementing the Real ID act is de-facto mandatory unless Wisconsinites are cool with their drivers’ licenses being invalid for federal purposes.  So while this looks like a spending cut, it is actually just delaying this spending into the next budget. 

Also notice that this was the excuse for the increased vehicle registration fee that was passed in the budget.  So now there is a fee that is being collected to implement the Real ID act, but the money is being taken used in the general fund instead.  Bait and switch, anyone? 

Permanently delay the April quarterly county general transportation aid payment until July and provide additional funding for state highway maintenance in 2008-09. Reduce the funding necessary to make county general transportation aid payments by $24,846,900 in 2008-09 and make a corresponding, one-time increase to the state highway maintenance appropriation in 2008-09.

This is listed as a non-budgetary policy change, but it does have a purpose.  What’s significant about moving the April payment to July?  Wisconsin’s fiscal year ends on June 30th.  This moves the payment into the next budget for 2009. 

Increase the amount of equalization aid paid on a delayed basis by $125 million, from $75 million to $200 million, beginning with payments made in 2008 for the 2007-08 school year. Also, change the date of the total $200 million delayed payment from the current law fourth Monday in July to the first Monday in July. Reduce the general school aids appropriation by $125 million in 2007-08 to reflect the delay.

They are merely delaying payment into the next budget.  The spending isn’t going away.  It’s just being shoved into the next budget so we can deal with it next spring – after the elections. 

Transfer $57 million of the amount in the budget stabilization fund (currently at $57.5 million) to the general fund in 2007-08.

Well, that’s what the fund is for.  Of course, now we’ll be asked to fill it back up in the next budget. 

Reduce the required statutory balance from $65 million to $25 million for 2007-09.

The statutory balance is simply cash that is kept in the bank to cover any unexpected expenditures.  They are reducing the required balance from $65 million to $25 million so that they can just spend the $40 million difference.  This introduces additional risk should an unexpected expenditure rear its ugly head. 

Increase the transfer from the permanent endowment fund to the medical assistance (MA) trust fund by $209 million in the biennium (from $50 million annually under 2007 Act 20 to $309 million in 2008-09) associated with a second tobacco securitization transaction to be carried out by the Department of Administration (DOA).

[…]

Authorize DOA to issue up to $1.7 billion in appropriation obligation bonds of the state before July 1, 2009, for the purpose of purchasing any of the tobacco settlement revenues that had been sold by the DOA Secretary under current law, unless a higher amount is required to defease any outstanding indebtedness secured by tobacco settlement revenues and to release those revenues to the state free and clear.

That one’s pretty complicated, eh?  Here’s a good explanation from the same memo:

As indicated in the table, this tobacco securitization proposal involves restructuring the timing of future cash flows to the state. The medical assistance trust fund would receive $309 million in 2008-09, and $50 million in tobacco settlement revenues annually from 2009-10 through 2029-30 through transfers from the permanent endowment fund. In exchange, the state would effectively forgo its expected annual tobacco settlement payments ranging from $115 million to $200 million from 2017-18 through 2027-28, which would provide revenues to the general fund needed to pay debt service on the appropriation obligation bonds.

Under the proposed transaction, the state would receive $1,626 million from 2008-09 through 2029-30, but would effectively forgo $2,414 million over the same period, resulting in a net reduction of $788 million.

So we’re restructuring things so that we can get some cash now but it will cost $788 million down the road. 

Reduce funding for medical assistance (MA) benefits by $24,354,600 (-$10,000,000 GPR and - 14,354,600 FED) in 2008-09 to reflect savings the Department of Health and Family Services (renamed the Department of Health Services, effective July 1, 2008) would be expected to generate in the program.

Don’t get me wrong… I think this is a good thing.  I just don’t think it will work.  This is just like the fictional savings that Doyle said that he would get out of the other agencies.  One has to ask, if there was $24 million in cuts in DHS that someone was willing to make, why haven’t we done it already?

