WisPolitics Budget Blog

Senate Majority Leader Russ Decker said today he's met with and talked to Gov. Doyle several times on the phone about the budget repair bill, and his message is "pretty much Senate Democrats want to close loopholes."

The so-called Las Vegas loophole is on Decker's wishlist for a budget repair bill, Decker,D-Weston, said.

"Other companies are carrying the weight of funding schools and transportation and university, some of these other companies with sophisticated enough to set up shop in Las Vegas, Nevada, as headquarters are getting away with not paying their fair share," Decker said.

Decker said the timing of when a bill can get passed "all depends on what's in it - 50 votes in the Assembly and 17 in the Senate to get it back to the governor's desk. It depends on what the governor brings forward."

Decker said he doesn't see a reason the repair bill would be pushed off until the next session, and hopes it can get dealt with "in a timely fashion."

Decker and other legislative leaders appeared yesterday at a Wisconsin Realtors Association forum at Madison's Monona Terrace and clashed on the proposed hospital tax, corporate tax breaks, universal health care and property taxes.

Assembly leaders urged a fast response to Doyle's coming budget repair bill. Assembly Speaker Mike Huebsch, R-West Salem, suggested certain government functions could shut down this year if there isn't quick action. Assembly Minority Leader Jim Kreuser, D-Kenosha, said voting on tough budget decisions isn't something lawmakers want to do close to an election.

"Sooner is better than later," he said. "It's not like a fine wine."

Senate Minority Leader Scott Fitzgerald, R-Juneau, called the task ahead "very, very difficult" and a "mini version" of the drawn-out budget process last year.

Decker suggested the hospital assessment plan to get more federal money. But Huebsch called both tax increases, pointedly saying of the hospital tax-and-reimbursement plan to the audience: "Don't try this in your business or you're going to jail."

Decker called the plan to get more federal money "totally legit" and said part of it should go to replenishing the Patients Compensation Fund.

As to the timing, Decker said the governor makes the first move and that any plan has to be balanced enough to get through a Republican Assembly and a Dem Senate. Once Doyle introduces a plan, "we'll go from there," he said. "We'll get through this."

Gov. Jim Doyle said today that he hopes to have legislative agreement on a budget repair bill soon, but even if leading lawmakers can't come to an agreement he expects to introduce the bill next week.

Speaking to reporters today after addressing Wisconsin Manufacturers & Commerce "Business Day in Madison" at the Monona Terrace, Doyle said he thinks the repair bill can be passed by the end of the Legislature's regular floor session on March 13.

"The real key here I think is to not go back and fight all of the budget battles," he said. "The budget is really where you make decisions on where priorities are and so on, and this is an adjustment we have to make based on the sagging national economy, particularly in sales. So if we can stay focused on just correcting the budget, bringing it into balance instead of going back and re-fighting every fight, I think we can get this done very quickly."

Speaking to the "Business Day" gathering, Doyle made a pitch for the hospital assessment as part of the solution to the revenue shortfall.

Doyle said the assessment on hospital profits could be used to leverage $450 million this biennium in federal money. The federal money would increase the medical assistance reimbursement for hospitals, and could provide $125 million for state Medicaid costs, reducing the burden on the state's general fund, he said. He said the tactic is used by many states, but the Legislature rejected his proposal in the state budget.

"To me, I can't understand why we'd turn our backs on $450 million in federal money," he said.

The Legislative Fiscal Bureau has projected state revenues will fall more than $600 million short this biennium, which Doyle said is mainly due to sluggish sales tax collections since Jan. 1. But he said he's confident the deficit can be solved without raising taxes. The hospital assessment is not a tax despite what some detractors call it, Doyle said.

"I'd like to know why it's a tax when the hospitals get more out of it than they put in," he said.

Doyle said his staff have been working with legislators to craft a palatable repair bill. While he said the hospital assessment is a "major piece" of his plan, there will also be deeper cuts.

Some people are just not going to get everything they thought they were going to get. We have to scale back a little here and a little there, and make up the difference," Doyle said.

Listen to Doyle's Q&A with reporters here.

Listen to Doyle's address at "Business Day in Madison" here.

The state's largest business lobbying organization, Wisconsin Manufacturers & Commerce, is urging Gov. Jim Doyle to solve the state's budget crisis without raising taxes. Doyle will speak to WMC members today at their annual "Business Day in Madison" function at the Monona Terrace.

"If state revenue projections are less than had been expected because our economy is
slowing down, that would be the worst time to raise taxes to balance the books," said
WMC president Jim Haney in a press release today. "If Governor Doyle builds bi-partisan support for a no-tax-hike solution, then he's doing what's best for Wisconsin at this critical time."

