ICYMI: Budget Hearings Ramp Up Debate On State Priorities

MacIver Institute Budget Blog | March 8, 2015

While most of the attention focused on the right-to-work debate last week, budget discussions started in earnest as state agency heads briefed the Joint Finance Committee (JFC) on the governor’s plans for their respective departments. Here’s a run down of some of the action.

Democrat members are calling the governor’s budget proposal a “crisis budget”, complaining over what they view as inadequate funding for K-12, transportation, environmental initiatives and of course, the University of Wisconsin System.

Republicans have their questions, too. There was clear discomfort from all members about finding a long-term funding solution for transportation. Instead of raising taxes and fees, the governor’s proposal suggests bonding $1.3 billion over two years to keep up with the state’s infrastructure needs.

Department of Transportation (DOT) Secretary Mark Gottlieb believes the wisdom of bonding for transportation projects is that the life of the facilities outlive the life of the debt. A salient argument, but expect legislators to investigate revenue raisers as the budget process unfolds.

Perhaps prophetically, Sen. Leah Vukmir (R-Wauwatosa) questioned Gottlieb on the impact of Wisconsin’s prevailing wage law on transportation costs. Contractors for state projects are required to pay their workers the “prevailing wage,” or wages that are most common for a certain type of work as determined by government.

The state’s prevailing wage law artificially inflates costs for public projects by typically requiring a wage much higher than the rate in a competitive market. Rep. Rob Hutton (R-Brookfield) has proposed a bill eliminating prevailing wage, something that if passed is sure to save money at DOT and the state as a whole.

Many JFC members were also concerned over the exploding costs of Medicaid, an $8 billion program that eats up 63 percent of new GPR spending in the governor’s budget. Remember, this is a Medicaid program sans federal expansion – proving the Medicaid expansion is still a bad idea for Wisconsin.

Department of Health Services Secretary Kitty Rhoades said herself that it is unrealistic to expect Washington, D.C. to keep their funding promises under an expansion scenario. She also pointed to Wisconsin’s aging population as a serious cost driver for government sponsored health care going forward. “It keeps me up at night,” described Rhoades.

Proposals for the Department of Natural Resources (DNR) garnered some serious discussion this past week. The governor’s budget freezes land acquisition through the Gaylord-Nelson Stewardship Program until the debt ratio is at a reasonable level. Debt service at the DNR engulfs 70 percent of its GPR appropriations, $90 million annually which is equal to $1.7 million a week.

That’s right, only 30 percent can go towards, you know, actually running the place. What’s more, DNR Secretary Kathy Stepp revealed that 17 percent of all land in Wisconsin is now owned by government for conservation. How much land does government need?

Now to address the elephant in the room: proposed UW System budget cuts to the tune of $300 million over two years. System President Ray Cross displayed ardent support for the less talked about part of the UW deal, converting the System to its own authority.

According to Cross, the UW System is the fourth most regulated university system in the country. He was adamant that the extra flexibility of a public authority model would indeed lead to efficiencies and savings without sacrificing quality. The cuts, however, are still too steep for Cross.

Recent findings on the real state of UW System finances make it hard to sympathize with Cross. The System’s net assets have continued to rise despite relatively flat state funding, not to mention program reserves that have quadrupled over the past decade. While Cross said he is “frustrated” with accusations about low teaching loads for university professors, is it too much for UW-Madison and UW-Milwaukee to provide information on teaching duties?

Something else that was astutely pointed out by Rep. Dale Kooyenga (R-Brookfield) this week is the impressive financial position of the Wisconsin Alumni Research Foundation (WARF), a UW-Madison affiliate. WARF is primarily responsible for the commercialization of the university’s research and technology. WARF increased their net position by $400 million this past year and holds $2.6 billion overall, according to Kooyenga. Why can’t the UW System benefit from WARF’s largesse? Cross didn’t have much of an answer for that.

Many other topics were discussed over the course of the week, including reforms to welfare benefits, K-12 funding, school accountability and the shifting of certain functions between agencies. The marathon that is the Wisconsin state budget has only just begun. Keep reading the MacIver Institute Budget Blog for weekly developments.