While the Wisconsin State Legislature adjourned their regular session last week, work still needs to be completed to fill the anticipated $652 million budget deficit. Administrative action was taken by the Governor to reduce the deficit to $416 million by requiring state agencies to lapse an additional $111 million, and rolling over short-term general obligation borrowing that would otherwise be paid off in 2007-08 and 2008-09.
Governor Doyle introduced a budget adjustment bill filling the remaining $416 million budget gap through lapsing or transferring an additional $219.4 million to the general fund, including additional funding from the transportation fund; transferring $5 million in funding for federal Real ID Act implementation to the general fund; creating an assessment on hospitals' gross patient revenue ($125 million); modifying the method of calculating net income for real estate investment trusts ($6 million); increasing the transfer from the permanent endowment fund to the medical assistance trust fund by $15 million annually; funding public library system aid utilizing the universal service fund instead of GPR ($11.3 million); increasing the limit on interfund borrowing; authorizing transfers from the budget stabilization fund; and modifying the structural balance requirement. As they did during 2007-2009 state budget deliberations, Republican leaders opposed the Governor's proposal, characterizing the hospital assessment as a tax increase.
The Governor adjusted his special session call to address the budget deficit to allow the Assembly to take up the budget March 12, the final day of the regular session in the Assembly. The Assembly rejected the Governor's budget adjustment bill and instead addressed the budget deficit by: transferring $55 million from the budget stabilization fund to the general fund; reducing the required statutory balance from $65 million to $20 million; reduced the Act 20 biennial lapse to $150 million and require, for the 2007-09 and 2009-11 biennia, the DOA Secretary to lapse or transfer $250 million from GPR compensation reserves and appropriations of executive branch agencies, with certain exclusions (the Assembly made no recommendations for the cuts); and delaying a school aid payment a few days into the next biennium.
On March 14, an interesting turn of events occurred with regard to the budget adjustment bill. Wisconsin Manufacturers and Commerce (WMC) announced its support for the hospital assessment to bring in an additional $400 million in increased federal Medicaid payments to Wisconsin. The Metropolitan Milwaukee Association of Commerce also announced its support for the hospital assessment as well. Historically, these two groups oppose any "tax" increase. Republican leaders in both the Assembly and Senate still indicate their opposition to the hospital assessment as a tax increase.
The Senate did not take up the budget adjustment bill during the final days of the regular session; rather they indicated they will take the bill to the Joint Finance Committee. Republicans agreed to participate in the Joint Finance process. On Wednesday, March 19, the Senate Finance Committee held a public hearing on the Assembly version of the budget adjustment bill in Milwaukee.
Following the public hearing the Senate Finance Committee on March 19 released its version of the budget adjustment bill. In comparison to the Assembly version of the bill, the Senate retained the $55 million transfer from the budget stabilization fund to the general fund and the delay in the school aid payment. The Senate modified the statutory balance reduction to $55 million; changed the $250 million lapse of GPR and/or compensation reserves to $40 million in the 2007-09 and 2009-11 biennia and exempted certain appropriations from the lapse requirements. The Assembly version of the bill includes a $111 million lapse under s. 16.50(2); the Senate bill assumes the lapse provision does not take effect.
The Senate budget adjustment bill implements the increase in the hospital assessment; provides the DOA secretary the authority to lapse or transfer funds to the general fund; increases the limit on interfund borrowing to 13% of GPR appropriations for FY 09 only; changes public library system aid from GPR to SEG from the Universal Service Fund; transfers Real ID implementation funds to the general fund from JFC supplemental appropriation; limits the lapse from the Department of Transportation to $50 million, provides general fund supported bonds for state highway rehabilitation; allocates $76.9 million of additional federal highway aid; changes $800,000 in current SEG-lapse to SEG funding for the Kenosha-Racine-Milwaukee (KRM) commuter rail extension; authorizes a vehicle rental fee, up to $15, for the three county area; increases the transfer from the tobacco securitization permanent endowment to the MA trust fund by $18 million annually; reduces the corporate income/franchise tax rate to 7.8%; implements combined reporting for corporations; and modifies the state's sales and use tax laws to conform to the provisions of the Streamlined Sales and Use Tax Agreement effective January 1, 2009.
In addition, the Senate bill addresses the shortfall in the Wisconsin Shares child care program by providing an additional $18.6 million in FY 08 for direct child care subsidies; requires a child care administrative agency to authorize payment for certified child care providers for actual units of service attended by each child; permits a child care administrative agency to authorize payment to a licensed or certified child care provider to hold a slot for a child if the parent has a temporary break in employment or intends to return to work and continue to use the provider.
Fiscal Bureau summaries of the budget adjustment bill are available online at the web site of the Legislative Fiscal Bureau, at http://www.legis.state.wi.us/lfb/LFBPublications_ButtonPages/Publications_Main.htm
At this time, no one is predicting a swift resolution to the budget deficit. The longer the debate continues, the greater the uncertainty for local governments and others on the impact of closing the deficit. WCA staff is monitoring the situation closely to protect all revenue streams payable to county government.