Department of Administration Secretary Mike Morgan is expected to send a letter this week to the governor and legislative leaders to formally notify them that state revenues are short more than one half of one percent, the mark that triggers the requirement for a repair bill, budget director Dave Schmiedicke said.

The move is a formality after the Legislative Fiscal Bureau announced earlier this month that state revenue projections are now $655 million less than what was expected when the budget was signed. The administration was able to shave some $236 million off that by restructuring a repayment and additional lapses from state agencies.

Schmiedicke said those steps are likely as much as the administration can do to address the deficit without legislative action. Other options are being studied, he said, declining to elaborate.

John Murray, spokesman for Assembly Speaker Mike Huebsch, said there have been meetings "similar to the regular budget process - getting a sense where people are at, what they can support what they can't support."

Taking part in the meetings have been legislative leaders or their designated staff, the JFC co-chairs or their staff, and Schmiedicke and DOA Deputy Secretary Dan Schooff.

A memo issued Friday by the Legislative Fiscal Bureau outlines the authority, powers, and duties the state constitution provides to the governor's office, the Department of Administration and Joint Committee on Finance to address fiscal emergencies following the adoption of the biennial budget.

See the memo here.

Labels: Budget_Repair_Bill

Gov. Jim Doyle said today that the hospital assessment should be put back on the table to alleviate the budget shortfall facing the state.

Senate Majority Leader Russ Decker, D-Weston, he too is for instituting the tax on hospital revenues that was cut from the budget last year, but the funds should be used to "back-fill" the Patients Compensation Fund and deficit relief.

Doyle spoke with reporters in Madison's City-County building after he and his wife cast early primary ballots for Barack Obama.

The governor said that it would be "nonsense" for the state to ignore as much as $450 million in federal money that could be claimed through increasing the tax on hospitals. The Legislative Fiscal Bureau projected a $652 million revenue shortfall over the biennium in a report yesterday. Administrative moves already taken have knocked the projected deficit down to $415.9 million.

Decker, who spoke to reporters in his Capitol office, said bill to start the hospital assessment, sponsored by Sen. Roger Breske, D-Eland, is circulating.

"Now that hospitals really thought it through thoroughly, they see it's really a benefit to them," he said.

Some state projects may have to be delayed due to budget constraints, possibly including the estate tax expiration and a health insurance tax break signed into the budget, Doyle said.

"All of these things are now on the table and have to be looked at," Doyle said. He said that the current budget deficit is "about a fifth" of the deficit he inherited when he took office.

"It's important that we keep moving forward, that we not crawl under a rock," Doyle said.

Listen to Doyle's comments here.

Decker also said he favors reinstating the estate tax if it will help to rein in the projected deficit.

Another remedy he mentioned was closing the "Las Vegas loophole."

When pointed out to him that the proposals have already been rejected by the Republicans who are the majority in the Assembly, Decker replied, "That's what they said about the cigarette tax, too."

Decker said he's met with DOA officials, and they are "doing everything they can" to bite into the budget hole. But Decker said "they can only go so far without legislative action."

Decker said he'd like to see the problem taken care before the Legislature breaks on March 13.

"It depends on how flexible people want to be," he said.

-By Andy Szal and Greg Bump

Labels: Budget_Repair_Bill

A big chunk of the anticipated $652.3 million budget deficit will be erased by lapsing funds from state agencies and reducing debt service expenditures.

The Department of Administration will require GPR-funded agencies to lapse the $106 million previously identified as part of a $200 million lapse under the budget bill, as well as an additional $5 million in 2008-09, according to the Legislative Fiscal Burea. The moves will add $53 million to the general fund balance in 2007-08 and $58 million in 2008-09.

Also, the administration will roll over short term general obligation borrowing that otherwise would have been paid off in 2007-08 and 2008-09. The move reduces GPR debt service expenditures by an estimated $63.6 million in 2007-08 and $61.8 million in 2008-09.

Combined, the DOA actions reduce the $652.3 million deficit by a biennial total of $236.4 million to $415.9 million.

See more in the LFB letter released yesterday.

JFC co-chair Mark Miller said today that a "comprehensive" solution must be found for the $652.3 million revenue shortfall for this biennium, and it would be irresponsible to use one-time money.

"We need to put the state back on a firm footing for the next budget," said Miller, D-Monona.

Miller said he's ready to roll up his sleeves.

"The sooner we do it, the easier it will be to make this correction," Miller said. "I'd like to see us get to work on it and come to a solution."

Rep. Kitty Rhoades, R-Hudson, the other co-chair of the JFC, said tax increases are off the table.

"One thing is for certain, with per capita income down and sales tax collections decreasing, now is not the time to raise taxes," she said in a statement. "The only solution is to stop spending more than we earn."

Gov. Doyle spokeswoman Jessica Erickson said addressing the revenue shortfall is "certainly a priority for the governor."

