Wisconsin Budget Project

Seniors Will Pay Millions More in Property Tax

noreply@blogger.com (Wisconsin Budget Project) — Wed, 01 Feb 2012 15:53:00 +0000

Thousands of seniors soon will pay higher property taxes according to a new report by the Wisconsin Budget Project. The Homestead Credit, which puts money back into the pockets of low-income seniors and helps them stay in their homes, will shrink this year, because state legislators voted to stop adjusting the credit for inflation.

As a result, a senior relying on Social Security can expect his or her tax credit to drop by $209, or 28 percent over the next five years, as shown in Chart 1. Other seniors will lose the tax credit altogether because their Social Security income will increase, but the income level that determines eligibility for the tax credit will be frozen.

The Homestead Credit lowers property taxes for owners and renters of limited means who are generally ineligible for the state’s Property Tax Rent Credit. Nearly a third of people receiving the Homestead Credit are 66 years old or older, and more than half of all recipients have income of less than $15,000 per year, according to the Wisconsin Department of Revenue.

Last year the Governor and state legislature reversed a 2009 decision to increase the tax credit annually and raise the eligibility ceiling to reflect changes in the cost of living. Prior to a small increase in the Homestead Credit in tax year 2010, the tax credit formula had been frozen for a decade.

Seniors will be particularly hard hit by the change. Even though the rest of the tax code is adjusted for inflation each year, the Homestead Credit formula has been frozen, which means that annual increases in Social Security income are gradually pushing many seniors over the income eligibility ceiling for the credits. For those who remain eligible, the size of their credits is steadily shrinking.

The analysis examined how the credit will shrink over time for seniors as their Social Security income gradually increases. The portion of property taxes that the Homestead Credit covers will drop to 18 percent in 2016, from 25 percent in 2011, for a person who is living only on Social Security.

The new cut in the Homestead Credit comes after two decades of decline in its value. Twenty years ago, this property tax credit was more than two and a half times larger than today and covered nearly 60 percent of that person’s property tax bill. By 2011, the credit covered only 25 percent.

The analysis can be found here.

Investing in Children Pays Off

noreply@blogger.com (Wisconsin Budget Project) — Tue, 31 Jan 2012 23:27:00 +0000

Public investments in child well-being have the potential to make significant differences in children’s lives, according to a new report from the Foundation for Child Development and KIDS COUNT. Children who live in states that place a high priority on support for public education and access to health care, and that have revenue policies that support those programs, are better off than children who live in other states. In the words of the report authors, “States that spend more on children have better outcomes, even after taking into account potential confounding influences.”

A number of public policies correlated with child well-being, according to the report. The policies with the strongest connection to child well-being included:

State and local tax rates;
Education spending per student;
Medicaid child eligibility as a percentage of the federal poverty level; and
Annual TANF (Temporary Aid for Needy Families) benefit per child.

Wisconsin ranked 14th among the states in the report’s index, which is based on child well-being in the year 2007. That puts Wisconsin two spots ahead of Illinois but nine slots behind Minnesota. The child’s well-being index is based on 25 indicators in the areas of economic well-being, health, risky behavior, educational attainment, community engagement, social relationships, and emotional/spiritual well-being.

In this two-year budget cycle, the Legislature put into place significant new tax breaks that largely benefit high-income earners and businesses, cut state spending on education by 10 percent per student, and cut the size of TANF benefits for children. Time will tell as to whether those changes will bring decreased well-being of Wisconsin children.

Tamarine Cornelius

Proposed Changes to Capital Gains Would Change How Much the Best-Off Pay in Taxes

noreply@blogger.com (Wisconsin Budget Project) — Fri, 27 Jan 2012 22:27:00 +0000

In his State of the Union address, President Obama proposed what many are calling the “Buffett Rule,” which would ensure that taxpayers earning $1 million would pay a minimum of 30 percent of their income in taxes. This proposed policy is named after billionaire investor Warren Buffett, who spoke out against tax breaks that result in Buffett’s secretary paying a higher percent of her income in taxes than he did.

One of the reasons that very wealthy people sometimes pay a smaller percentage of their income in tax than middle class taxpayers is that a greater share of wealthy people’s income comes in the form of capital gains. Capital gains are taxed at a special low rate, lower than the rate that must be paid on income earned through work.

If implemented, the Buffett rule would raise an additional $50 billion in revenue, according to a new analysis by Citizens for Tax Justice. This amount would be very close to the cost of continuing federal unemployment benefits through the end of 2012. Only a very few of the best-off taxpayers would be affected by the Buffett Rule as proposed by President Obama – the top eight-hundredths of one percent, to be exact, according to CTJ. Yet while the President proposes policies to narrow the capital gains tax break, GOP candidates who are vying to oppose him are debating how much it should be expanded.

Newt Gingrich has proposed that taxes on capital gains be eliminated altogether, with the goal of making “American entrepreneurs more competitive against those in other countries.” The elimination of the capital gains tax would mean that very wealthy people who live mostly on income from their investments would pay little or nothing in federal tax.

Ironically, Gingrich has criticized Mitt Romney for only paying 14 percent of his income in federal taxes, but Gingrich’s plan would lower Romney’s taxes to virtually zero. Mitt Romney has proposed eliminating the capital gains tax for taxpayers making less than $200,000 per year.

Tamarine Cornelius

Is the Recovery Leaving Wisconsin Behind?

noreply@blogger.com (Wisconsin Budget Project) — Wed, 25 Jan 2012 17:44:00 +0000

Wisconsin lagged behind other states in job creation in 2011, raising questions of whether the economic recovery is leaving Wisconsin behind.

State policymakers have placed a high priority on private sector job creation in Wisconsin, with frustratingly little to show for it. Between December 2010 and December 2011, Wisconsin added just 13,500 private sector jobs – barely keeping up with population growth. Jobs figures for December 2011 are preliminary and will be replaced with final figures in March.

It’s clear that Wisconsin is not making meaningful progress towards Governor Walker’s goal of 250,000 new private sector jobs. In fact, at this rate it would take nearly 19 years to create 250,000 new private sector jobs in the state.