Non-Budgetary Policy Changes

Modify the property tax exemption for educational, religious and benevolent institutions, women’s clubs, historical societies, fraternities, and libraries to extend to low-income housing and exclude low-income housing from the “rent use” requirement under current law.

I’m OK with this one.  It extends property tax break to the owners of low-income housing.  It doesn’t list any financial impact because it primarily hits the municipalities – not the state.  Plus, they probably couldn’t get a decent estimate on it.  As far as I can tell, this measure is designed to attract votes from Milwaukee Democrats.  What has a disproportionate amount of low-income housing in Wisconsin?  Milwaukee.  Who do the slum lords in Milwaukee support?  Democrats.  But it will also help out a lot of charitable institutions and churches, so it’s not altogether a bad thing. 

Extend the current law exemption for eligible farmland from special assessments for the construction of a sewerage or water system by a town sanitary district or a town to camps.

This also does not have any numbers for it because it doesn’t hit the state budget.  This strikes me as someone’s pet project.  Look for the guy with a camp or two in his district. 

Modify current law related to the crime of escape by defining “custody” to include actual custody or authorized physical control of persons on probation, parole or extended supervision by the Department of Corrections or under the control of a correctional officer.

This is a good thing.  I’m OK with it.  I’m not sure why it’s in a budget repair bill, but whatever. 

Revise current law relating to the date by which individuals must complete an initial training program before they can solicit, negotiate, or sell long-term care insurance.

Here’s another legislator’s pet project. 

Expand the Department of Agriculture, Trade and Consumer Protection’s (DATCP) telephone solicitation regulation (no-call) program to cellular telephones.

Here’s another one.  I’m fine with this.  It just doesn’t belong in a budget repair bill.

Specify that no person may possess, release, control, store, sell, or transport, any fish, or viable fish eggs that are of an invasive species, if the person knows, or should know, that the fish is, or the eggs of the fish are, of an invasive species.

Yeah, a budget repair bill is a great place for creating a new penalty for transporting invasive species, don’t you think?

Tax/Fee Increases

Increase the fee for an annual non-resident snowmobile trail use sticker (non-resident trail pass) to use public snowmobile corridors in this state from $18 to $35 effective July 1, 2008.

Here’s a fee increase that adds up to $545,000.  Of course, it won’t do much good until the snow starts falling again.  Hope we have a snowy winter. 

Require, under the state individual income and corporate income and franchise taxes, that the deductions claimed for certain rental and interest payments by businesses to related entities be added back when computing state total income.

Under current law, companies are taxed on their profit.  Profit is revenue less expenses, right?  So what a lot of companies do is create a separate company that builds a facility and then rents it back to the first company.  This way the rent is counted as an expense and reduces the profit to be taxed.  The liberals have all been in a tizzy over this ever since it came out that Wal-Mart does this for all of their stores in Wisconsin.  Lots of other companies do it too and it’s perfectly legal. 

By changing this law, businesses operating in Wisconsin will have to pay an additional $15,000,000 in taxes per year. 

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Overall, this is a horrible plan.  Yes, there isn’t a hospital tax, and that’s a good thing.  Yes, it could have been worse.  But this isn’t even good enough for anyone to argue that I’m making perfect the enemy of the good.  I’m just trying to make tolerable the enemy of the rotten. 

This repair bill is utterly irresponsible.  It doesn’t fix anything substantial.  It just shuffles the deck and shoves more expenses into the future. 

The convention this weekend is going to be interesting, to say the least. 

UPDATE: Dad29 has his take here:

Speaker Huebsch should simply resign. This is abominable, disgraceful, and immoral. This is the kind of crap that would place any private-sector employee in Club Fed for fraud.

The Assembly GOP built some support and momentum with their stance during the budget battle.  They can expect an outright defection of conservatives if the rest of the caucus doesn’t stand up to Huebsch.  I know that some in the caucus would like that, but try keeping the majority without conservatives’ money, time, and votes. 

UPDATE2: Here’s the latest update to the memo linked above.  They corrected some flubs and typos.

Posted by Owen at 1801 hrs
Politics + Politics - Wisconsin