Wisconsin’s $60.8 Billion Budget Deserves Careful Review
Senator Glenn Grothman
June 20, 2007
Over the next few weeks and perhaps the next few months, most of the news coming out of Madison will be about the State Budget. Unfortunately, budgets are made up of numbers which bore some of the public and most of the press. In this column, I’ll try to review where the money is going and why this is perceived to be a difficult budget. The total budget is $60.8 billion covering two years up 11.8 percent over what was passed two years ago. Much of the budget is made up of federal pass throughs, bonds that may or may not be issued, and some double counting exists when one government agency charges another agency for services performed.
Most of the focus will be on the general purpose revenue (GPR) portion of the budget taxes collected by the State that are not specifically supposed to go for segregated purposes (for example, gas taxes which are supposed to solely fund transportation projects.) General fund revenue is up only 5.3 percent compared to the budget two years ago largely because sales taxes are up only 3 percent. This is a result of housing costs (and interest payments) and gas prices eating up more of peoples' budgets. About half of GPR comes from the State income tax, 32 percent from the sales tax, 6 percent from corporate income, and 3 percent from tobacco and alcohol related taxes.
The dominating item in the GPR budget is our attempt to fund two-thirds of school costs - 45 percent of the budget. Various health programs for medium and low-income people are the second largest segment. These programs account for over 10 percent of the budget and will account for over 13 percent if new cigarette tax income is included. Tying for third is the University System and Corrections at 8 percent. Fourth, is city and county aid accounting for 7 percent of the budget.
If the State were to spend exactly what was spent last year while making adjustments for our continued commitment to fund the schools at two-thirds and pay for increases in prisoner and State health care program populations, the State of Wisconsin would have to increase general purpose taxes by $700 million over two years or take money from segregated accounts to make up the difference. This scenario reflects State employees not receiving a pay raise for two years (and assuming no increase in the cost of their insurance), no increase in service fees that doctors and hospitals receive for caring for the poor, and no increase in money for cities, counties, universities or tech schools.
In a little-noticed provision in state employee contracts, raises for state employees were given with just months to go in the last year. Of course, the raises affect the entire budget this time which results in a $340 million difference (half of the raises are to Corrections officers, a third to UW employees.) The school levy credit which appears on your tax bill was not paid to local governments last year but will be paid this year resulting in another $123 million increase.
How can this be? With past budgets, in order to make ends meet in the general fund, the Governor and Legislature took money from other accounts $430 million from the transportation fund in the last budget alone. If this practice is not done in this budget, we must either spend less or tax more. Past borrowing from the transportation fund has meant more borrowing for new roads which means more debt payments now. It would be terribly irresponsible to take from segregated accounts again.
What should be done? If the schools do not receive two-thirds funding from the State as required by current law, it almost certainly means larger property tax hikes. School districts, cities, and counties argue (and rightly so) that the State is forcing them to increase compensation (and fringe benefits) to their employees. The Legislature could deal with school aids separately. It will be very difficult to change this law with Democrats running the Senate and Jim Doyle as Governor. So Madison will be at an impasse.
What is the right thing to do? First, legislators must not approve any new programs or expansions of old ones. (Sadly, Governor Doyle has proposed many increases which various spending constituencies now expect to pass.) Second, try to change current law regarding Medicaid, or employee bargaining. Third, trim back current programs.
Also worth noting is that the State does not have to pass a budget. If we don’t pass a budget, spending continues at last year’s levels. On the other hand, the State has always passed a budget. Some more conservative legislators may not want to compromise at all, but if they aren’t part of a compromise, the most free-spending legislators may get together and pass their version. The budget should get done by June 30th. It won’t. In 1999, the budget wasn’t signed until November. While Madison insiders feel it looks irresponsible to delay passage, it’s more important to fight and get it right than done early and spend too much.