The Governor and Legislators have focused their efforts on creating jobs in the private sector. But jobs in the public sector are important to the state’s economy too. In Wisconsin, hundreds of thousands of people hold public sector jobs teaching our children, repairing our roads, and keeping our communities safe. Over the last year, Wisconsin lost more than 10,000 jobs in the public sector, meaning that the total number of jobs Wisconsin added in 2011 was a measly 3,200. At that rate, it would take Wisconsin 78 years to add 250,000 jobs, whether they are in the public or private sector.

Job creation at the national level, less than stellar itself, far outpaces job creation in Wisconsin. On average, other states created private sector jobs at a rate three times as fast as Wisconsin. And when you include public sector jobs too, other states created jobs at a rate 11 times faster than Wisconsin. The last six months have been particularly bad for Wisconsin, when Wisconsin lost almost twice as many jobs as any other state.

State policymakers have pursued a variety of avenues in the name of job creation, including adding new tax breaks that largely benefit the wealthy and corporations, stripping more than a billion dollars out of Wisconsin’s public education system over two years, and making very significant cuts to the university and technical college systems that are turning out our economy’s newest workers. So far, these policies have not resulted in significant job creation.

Tamarine Cornelius

“Shifting the Shaft” – DOC Lapses Fall Heavily on Local Aid for Juvenile Justice

noreply@blogger.com (Wisconsin Budget Project) — Tue, 24 Jan 2012 22:00:00 +0000

The budget lapses recommended by the Department of Corrections (DOC) remind me of an expression that was occasionally used by a former Milwaukee-area Congressman, Jerry Kleczka. I’ve been observing Wisconsin politics long enough to remember when Kleczka served in the state Senate and co-chaired the Joint Finance Committee during the early 1980s.

Senator Kleczka was a strong-willed co-chair who watched the state’s purse strings carefully and who didn’t mince words. As I recall, he was known at the time as a fiscally conservative Democrat, although I think a better description would be to call him “fiscally responsible.” He believed in fiscal choices that would keep the budget in balance over the long haul – in contrast to the short-term solutions that were more frequently employed in subsequent years by lawmakers in both parties.

One of the indelicate expressions Kleczka would occasionally use was “shifting the shaft” – by which he meant that the state was shifting its own fiscal problems onto others, such as local governments or property taxpayers. That expression strikes me as an apt description of the DOC plan to make local governments bear a disproportionate share of the new round of budget lapses that the agency is making in the current fiscal year, particularly through cuts to Youth Aids.

The proposed lapse plan, which was unveiled by the Department of Administration (DOA) on December 23, requires the Dept. of Corrections to lapse $9.46 million to the General Fund. (Note: Lapses are essentially the same as other budget cuts, except the funding an agency lapses isn’t automatically removed from the base budget level that is the foundation for the next budget bill. Although that is potentially an important distinction, it doesn’t necessarily stop budget writers from recommending elimination of the funding in the next biennial budget.)

By far the largest single cut among the DOC lapses is from Youth Aids, which is the state aid to counties to help them pay the costs of juveniles sent to the Lincoln Hills correctional institution and for community-based programs for juvenile offenders. Youth Aids was already cut by 10 percent in the budget bill, and it has been eroded badly by inflation over the last decade. Taken together, the budget bill and new lapses reduce the 2011-12 Youth Aids funding by 14 percent (without factoring in the increased loss from inflation), at a time when DOC is charging counties 3.3 percent more for youths placed in the state’s juvenile correctional institutions.

The following figures illustrate that the lapses recommended by DOC and endorsed by DOA fall disproportionately on local aid, and especially on aid to counties for juvenile justice costs:

Cuts to juvenile justice programs account for half of the DOC lapses, even though spending for those programs constitutes just one tenth of the total DOC budget.
Youth Aids would lose $3.9 million, or 4.4 percent of its budgeted level for 2011-12, whereas the overall lapse for DOC is less than 1 percent of the agency’s total General Fund budget.
Including Youth Aids, the department’s aid to local governments is cut by $4.1 million, or 43% of the total lapses, even though local aid comprises just 8 percent of the total DOC budget.

The DOC cuts are one part of a much larger plan that would lapse $123 million to the General Fund in the current fiscal year, with much of that falling on the UW System. The proposed lapses don’t need to be approved by the full legislature, but they may be reviewed by the Joint Finance Committee, which is likely to have a meeting to consider them in the next week or two. We’ll follow up with more information if or when such a meeting is scheduled.

Jon Peacock

Is the Wisconsin Budget Still in the Red?

noreply@blogger.com (Wisconsin Budget Project) — Mon, 23 Jan 2012 15:54:00 +0000

The Department of Health Services (DHS) says Wisconsin has a deficit, notwithstanding the fact that the Governor has repeatedly said that he got the state budget into the black. A new WCCF blog post explains that DHS is using different accounting than the state typically uses because certifying that Wisconsin has a deficit would allow the department to eliminate or restrict BadgerCare eligibility for 53,000 adults.

See also Jason Stein’s very good explanation of the issue in an article in today’s Journal Sentinel.

Jon Peacock

State Revenue Up 4.7 Percent in First Half of 2011-12 Fiscal Year

noreply@blogger.com (Wisconsin Budget Project) — Sat, 21 Jan 2012 00:01:00 +0000

The Department of Revenue (DOR) issued its December revenue report today. The new DOR figures show that revenue collections were up 5.0 percent in December, compared to one year earlier. For the first half of the current fiscal year, tax collections are up by 4.7 percent. That growth rate is well ahead of the assumption in the biennial budget bill that General Fund tax collections would increase by 3.0 percent for the full fiscal year.

Sometime next week we expect the Legislative Fiscal Bureau (LFB) to issue new budget estimates for the 2011-13 biennium. Today’s revenue numbers, coupled with the reduced estimate earlier this month of the state’s Medicaid deficit (which improved by $127 million GPR), make me more optimistic about next week’s report by the LFB.

