Walker’s Next Budget

Governor Walker’s public statements and his instructions to state agencies on how to develop their proposals for Wisconsin’s next state budget give some glimpses into what the state’s 2017-19 budget might bring.

Wisconsin has a two-year budget. The process of deciding what to include in the budget starts in the summer of even numbered years — in other words, now — when the Governor instructs state agencies how to develop budget requests. Agencies submit their requests to the Governor in September, and the Governor takes the requests into consideration when developing his own budget proposal to submit to the Legislature. The Governor is expected to release his budget proposal in the early part of 2017. (For more about the Wisconsin state budget cycle, check the Wisconsin Budget Project’s Budget Toolkit.)

For the upcoming budget, Governor Walker has instructed state agencies to assume there will be zero growth in General Purpose Revenue (GPR) appropriations. In other words, he wants agencies to submit budget requests that are not any higher their budgets were two years ago, even though inflation and other factors have pushed costs up.

The Governor has carved out some exceptions to his zero-growth policy, including ones for:

• State support for K-12 schools. This exception may signal he is open to an increase in resources for public schools, which could help ease some of the very deep cuts that Wisconsin has made in education funding in recent years. Wisconsin state support for K-12 education dropped by 14% between 2008 and 2014, one of the biggest decreases in the country;
• Certain health and assistance programs, including Medicaid. Medicaid, like other entitlements, has routinely been exempted from spending freezes because there is typically growth in caseloads and increases in the cost per participant;
• State-level efforts to make sure children are safe in their own homes, or placed in safe foster or adoptive homes;
• Employment services for people with disabilities; and
• Increased costs to provide services at prisons and other state institutions.

He also reminded agency heads that new legislation requires them to also submit a second budget proposal with a five percent reduction in the agency budget.

The Governor’s instructions this year state that Wisconsin “has a goal of increasing the ongoing receipt of federal funds where the use of federal funding is consistent with state program goals.” That’s an interesting development because in past years the Walker administration has not prioritized the receipt of federal funds, and has taken pride in turning down some large sources of federal dollars.  The new instructions direct agencies to look for areas where unexpended federal grants could be reallocated “to other activities to the extent possible under state and federal rules,” and they authorize agencies to submit policy papers by September 15 that identify “additional federal grant opportunities that were not included in the agency’s request.”

One such opportunity, which we hope the Deptartment of Health Services will write up in a policy paper, is the receipt of federal funds for the expansion of BadgerCare. According to the most recent LFB analysis on the topic, issued last December, boosting the BadgerCare income limit for adults to 133% of the federal poverty level in 2016 (from 100% of FPL) would have saved state taxpayers $323.5 million during the 2015-17 biennial budget period, while covering an additional 83,000 adults.  Similar savings could be achieved in the next biennium.

In a separate letter, Governor Walker told the state Department of Transportation to submit a budget request that does not include an increase in the gas tax or vehicle registration fee, both of which largely go to pay for repair and construction of the state’s highways.

The Governor made his opposition to increasing the gas tax or vehicle registration fee very clear, telling the Secretary of Transportation that “raising the gas tax or vehicle registration fees without an equal or greater reduction in taxes elsewhere is not an option, and it would throw a wet blanket on our growing economy.”

The problem is that the state does not have nearly enough money from the gas tax and other dedicated sources to pay for the highway projects currently planned. In fact, the state is projected to fall over $900 million short in transportation funding over the upcoming two-year budget period, according to a recent memo from the Legislative Fiscal Bureau. That figure assumes the state doesn’t borrow any additional money for transportation purposes.

Governor Walker’s letter told the Department of Transportation that “proposed spending on mega projects in Southeastern Wisconsin should be minimized” to save money and bring spending back into line with available resources. But the Governor has also “told the Federal Highway Administration that his administration wants to kick off an $850 million project to widen an east-west stretch of I-94 between the Marquette and Zoo interchanges from six lanes to eight,” according to an article in the Milwaukee Journal Sentinel. Those statements seem to be in conflict with each other.

The budget instructions give no indication that Governor Walker is considering rolling back the very large budget cuts lawmakers have made to the University of Wisconsin System. However, Governor Walker hopes to extend the UW tuition freeze for another two years, according to an article in the Wisconsin State Journal. A tuition freeze can help keep higher education affordable for families, but it needs to be accompanied by an increase in state funding to ensure that the UW System has the resources in order to continue to provide high-quality education to our students.