However, there isn't a timeline for Gov. Jim Doyle to introduce a bill to repair the shortfall.

According to state statutes, if after reviewing the estimates the secretary of Administration determines that expenditures will exceed revenues by more than one-half of 1 percent for that fiscal year, he or she must immediately notify the governor, the presiding officers of the Senate and Assembly, and the Joint Finance Committee.

One-half of 1 percent of the current fiscal year budget would be $65 million to $70 million, according to state Budget Director Dave Schmiedicke.

The statute then requires the governor to submit a bill containing recommendations for correcting the imbalance. This would include recommendations for whether funds should be transferred from the budget stabilization fund to the general fund. If the Legislature isn't n session at the time, the guv can call a special session to deal with the bill or bills.

Erickson said the administration is already taking steps to stem the shortfall. Yesterday, DOA Secretary Mike Morgan sent a letter to cabinet agency heads asking them to cut an additional $111 million from their budgets this fiscal year, on top of the $200 million called for in the budget.

See the letter here.

Linda Barth, spokeswoman for the Department of Administration, said Morgan plans to move "as expeditiously as possible."

"Secretary Morgan is going to review the report he received today, consult with legislative leaders and determine what the next steps are," she said.

Assembly Republicans were caucusing today. John Murray, spokesman for Assembly Speaker Mike Huebsch, R-West Salem, said Assembly Republicans will "work closely with Governor Doyle and other legislative leaders" to address the shortfall.

Carrie Lynch, spokeswoman for Senate Majority Leader Russ Decker, D-Weston, said Senate Democrats want to get to work on the problem immediately.

"I don't think it will get any better if we wait," she said.

Miller and Lynch suggested one place the state could bridge the gap is to close the "Las Vegas loophole" that allows corporations to set up "dummy corporations" in other states to avoid state taxes. "It would go a long way toward solving the problem," he said.

Statements issued today:

Gov. Doyle: Statement on budget shortfall

Dept. of Administration: Statement from Secretary Michael Morgan: Deeper cuts ordered for state agencies

Sen. Decker: Statement on new general fund revenue estimates

Sen. Fitzgerald: Statement on projected budget deficit

Sen. Kanavas: Statement on state’s massive budget shortfall

Rep. Huebsch: Statement on state revenue shortfall

Rep. Kreuser: Statement on impact of federal economy on Wisconsin

Rep. Fitzgerald: Statement on budget shortfall

Sen. Miller: Statement on the projected budget deficit

Rep. Rhoades: Statement on LFB revenue estimate

Milwaukee Co. Exec. Walker: Warns state not to balance state budget on backs of taxpayers

Wisconsin Alliance of Cities: Statement re: Budget deficit

Wisconsin now faces a projected $652.3 million shortfall for the biennium, according to new projections from the Legislative Fiscal Bureau released today.

The LFB had previously estimated a hole that could reach $400 million, but said in today's letter to the Joint Finance co-chairs that the January tax collections and February forecast "both point to further weakness in general fund tax collections."

See the letter here.

Assembly Speaker Mike Huebsch, R-West Salem, announced today that the Assembly will freeze hiring and out-of-state travel beginning Monday, citing the slowing national economy and an expected shortfall in state revenues.

See the press release here.

After a brief hiatus, the Budget Blog returns ...

A memo sent by the Department of Administration to the co-chairs of the Joint Finance Committee estimates that at some point in June, the general fund will balance will hit a deficit of $944 million.

According to the memo, the general fund balance going in to June is projected to be $207.8 million. In that month, the state will bring in receipts of $2.5 billion, but will disburse more than $3 billion. That would leave the state with a July beginning balance of negative $339.7 billion, according to the memo.

See the memo here.

Eric Schutt, chief of staff for JFC co-chair Rep. Kitty Rhoades, R-Hudson, said the memo is a reflection of the day to day cash flow of state coffers. Deficits in the fund balance can be caused in months where the state makes large payments to local governments for shared revenue or school aids, Schutt said.

The DOA secretary sends the letter to inform the co-chairs that he will exercise his authority to manage the inter-fund balance, and has various tools to reconcile the balance, including delaying some payments or issuing operating notes.

The general fund balance is "a number we're certainly going to keep monitoring," Schutt said, but it is an "apples and oranges" comparison to the revenues deficit projected by Legislative Fiscal Bureau director Bob Lang that could trigger a budget repair bill.

The LFB's revenue estimates will be released late next week or early the following week.

According to an LFB information paper on the 2005-06 fiscal year, it's not unusual for the general fund to dip into a deficit. For instance, in December '05, the state ended the month with a general fund balance of negative $865 million.

See the LFB informational paper here. (See page marked 3 for chart.)

Labels: general_fund_balance