Over the first six months of the fiscal year, the fastest growth among the major categories of Wisconsin taxes has been the 5.5% increase in individual income tax collections. The next largest increase has been 4.0% growth in corporate income tax revenue. Sales tax revenue has been growing at a somewhat slower pace – 3.7 percent. Excise taxes, which comprise only about 5 percent of total state revenue, have declined slightly (0.9%) over the first half of the fiscal year.

Next week we’ll examine the new LFB numbers after their report comes out, and we’ll look at the question of whether Governor Walker is right in saying the Wisconsin budget is balanced, or whether the state Department of Health Services is right when they argue to federal officials that the state has a large deficit in the current fiscal year.

Two Very Different Approaches to Waste, Fraud, and Abuse

noreply@blogger.com (Wisconsin Budget Project) — Fri, 20 Jan 2012 19:11:00 +0000

Two new reports from the Governor’s Commission on Waste, Fraud, and Abuse show that Wisconsin policymakers have very different ideas about how best to reduce waste, achieve savings, and protect the state’s resources. The goal of the commission was to “identify waste, fraud, and abuse in state government programs and state appropriations and recommend solutions.” While that may seem straightforward, different groups of policymakers on the Commission took very different approaches to finding those savings.

The majority report of the Commission identified $456 million in potential savings in one year for state and local governments. The largest chunk of the savings – just over a third – comes from stepped-up efforts in fraud prevention in the supports the state provides for working-class families, such as BadgerCare and food assistance.

Nearly half a billion in savings in just one year would seem like a windfall for Wisconsin. But the minority report of the Commission pointed out several issues with the potential savings, some of which were technical and some philosophical. A large part of the proposed savings may not even be possible, the minority members of the Commission warned:

“[The] report is full of ideas that have already been accomplished, are already being implemented or items over which the decision-making process rests in the hands of the federal or local units of government.”

Like the main report from the Commission, the minority report also stressed the importance of achieving savings by addressing fraud in state supports for working-class families. But the minority report also highlighted the potential reducing state costs by capturing new federal dollars to pay for state services. There are ample opportunities to secure additional federal dollars – Wisconsin bypassed opportunities to capture an additional $1.3 billion in federal funds over the current two-year budget period alone, according to a Wisconsin Budget Project analysis of Legislative Fiscal Bureau figures. And that figure will increase given Governor Walker’s recent decision to cease utilizing a $38 million federal grant to implement health care reform in Wisconsin.

Saving taxpayer money and reducing waste shouldn’t be a partisan issue. In addition to making sure that supports for working-class families are carefully administered, we need to identify opportunities for federal money and roll back the unaffordable tax breaks given by the Legislature to the corporate and well-off. Then we can move together towards improving our stewardship of public resources.

Tamarine Cornelius

Little Accountability in Subsidies Found

noreply@blogger.com (Wisconsin Budget Project) — Wed, 18 Jan 2012 20:07:00 +0000

What happens when a corporation that receives public money for economic development doesn’t create the promised jobs? All too often, nothing, according to a new report from Good Jobs First that highlights how states often do not have policies in place to enforce job-creation commitments made by companies receiving public subsidies.

Active enforcement of job-creation requirements is important to make sure that public money is well spent. Merely having the requirements on paper without enforcing those standards risks turning economic development programs into corporate giveaways, the report warns.

According to Good Jobs First, in order to help insure that public money is well-spent, state economic development agencies should:

Require corporate recipients to report back on job creation and other benchmarks, and make that information easily accessibly on-line;
Verify company-reported figures;
Penalize recipients not in compliance with subsidy requirements;
Give state officials minimal discretion as to when to penalize recipients, as this often leads to watering down of enforcement mechanisms; and
Publish detailed information on enforcement activities.

Wisconsin actually scores better than most other states on enforcement policies for economic development subsidies, tying for an 8th place ranking. But that is more a reflection of how poorly other states rank than on the quality of Wisconsin’s policies.

Wisconsin does allow for the recapture of some subsidies if the recipient des not meet the jobs commitments, although some of those recapture decisions are left to the discretion of state officials. Where Wisconsin falls particularly short – as do many other states – is in publicly posting the names of companies found to be in non-compliance, and the dollar amounts that companies were penalized.

Tamarine Cornelius

What Does Walker’s New Opposition to Health Care Exchanges Mean for the State’s Federal Grant?

noreply@blogger.com (Wisconsin Budget Project) — Tue, 17 Jan 2012 22:49:00 +0000

Will the Governor Give up the Grant, Will Federal Officials End It, or Neither of the Above?

Politico posted a very interesting article on its website last night – “Scott Walker's health care dilemma” – relating to the question of whether Governor Walker will decide to terminate the Early Innovator grant Wisconsin received a year ago to cover costs associated with health care reform implementation. In recent weeks the Governor has been pressured to “return” the grant, after he said just before Christmas that the state would stop implementing the health care reform law.

As the article notes, Walker “is the lone Republican governor keeping an Early Innovator grant awarded early last year under the health reform law. ….He isn’t using the $37 million federal grant. He isn’t giving it up. And it may stay that way.” However, the Governor is under pressure from Senator Lasee and Tea Party activists to reject the federal funding. In addition, some Democrats are questioning how Walker can allow the grant funding to continue, and whether federal officials have to cut it off.

The Politico article addresses a couple of misconceptions. First, it counters the erroneous perception of many people that the state has already received the federal money:

“Actually, even though the state was awarded $37 million, the government didn’t send out a big check, so ‘giving back’ the money is a bit of a misnomer. An Early Innovator has to meet benchmarks in order to tap into each portion of the funds. Wisconsin did meet some early requirements and got some money to work on the technical aspects of creating the exchange framework. (Neither the state nor CMS – the Medicare and Medicaid agency overseeing the Early Innovators — has said how much, although public documents show it was just $1.3 million in September.)”

The article also points out that Obama Administration officials aren’t likely to cut off the funding anytime soon:

“In fact, even though Wisconsin walked away from ‘early innovation,’ CMS still sees the state as an innovation success story in some respects. …It had completed a working prototype of an exchange portal and made significant progress on its real-time Medicaid eligibility systems — one of the most complex aspects of exchange design. According to a September report, Wisconsin had spent roughly $1.3 million of the grant and hit numerous baselines, giving the state the opportunity to draw down more funds if and when it chooses to do so.”

