As has been noted in the WCA eNews and other communications, state revenue re-estimates in May showed declining state revenues, which meant that the state budget deficit projected for 2009-2011 had increased. This newest part of the shortfall adds $1.6 billion to the projected deficit.
The new larger state deficit caused legislative leaders to suspend action on the budget temporarily. The Joint Committee on Finance ceased its budget deliberations for several days while legislative leaders and the Governor discussed options to address the new revenue shortfall.
The state budget situation began to move forward last week on Thursday, May 21 when Governor Doyle held a press conference to announce a package of decisions that collectively address the new shortfall. The Governor was joined at the press conference by the two co-chairs of Joint Finance, Sen. Mark Miller and Rep. Mark Pocan. The measures they announced have been agreed to by all three.
Typically the Governor and his administration would not be as involved in budget discussions during the "Joint Finance" stage of the budget, but addressing a situation of this magnitude required input from the Governor on what he would be willing to sign into law and on what administrative actions the executive branch would be willing and able to take on its own to address the shortfall.
These decisions will have to be formalized by the Finance Committee and by the Legislature. However, under the circumstances the announced package provides a new point from which budget discussions will advance.
The plan announced on May 21, 2009 calls for:
- Additional 5% cuts across the board to all state agencies (in addition to the 1% cut included in the Governor's proposed budget from this past February). Governor Doyle said the 5% reductions will be across-the-board, but will not cut necessary services, the UW or maintenance of effort in order to continue to attract federal stimulus money.
- Shared revenue will also be cut by an additional 2.5% (in addition to the 1% cut to shared revenue included in the Governor's proposed budget from this past February, a point confirmed by DOA on Friday, May 22). It's not yet clear how this new cut will be allocated. The actual motion to make this change is expected to come before the Finance Committee after Wednesday, May 27.
- There will be an additional 2.5% cuts in school aids. Governor Doyle also said that there will be a reduction to the school revenue limit in the allowable income per student, but was not certain of the actual number.
The total GPR saved by these cuts is estimated at $669.7 million over the biennium.
- The 911 fee approved previously for 911 equipment will be taken by the state for the next two years. Gov. Doyle has indicated that collections from the fee will be "redirected to support police and fire protection." This is expected to mean that the money will be used to help make shared revenue payments to municipalities and counties. Money from the 911 fee will substitute for at least $100 million in GPR that would have supported shared revenues. Most participants in the agreement who have spoken of the "redirection" and have indicated that it will be temporary, i.e. for the duration of the 2009-2011 biennium, although details on this point have not yet been announced. The actual motion to make this change is expected to come before the Finance Committee after Wednesday, May 27.
- Additional furloughs and rollbacks of the 2% state worker pay raises, which will generate savings estimated at $224 million over the biennium. (Union approval of this proposal will be needed for represented employees. NOTE: On May 26, it was announced that AFT Local 212, which represents faculty and staff at Milwaukee Area Technical College, voted overwhelmingly to give back a 3.25% pay raise for the 2009-10 academic year. Other similar votes are no doubt being planned.)
Despite the savings, Gov. Doyle commented in his press conference on May 21 that he anticipates a need to lay off 1,000 state employees. If the rollbacks of the 2% state worker pay raises are not approved, Governor Doyle said that he thinks an additional 400 layoffs could be necessary.
- Re-estimates of the Medicaid/hospital assessment will reduce the deficit another $165 million. This seems to involve an increased assessment that will, in turn, result in increased receipts of federal money. The actual motion to make this change is expected to come before the Finance Committee after Wednesday, May 27.
- Some state debt will be restructured, resulting in $285 million saved in interest charges.
- A combination of improvements to state tax collections, modifications to plans for increased tax credits, and other adjustments will collectively reduce the deficit by $185.2 million.
Doyle said he would utilize some of the Build America bonding to finance transportation projects, but did not say he had discarded the oil company assessment proposal in his budget.
Other Budget Items of Note:
On Friday, May 22 and Saturday, May 23, the Joint Finance Committee voted to take the following steps that is of interest to counties.
- Tipping fees and Clean Sweep: Joint Finance voted to raise the tipping fees from $5.09 per ton to $13 per ton and reinstate the Clean Sweep program at a funding of 75 % of the current level. This motion was authored by JFC co-chair, Senator Mark Miller, and passed 12-4.
- Prevailing Wage: Gov. Doyle's budget would have required the prevailing wage to be paid on all public works projects with a cost of more than $2,000, including private projects that received any public funding. WCA opposed these changes.
In response, the Joint Finance Committee raised the threshold for prevailing wage projects to $25,000, delayed its effective date until Jan. 1, 2010, and exempted minor service maintenance and warranty work as well as private projects that receive less than $1 million in direct financial assistance from local governments. The committee's version would also apply the prevailing wage to any contract between two or more local units of government in which one unit of government performs covered work for the other.
- Domestic Partners: On Friday, May 22, the Finance Committee adopted Gov. Doyle's proposal to allow same-sex couples to register as domestic partners but also made several changes sought by WCA. Specifically, the new domestic partner registrations will be treated as a vital record, and not as a miscellaneous record, by the state and local registers of deeds; and the domestic partnership provisions won't take effect until 30 days after the budget bill is published, which gives the state and local officials some time to prepare for the new registration requirements.
- Mental Health: In Joint Finance action on Saturday, May 23, the Governor's position prevailed, with a starting date of January 1, 2010. None of the language changes sought by WCA were acted upon. If the budget moves through as is, WCA believes we will have to pursue separate language (a separate bill) to deal with the issue of emergency detentions. There are some indications that the Joint Finance Committee may be making more changes in this area, however, so we continue to monitor the issue.
- Income Maintenance: Action on Saturday, May 23, by the Finance Committee in this area is thought (preliminarily) to restore funding for counties in 2010 and 2011 contracts, since the funding amounts adopted will not be paid to Milwaukee County under the terms of the state's takeover of IM functions in Milwaukee County.
- Indigency and Public Defender positions: the Joint Finance Committee voted to create 49.3 GPR-funded positions for indigent legal defense counsel, including 32.3 attorneys, but the move will be delayed until the end of the 2011 fiscal year. In addition to the attorney positions, the motion also created several support positions related to indigency defense. The motion also addressed the indigency standard. The standard adopted by the Joint Finance Committee is 115 % of the federal poverty level, and this change will take effect on June 30, 2011.
WCA is reviewing this latest packet of changes and assessing our opportunities to influence these proposals. Given the extreme fiscal distress facing the state, it's not at all clear that this package can be subject to changes, and if so, to what extent. For additional questions, contact WCA Legislative Director John Reinemann via email or at 866.404.2700.
