Medicaid Claims Majority of New State Spending During 2015-17
New State Budget Also Has Major Implications for Education and Transportation
MADISON—State general fund spending will increase $1.1 billion over the next two years, with Medicaid and K-12 education accounting for 86% of the total. General fund spending will total $31.9 billion over two years. A new report from the Wisconsin Taxpayers Alliance (WISTAX), “2015-17 Budget Recapped,” is a citizen’s guide to the new 2015-17 state budget that details revenues, spending, and major policy shifts included in Act 55.
Medicaid, a state-federal partnership that provides health insurance for the poor and disabled, has grown significantly faster than other state programs over the last decade or more. During 2005-15, general fund (GPR) spending on the program rose an average of 4.2% per year, while GPR spending on all other programs increased an average of just 2.4% annually. The new state budget continues that trend as Medicaid spending climbs an average of 7.5% per year, compared to just 1.4% for the remainder. Spending by the Department of Health Services, which oversees the Medicaid program, will claim $658 million of the $1.1 billion in new spending.
The Department of Public Instruction claims much of the remaining new spending: $289 million. The vast majority of the new spending is additional aid to K-12 schools, primarily in 2016-17. State aid to schools will increase less than 1% this year, but 3.8% next year.
The new budget also changed some of the educational options available to K-12 students. Caps on Wisconsin’s statewide private school choice program were changed. In 2014-15, participation was limited to 1,000 students statewide. That cap was replaced with district caps of 1% of prior-year enrollment, with that percentage rising one percentage point annually until it is eliminated in 2026-27. In addition, the state’s desegregation program (Chapter 220), will be phased out. Program participation has declined steadily over the past 20 years.
Two other areas generated much debate this spring: transportation and the U.W. System. Wisconsin funds roads and highways primarily with gas taxes and vehicle registration fees. However, those have increased less than 10% since 2008, while road costs continue to rise. With increases in transportation taxes and fees off the table, the major stumbling block was the amount of transportation borrowing. The legislature reduced the governor’s $1.3 billion request to $850 million, with $350 million of that requiring approval by the Joint Committee on Finance (which recently occurred). Borrowing costs will now claim about 21% of Transportation Fund revenues, up from 10.3% in 2007.
There was also disagreement over autonomy for the U.W. System proposed by Governor Walker (R). The governor proposed autonomy for U.W., but reduced state funding by $300 million over two years. The legislature rejected the autonomy proposal and reduced the cut to $250 million. Several statutory changes were also significant. Tenure language in state law was deleted, while involvement of faculty, staff, and students in shared governance was modified.
WISTAX researchers also looked ahead. As approved, the ending balance of the two-year budget was just $131.4 million, or 0.8% of 2017 spending. A final accounting of 2015 finances raised that amount to $267 million, or 1.6% of spending. However, many budget experts recommend cushions of at least 2%. While the $267 million is relatively large by Wisconsin historical standards, it may be insufficient should taxes lag. Predicting tax collections is difficult, and a 2% error rate is not unusual.
A free copy of The Wisconsin Taxpayer magazine, “2015-17 Budget Recapped,” is available by visiting www.wistax.org; emailing firstname.lastname@example.org; calling 608.241.9789; or writing WISTAX at 401 North Lawn Ave., Madison, WI 53704-5033.