The political pressure on the Governor to forsake the federal funding makes this an intriguing story to follow. Unfortunately, that controversy might distract from the more basic question of whether it would make more sense at least to be making contingency plans, in the event that the Supreme Court upholds the constitutionality of some or all of the Affordable Care Act. As I noted in the initial Journal Sentinel article about the Governor’s change of heart, putting a halt to further state work will leave the state ill-prepared if the federal law isn’t fully overturned.

For more on the topic of whether Wisconsin should keep planning for health care reform implementation, see the January 9th Journal Sentinel editorial. See also the letter to the editor by my co-worker, Sara Eskrich.

Jon Peacock

Wisconsin’s State Government Job Losses Lead the Nation

noreply@blogger.com (Wisconsin Budget Project) — Fri, 13 Jan 2012 19:14:00 +0000

Wisconsin has lost a higher percentage of its state government employees than any other state, according to quarterly figures newly released by the federal Bureau of Labor Statistics. Wisconsin had nearly 8,000 fewer workers in state government in June 2011 than in June 2010. There are currently about 225,000 unemployed people in Wisconsin searching for jobs.

Even before these job losses, Wisconsin had one of the leanest state governments in the nation. In 2010, Wisconsin ranked 42nd among the states in the number of state employees per capita, according to the most recent figures available. That means Wisconsin’s state government is nearly 10 percent smaller the national average, compared to our state’s population.

Over the past year, Wisconsin's decline in state government has far surpassed the drop in any other state. Wisconsin lost 10 percent of its state government employees between June 2010 and June 2011. Louisiana, which lost the second largest amount of its state government workforce, shed only 6 percent of its state government workers. Nineteen states added jobs in state government during this period.

An article in the La Crosse Tribune today notes that much of Wisconsin's drop in state employment was probably from retirements rather than layoffs -- in which case new hires could cause a rebound in the coming months. Retirements are no doubt a significant factor, but the latest round of lapses from state agency budgets and UW System funding is likely to result in vacant postitions going unfilled and possibly also more layoffs. We'll watch with interest to see whether or to what extent public sector employment rebounds over the next few months.

Tamarine Cornelius

Falling Support for Schools Threatens Wisconsin's Economic Future

noreply@blogger.com (Wisconsin Budget Project) — Thu, 12 Jan 2012 22:25:00 +0000

Massive reductions in state and local support for education could inflict severe damage to Wisconsin’s public schools, according to a new report from the Wisconsin Budget Project. Wisconsin’s well-educated workforce has long been a foundation of the state’s economy. This blow to Wisconsin’s educational system threatens to undermine that key driver of economic development.

Nearly $2 billion in cuts over the next two years will leave students with fewer courses in math, science, and other core subjects, along with dwindling opportunities for career and technical studies. Class sizes have increased, and teachers and support staff have been laid off, not only hurting students but also adding to the state’s already elevated unemployment rate.

Wisconsin’s cuts to education spending were bigger than those in most other states. On a dollars-per-student basis, Wisconsin’s cuts were the second largest in the country. The report also notes that the poorest school districts have been hit the hardest by cuts in state funding for education. Districts with more than 60 percent of students eligible for free or reduced lunch saw their general state aid decrease by almost twice as many dollars per student as the state’s more affluent districts, as shown in the chart below.

In addition to the large cuts to state spending on education, the Legislature imposed stricter constraints on property taxes, severely limiting districts’ ability to compensate for the loss of state dollars with local funds.

At the same time as state support for public schools has plummeted, support for private schools has increased. The Legislature spent $27 million over two years to expand the voucher system that allows parents to use tax dollars to send their children to private schools. The Legislature paid for that expansion by docking public schools an extra $11 million.

To be competitive in the 21st century economy, Wisconsin must continue to invest in the education of our future workforce. The cuts we’re seeing in school districts all over the state represent a thread to our state’s economic vitality.

University System Takes it on the Chin

noreply@blogger.com (Wisconsin Budget Project) — Tue, 10 Jan 2012 20:52:00 +0000

University of Wisconsin students will take longer to graduate, run up more debt, and have less access to high-need programs, University officials say. The reason: A state budget that requires the UW System to shoulder a disproportionately large share of the cuts.

The state’s two-year budget that passed last summer cut state support for the UW System by about nine percent, much larger than cuts made to other areas of the budget. In comparison, state support for prisons and other correctional services was cut by only about two percent. The state budget also paved the way for a 5.5 percent UW System tuition increase in each of the next two years, and froze the amount of tuition assistance available.

Now the state is once again making deep cuts to the UW System. The budget directed the state to find new, unspecified savings (also called funding lapses), on top of the specific cuts included in the budget. The Department of Administration has laid plans for $66 million of those additional cuts to come from the UW System over the next two years – including $46 million in cuts that need to be made yet this fiscal year, which ends in June. That means the UW System will in essence have to find a year’s worth of savings in one semester.

These new lapses will hit college students hard, as the UW System is asked to bear a disproportionately large share of total lapse amount. The UW System is expected to absorb 38 percent of these additional cuts, even though the UW System only represents 7 percent of state spending.

The University System has released its plan for dealing with the new cuts. Here are some of the likely effects:

UW-Milwaukee may have to eliminate more than 100 instructional positions, meaning 6,000 students may not be able to get into the classes they need, and may take longer to graduate;
Student enrollments will be reduced in high-need programs such as nursing, and math and science teacher programs;
Funding for small business centers will be reduced, resulting in less support for growing WI businesses;
Academic advising, tutoring, and job placement services will be reduced; and
Continuing education programs and outreach efforts will be scaled back, affecting non-traditional adult students.

These new cuts to the UW System aren’t set in stone. Later this month, the Legislature’s Joint Finance Committee will review the allocation of the lapses and could potentially make changes at that time. The full Legislature will not have the opportunity to weigh in on these lapses.

