In May, the Legislative Fiscal Bureau announced that the state is expected to take in more revenue during the biennium than was expected when Governor Walker crafted his budget. This announcement came in the midst of the budget debate in the Joint Finance Committee. Immediately, there were calls by some to increase spending. Rather than use this newly found money to expand government spending, the legislature chose to use it to pay down debts the state owes.
Earlier this month the legislature passed Assembly Bill 148, known as “the bill to pay the bills,” which the governor promptly signed, to use some of the additional unexpected revenue to repay the Wisconsin Injured Patients and Families Compensation Fund, make an early payment on a Medical Assistance bill and reduce unrealistic lapse requirements made in previous budgets. These choices let us save money on debt payments and put us on track for responsible budgeting.
Paying off the debt to the Injured Patients and Families Compensation Fund will save the state up to $70 million in debt service payments, according to the Legislative Fiscal Bureau. In 2007, then Governor Jim Doyle raided the Patients Compensation Fund and took $200 million to pay for ongoing government spending. The Injured Patients and Families Compensation Fund is a special fund that doctors pay into to cover medical malpractice claims. The existence of the fund is one reason malpractice insurance costs less in Wisconsin than in other states. The Wisconsin Supreme Court ruled that the raid on it was illegal and ordered the state to replay the original $200 million plus interest. At this time we do not know what the interest payment will be, but AB 148 sets aside $235 million to repay this fund. If the interest payment is less than $35 million, the rest of the money will be returned to the general fund.
A separate part of the legislation saves the state $23 million by paying a bill owed to the Medical Assistance Fund in June rather than a month later. The state was set to pay the MA fund $170 million in July, but saved money by paying the bill a month early. Now, the state will pay $147 million in June. Paying the bill a month earlier lets the state take advantage of higher federal reimbursement rates that are in effect until June 30, 2011.
Both the 2007 and 2009 biennial budgets required state agencies to lapse, or return, part of their operating budget to the state’s general fund. Between those two budgets, the Department of Administration (DOA) was required to lapse a total of $641.8 million. $300 million was lapsed in 2009-10 leaving $341.8 million left to lapse for 2010-11. Legislation earlier in the year reduced the amount DOA was required to lapse by $79 million. Assembly Bill 148 further reduces what DOA is required to lapse by an additional $54 million, leaving $208.8 million to be lapsed. Lapses are really unspecified cuts to agencies that do not impact the agency’s spending authority in future biennia. The lapse requirements made in the 2007 and 2009 budgets were unrealistic and were not an effective way of budgeting.
I co-sponsored AB 148 and voted for it in the Senate because I think it was the financially responsible thing to do. It would have been nice to spend the money on something new, but first we have to pay our bills. I thought of it like a family in a house with an old furnace. The wife comes home one day with a $5000 bonus from work. The husband and wife go out to dinner and think of all the trips they could go on with that money, but when they wake up the next morning their house is cold and the old furnace has finally given out. Now, they know where that new money is going, to pay the bill for the new furnace. Like this family, the state needed to pay its bills first.
If you have any questions about any of the information I have included or if you have suggestions on other topics or issues you would like learn more about, you may call my office toll-free at (800) 991-5541; write me at P.O. Box 7882, Madison, WI 53708; or e-mail me at: Sen.Olsen@legis.state.wi.us. You can also sign up for our newsletter at our website:
http://www.legis.state.wi.us/senate/sen14/news/index.htm .