Wisconsin already lags behind the national average in the percent of the population with a college degree. Only 26 percent of Wisconsin residents age 25 years or older have a four-year college degree, compared with 28 percent nationally and 31 percent in Minnesota. UW campuses confer 26,000 undergraduate degrees a year.

If we want Wisconsin to compete in the global economy, we should be working to increase access to higher education, not limit it. These cuts to the UW System will make it harder for Wisconsin to invest in higher education and to boost its share of college graduates.

Tamarine Cornelius

2012 Brings Numerous Changes Adversely Affecting Working Families

noreply@blogger.com (Wisconsin Budget Project) — Mon, 09 Jan 2012 20:56:00 +0000

As the calendar turned to 2012, many of Wisconsin’s working families began to feel the effects of state budget cuts and policy changes made in the biennial budget bill signed into law last July. According to a new synopsis of delayed budget changes by Wisconsin Council on Children and Families, working families are beginning this month to be adversely affected by a number of changes, such as reduced tax credits, higher health care premiums and copays, and a new waiting period for unemployment insurance benefits.

“The range of changes that will make things tougher for Wisconsin families starting this year is startling,” said Ken Taylor, executive director of the Wisconsin Council on Children and Families. “At a time when so many working families are just starting to get back on their feet in the wake of the recession, it’s troubling to see just how many policy changes are going to make it more difficult for them to bounce back economically.”

Read more in today’s WCCF blog post or in the new two-page synopsis of the delayed budget changes.

Get the Credit You Deserve -- In English, Spanish and Hmong

noreply@blogger.com (Wisconsin Budget Project) — Thu, 05 Jan 2012 03:38:00 +0000

Each year WCCF updates a one-page brochure that helps educate people about the major refundable tax credits for low-income families -- the federal and state Earned Income Tax Credit (EITC), the state Homestead Tax Credit, and the federal child tax credit. Please help us get the flyer into the hands of low-income families who could benefit.

A few years ago, as part of EITC Awareness Day, the Secretaries of the Dept. of Revenue and Dept. of Children and Families encouraged state residents to check their eligibility for tax credits aimed at helping low-income workers and families. Their press release said an estimated 20-25% of WI taxpayers eligible for the EITC do not claim it on their returns. An even larger percentage of eligible households don't claim the Homestead credit.

You can find the updated version of the tax year 2011 flyer on the WI Budget Poject website. In addition to the English version, you can also get the flyer in Spanish and Hmong.

Jon Peacock

Much Smaller Medicaid Deficit Announced Today

noreply@blogger.com (Wisconsin Budget Project) — Wed, 04 Jan 2012 01:41:00 +0000

$322 Million Reduction in Medicaid Deficit Provides Opportunity to Protect BadgerCare

The state got some very good fiscal news today, in the form of a letter stating that the Medicaid deficit is about $322 million less than previously estimated by the Department of Health Services (DHS). The state share of that reduction is $127 million – which is more than twice the size of the savings that would be realized from the provision in the budget bill that would end BadgerCare coverage of 53,000 adults, beginning in July 2012.

According to the DHS letter made public today, the revised projection results from a combination of factors, including lower-than-expected enrollment in the current fiscal year, lower costs per enrollee, smaller-than-anticipated Medicare Part B premiums (which are paid by Wisconsin for dual enrollees), and a much lower (by $18 million) drug rebate reimbursement to the federal government. (The previous deficit estimate and cost-saving projections can be found here.)

DHS is seeking federal approval for changes that are expected (by the department’s own conservative estimates) to result in more than 64,000 people losing their Badgercare coverage, and which would adversely affect about 270,000 additional BadgerCare participants who would have reduced benefits and higher premiums or co-pays. The full range of proposed changes to BadgerCare would save an anticipated $116 million of state GPR funds in the current biennium, according to a Fiscal Bureau synthesis of the DHS estimates.

The reduction of the 2011-13 Medicaid deficit by $127 million GPR means that the state could avoid all of the proposed BadgerCare cuts (many of which are unlikely to receive federal approval). However, it appears that the state plans to use some of the newly identified cost savings to cover a portion of the cost of lifting the Family Care cap, which DHS says will cost about $80 million GPR in the current biennium (minus savings form various “efficiencies” in Family Care that DHS says it will implement, but has yet to quantify or specifically identify).

Another option to preclude cutting tens of thousands of people from BadgerCare is to use the CHIPRA performance bonus funds. The state received a $24.5 million federal bonus last week for BadgerCare’s success in enrolling low-income children. The state can expect a bonus of nearly that much next year, meaning at least $45 million is available during this biennium to assist in avoiding BadgerCare changes that would simply shift costs elsewhere in the health care system.

Unfortunately, DHS said today that it wants to proceed with the proposed cuts to BadgerCare, notwithstanding the much smaller Medicaid deficit. For more on today’s announcement, see Jason Stein’s article in the Journal Sentinel. See also the WCCF reaction to today’s news.

Jon Peacock

Minimum Wage Rises in Several Other States – But Not Wisconsin

noreply@blogger.com (Wisconsin Budget Project) — Mon, 02 Jan 2012 21:03:00 +0000

On the first day of 2012, eight states increased their minimum wages to adjust for inflation. More than a million minimum wage workers in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont, and Washington will see an increase in their paychecks.

Minimum-wage workers in Wisconsin will get no such bump in their paychecks. That’s because Wisconsin does not have a law requiring that the state’s minimum wage keep up with inflation. As a result, the lowest-income workers in Wisconsin are falling further behind.

Wisconsin’s minimum wage has been frozen at $7.25 since 2009. With no adjustments for inflation, the annual purchasing power of a minimum wage worker in the state has decreased nearly 7 percent between 2009 and 2012. If the minimum wage had kept pace with inflation, a full-time minimum wage worker in Wisconsin would earn an additional $1,070 in 2012.

Thousands of workers in Wisconsin work at the minimum wage – about 90,000 according to the latest count. An increase in the state’s minimum wage would help those workers support their families and make additional contributions to the state’s economy.

Tamarine Cornelius

The Wisconsin Budget Project Needs Your Support

noreply@blogger.com (Wisconsin Budget Project) — Fri, 30 Dec 2011 01:15:00 +0000

The Wisconsin Budget Project produces high-quality research, clear and accurate data, and trusted policy analysis. And we make all of it available - for free - to everyone. We believe that this leads to more inclusive public debates, more voices being heard, and policy choices that better reflect the interests and values of everyone in our state, especially low- and moderate-income families.

If you agree that this is important, please consider a (tax deductible) donation to the Wisconsin Budget Project today.

It’s hard to imagine a time when the significance of state budget choices has been so obvious. The decisions made earlier this year in the budget and budget repair bills are having profound effects on access to health care and human services, the quality of K-12 education, the affordability and quality of higher education, and the quality of life for thousands of public sector employees.

During a time when struggling low-wage workers have needed more help, the state budget substantially reduced the support to help keep them in the workforce and out of poverty – because of budget choices such as cutting the Earned Income Tax Credit, eroding the Homestead property tax credit, reducing child support enforcement, raising health care premiums and co-pays, and undermining access to child care subsidies.

These choices were avoidable. The Wisconsin Budget Project and our co-workers at WI Council on Children and Families played a leading role in organizing the Better Choices for Wisconsin coalition and developing the Wisconsin Values Budget, which illustrated how the state budget could be balanced without making such harmful cuts for Wisconsin’s families and its middle income and low-wage workers.

In the coming year, Wisconsin will face additional budget challenges and will debate the direction of future budgets. The WI Budget Project and WCCF will be actively engaged in documenting the consequences of the budget choices made in 2011, in developing alternatives to the budget slashing approach, and in advocating for a balanced solution to Wisconsin’s fiscal difficulties.

But at a time when our work is more important than ever, the Budget Project will be taking a substantial hit in our support from national funders. We need your help to close the hole in our budget, as we work to shed light on how Wisconsin can develop a better state budget.

With your help, the WI Budget Project will continue to play a critical role as a leading voice for tax and revenue policies that support the public investments that have made Wisconsin a great place to live and do business.

Thanks for your support.

Jon Peacock

Taking a Closer Look at the Pace of Job Creation in Wisconsin

noreply@blogger.com (Wisconsin Budget Project) — Thu, 29 Dec 2011 19:50:00 +0000

Recent jobs figures show that Wisconsin is making only minimal progress towards Governor Walker’s goal of 250,000 new private sector jobs. If Wisconsin continues to create jobs at the same rate as it has over the first 11 months of 2011, it would take more than 14 years to create that number of jobs in the private sector.

The number of private sector jobs in Wisconsin has been growing at a snail’s pace, but the total number of jobs has grown even more slowly. Wisconsin has been shedding jobs in the public sector, leading to layoffs and job loss for our teachers, librarians, and bus drivers. The result is that it would take more than half a century to add 250,000 jobs – public or private – to the Wisconsin economy at the current pace.

When Illinois raised taxes on corporations in early 2011, Governor Walker trumpeted Wisconsin’s new tax cuts and welcomed Illinois businesses that might be interested in leaving the state. But Illinois added private sector jobs at a rate far faster than Wisconsin in 2011, even adjusting for the relative size of the state’s economies. If Wisconsin’s economy had grown at the same pace as Illinois’, Wisconsin would have added an additional 22,000 private sector jobs in 2011. That’s enough jobs to put every unemployed job seeker in Green Bay and Appleton back to work.

Over the last year, the Governor and the Legislature have made budget cuts that have resulted in fewer academic opportunities for Wisconsin elementary and high school students, tax increases for working families, and higher university tuition. In the meantime, the Legislature has added millions in new tax cuts that largely benefit corporations and well-off individuals. State policymakers have justified these actions in the name of job creation. But it’s a false choice to say that we can’t both create jobs and invest in our communities.

Tamarine Cornelius

Looking ahead to the 2012 State Budget: How Green is the “Recovery”?

noreply@blogger.com (Wisconsin Budget Project) — Thu, 29 Dec 2011 00:48:00 +0000

News from Within and Outside Wisconsin Sends Mixed Signals on Revenue Growth

As I monitor Wisconsin’s fiscal prospects, I try to decipher any tea leaves (not tea bags) I can find, including omens of fiscal health outside our state. The news over the last few weeks has been mixed –making me a little bit less worried about the prospects for getting through 2012 without a new deficit, but still apprehensive about the state’s fiscal health over the next several years.

In this post I’ll examine the fiscal and economic data revealed in recent weeks, including a somewhat encouraging revenue report from the WI Department of Revenue (DOR) in mid-December, as well as a mixture of positive and cautionary data from several other sources. A few reports from outside Wisconsin suggest that although revenue collections are looking up now, ongoing growth will be tepid and federal budget cuts may cause new economic challenges, as well as troublesome holes in federal aid for the states.

DOR Revenue Data – The most positive bit of fiscal news over the last month was the Wisconsin DOR report on revenue collection from July through November. That Dec. 16 report shows revenue growth for the first 5 months of the 2011-12 fiscal year is up 4.6%, which is a bit ahead of the assumption in the biennial budget bill that General Fund tax collections would grow by 3.0 percent for the full fiscal year. It’s very encouraging that tax revenue growth has been running ahead of the anticipated growth rate.

The Philly Fed’S Growth Index –The much more worrisome news is that job growth in Wisconsin has lagged behind almost all other states since the start of the current fiscal year. In a recent Budget Project blog post, we examined an economic growth index that is updated each month by the Philadelphia Federal Reserve and provides a way of comparing growth in the states. As we reported about two weeks ago, it rated Wisconsin as having the lowest growth among all states during the 3-month period of August through October. The November data is now included, and Wisconsin ranks 49th (tied with MN) if one looks at the latest 3 months. We also rank 49th if one analyzes their data for the first five months of the current fiscal year. Our state’s anemic job growth doesn’t appear to have hurt state revenue collections yet, but there is typically a lag between economic changes and revenue collections.

Comparative revenue growth data – The Rockefeller Institute of Government released a December 8 report regarding state tax collections in each state in the first quarter of the current fiscal year. It shows that Wisconsin’s tax revenue grew by 5.0% in that quarter, compared to the same quarter of the previous year. Though that wasn’t bad, it was far below the national average of 7.3% growth.

The Fiscal Survey of States – This Nov. 28 report by the National Association of State Budget Officers says that even as states struggle with tepid revenue growth, they will be called on to spend more because of the economic distress caused by high unemployment. According to NASBO Executive Director Scott Pattison:

“State budgets are certainly improving; however, growth is weak, and there is not enough money for all the bills coming in. State officials will still be cutting some programs, and increases in funding for any program except for health care will be rare.”

The NASBO report says that although state general fund revenue increased in 2011 and is expected to increase in 2012, it remains $21 billion below the 2008 level, and the report adds that states are bracing for further reductions in federal aid because of Congressional efforts to slow the growth of the deficit.

Minnesota Budget Forecast – I also read with great interest Minnesota’s economic and budget forecast, which was issued at the end of November. At first blush it was very encouraging because it projects an $876 million surplus at the end of the 2011-13 biennium ($526 million more than previously forecast). Although I initially thought that positive development could be a harbinger of good things for Wisconsin’s budget, a closer reading of the MN report reveals a number of cautionary trends. The most obvious of those is that it projects a $1.3 billion shortfall for the next budget cycle (the FY 2013-15 biennium), or $2.6 billion if one includes the impact of inflation. Also, the anticipated surplus in the current biennium is not the result of an increase in projected revenue. It stems instead from a higher-than-expected closing balance for the last biennium and a further decrease in spending – saving an additional $348 million in the current biennium. Even though the new forecast uses a higher starting point for revenue collections at the outset of the current fiscal year, the total amount collected over the biennium is now predicted to fall by $24 million.
http://www.mmb.state.mn.us/doc/fu/11/summary-nov11.pdf

In sum, various reports issued over the last few weeks make me more optimistic about the prospects that the state will get through 2012 without having to deal with a large shortfall in tax collections. However, the following biennium could be difficult, and getting through the current one could also be very tough if Congress makes deeper cuts in human service programs and other aid to states. And the Minnesota forecast cautioned that its economic growth projections and revenue estimates would drop significantly if Congress does not renew the payroll tax deduction and the extended weeks of unemployment insurance benefits.

Jon Peacock

Ten Most Popular Posts of 2011

noreply@blogger.com (Wisconsin Budget Project) — Tue, 27 Dec 2011 18:13:00 +0000

2011 was a budget year like no other in Wisconsin’s history. We take a look back at the year with a Top Ten list of the Wisconsin Budget Project’s most popular blog posts.

#10 Questions to Ask Before Privatizing Government (June 3, 2011)
Ten basic questions to help policymakers, the public, and the media debate privatization proposals.

#9 Grim Days for Schools, with Grimmer Days Ahead (November 16, 2011)
Severe budget cuts to public education in Wisconsin have resulted in thousands of job losses, larger class sizes, and fewer academic opportunities for students.

#8 Public Employees Receive First Diminished Paycheck (August 25, 2011)
Public employees with relatively low salaries or hourly wages stand to lose thousands of dollars a year, the equivalent of as much as six months of grocery costs.

#7 Value of Governor’s “Tools” in Dispute (April 13, 2011)
Many local governments will not be able to take full advantage of the “tools” proposed by the Governor and will be negatively impacted due to circumstances beyond their control.

#6 Icing on the Cake for Corporations, Crumbs for Working Families (June 10, 2011)
Wisconsin can’t afford a significant new tax break for corporations, especially one that doesn’t require businesses to create a single new job. Meanwhile, working families are required to shoulder higher taxes.

#5 DOA Document Puts 2011-13 Deficit at $3.6 Billion (February 8, 2011)
An explanation of how the Department of Administration calculated the size of the budget deficit.

#4 Non-Fiscal Proposals Are at the Heart of the Current Budget Stalemate (February 23, 2011)
Solving the 2011 budget shortfall wouldn’t appear to be very difficult, but numerous non-fiscal policy measures proposed by the Governor in the budget repair bill led to a political stalemate.

#3 Five Things You Might Not Know About Public Employees in Wisconsin (November 1, 2011)
Did you know that Wisconsin has a leaner public sector than all but 11 other states? And that relative to our population, the number of public employees in Wisconsin has declined over the last decade?

#2 Ten-Year Tax Cut Tally Tops Two Billion (June 11, 2011)
Many of the tax cuts put into place in 2011 are delayed or phased in, meaning that their annual price tag will grow steadily over the next several years. The ten-year cost of the tax cuts: $2.3 billion.

…and the Wisconsin Budget Project’s most popular blog post of 2011:

#1 Budget Includes Tax Increase for the Working Poor and Tax Cut for Wealthiest (March 14, 2011)
By increasing the taxes paid by the working poor and decreasing taxes paid by the wealthiest state residents, the Legislature has made its priorities clear.

Tamarine Cornelius

DOA Announces $123 million of Funding Lapses (Cuts); More to Come

noreply@blogger.com (Wisconsin Budget Project) — Sat, 24 Dec 2011 00:55:00 +0000

UW System and Children’s Programs Hit Hard by Lapses Announced Today

This afternoon the Walker Administration announced its plans for lapsing $123 million to the General Fund. (I wonder why news like this so often comes out late on a Friday before a big holiday?) The biennial budget requires the Department of Administration to allocate $174 million of lapses, and today’s announcement covers just the first fiscal year – meaning that there will be at least $51 million in additional lapses sometime during the next 18 months.

The biggest hit is to the UW System, which has to give back $46 million. Several programs for children and youths are also absorbing substantial blows. The lapses include almost $18.6 million from federal bonus funding for children’s health care, $8.3 million from the Department of Children and Families (DCF), and about $4.7 million from juvenile corrections (primarily Youth Aids).

In a press release this afternoon, Rep. Peter Barca took issue with the UW System cuts: “Today’s budget cuts are again disproportionally targeted at one of the worst places to hit in a difficult economy: our Wisconsin public education system. …the UW System is losing millions more on top of a previous $250 million cut and will likely have to cut economic development programs, classes and much more.”

According to today’s letter from DOA Secretary Mike Huebsch, “specific education exemptions were granted to school aids, higher educational financial aid and technical college aids.” In addition, there are exemptions for Medical Assistance – except for the CHIPRA bonus funding – and other direct care programs at DHS, and child welfare and certain TANF programs at DCF.

The plan also exempts “certain correctional programs and other institutions that operate 24/7.” Our post on the WCCF blog includes a response from Jim Moeser, WCCF’s deputy director, regarding the lopsided portion of the corrections system cuts borne by community based programs and county juvenile justice funding.

The Joint Finance Committee has until January 18 to review the plan.

Jon Peacock

The Link Between Budget Cuts and Job Loss

noreply@blogger.com (Wisconsin Budget Project) — Tue, 20 Dec 2011 22:47:00 +0000

In tough times, the worst thing the state can do is further shrink the economy. Yet that’s just what the Governor and Legislature seem intent on doing, according to a new report from the Institute for Wisconsin’s Future (IWF). The resulting job loss has thrown 18,000 Wisconsin residents out of work in the private sector alone.

There’s no question Wisconsin’s economy is stuck in neutral. New jobs figures show that Wisconsin has lost jobs for five straight months, and Wisconsin ranks last among the states in recent economic performance.

IWF’s report points to policy decisions by the Governor and Legislature as the reason for Wisconsin’s economic doldrums:

"When huge amounts of money are taken out of the economy, as Governor Walker’s policies are doing, it hurts almost everyone. Businesses have fewer customers; workers have fewer jobs; state and local governments have less tax revenue."

The resulting job loss is a drag on Wisconsin’s economy.

Here’s how the Institute for Wisconsin’s Future breaks down the 18,000 jobs lost as a result of fiscal policies implemented by the Governor and Legislature:

Cuts to state and local services resulted in 5,400 jobs lost in the private sector;
Cuts directed at individuals resulted in 1,200 jobs lost;
Changes to public employee compensation in this year’s budget repair bill resulted in 6,900 jobs lost; and
Federal aid turned down by the Governor and Legislature resulted in 4,700 jobs lost.

Tamarine Cornelius

Wisconsin Ranks Last in Economic Index for August through October

noreply@blogger.com (Wisconsin Budget Project) — Tue, 20 Dec 2011 03:13:00 +0000

The Federal Reserve Bank of Philadelphia tracks economic indicators for each state on a monthly basis and prepares a map comparing the states’ economic trends over the last three months. Let’s hope the next map, likely to come out later this week, has better news for Wisconsin than the last one – when the Badger State had the worst rating among all 50 states.

The ratings are based on a measure they have developed called the coincident index, which combines four state-level indicators: nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements. The map for the 3-month period August through October singles out Wisconsin as the lone state highlighted in red, which represents the lowest category. Our state practically jumps off the page because it’s in such marked contrast to surrounding states.

You can find all of the maps that the Philadelphia Fed has prepared over the last 7 years on their website. One can also download all of the coincident indexes for each state since 1979. I settled for the last four months, to see how Wisconsin compares to other states since the start of the current fiscal year. Wisconsin climbs to 49th when one calculates the change in the index since the beginning of July, barely edging ahead of Indiana. I’ll update that analysis after the November numbers are added.

I happen to think that politicians (including governors, presidents and legislators) get too much credit or blame for economic trends. However, if you are going to try to judge state policymakers based on the economic indicators in their state, it should be done by comparing the state’s economic trends with those elsewhere, not by analyzing the data in isolation from the rest of the nation or region. Because the coincident index provides a comparative measure, it seems to be a useful and very interesting tool for monitoring how Wisconsin is doing economically.

Jon Peacock

The Five Worst State Budget Ideas of 2011

noreply@blogger.com (Wisconsin Budget Project) — Fri, 16 Dec 2011 19:44:00 +0000

In 2011, the Legislature made many ill-advised budgeting decisions, decisions that will have long-term negative effects on Wisconsin’s ability to create family-supporting jobs. The Wisconsin Budget Project takes a look back at 2011 to identify the five worst budgeting ideas of the year.

#5: Shortchanging our economic future
A well-educated workforce is critical to laying the groundwork for the state’s economic future. We should be committing resources to building our educational system, to ensure that the children of today will be productive workers in tomorrow’s economy. Instead, the Legislature made very deep cuts to K-12 education, so deep that Wisconsin has the unfortunate distinction of cutting more education dollars per student than almost any other state in 2012. That’s no way to build future prosperity.

#4: Tax cuts that primarily benefit corporations and the well-off
The Legislature prioritized tax cuts over investing in Wisconsin public education, transportation, and safe communities. These tax cuts add up to more than two billion dollars over the next ten years, every dollar of which has to be made up in deep cuts in the kind of investments in our communities that really matter. That’s a bad deal for Wisconsin.

#3: Tax hikes for the working class
The Legislature increased the amount of income taxes and property taxes working-class people pay, by making significant cuts in two targeted tax credits. The result is that seniors will find it harder to stay in their homes, and low-income workers will find it harder to support their children.

#2: Restricting access to health care
If we want to build a strong economy for everyone, we need to make sure that workers have access to health care. Instead, the Legislature gave the executive branch the green light to make changes that would result in more than 64,000 working people and children losing their coverage – a number that represents more people than live in the city of La Crosse.

…and the worst budget idea of 2011:

#1: Slamming the brake on the state’s economic engine
If we want to create jobs and build a better economy for everyone, there’s no better way to do that than investing in our state’s higher education system. UW-Madison alone contributes more than $12 billion to the Wisconsin economy and supports 128,000 Wisconsin jobs. Instead, the Legislature made deep cuts in support for the University of Wisconsin and the technical college system. The result: higher education in Wisconsin will become less affordable, the university system will attract less in outside investment, and we all lose.

Let’s hope for a brighter 2012.

Tamarine Cornelius