• All children regardless of income (except unqualified immigrants).
• Pregnant women between 185 and 300 percent of the poverty level.
• Farm families and other self-employed parents with incomes up to 200 percent of poverty (who were previously excluded by adding depreciation deductions back to their income).
• Youths aging out of foster care.
• Parents with children in foster care and caretaker relatives with income less than 200 percent of poverty.

The proposal also contains other improvements, including:

• replacing the current employer verification requirements with a less burdensome process for verifying income and health insurance status;
• establishing presumptive eligibility for children; and
• elimination of premiums for kids in families below 200 percent of poverty.

There are also a few respects in which coverage could be restricted. These include the elimination of certain deductions from income when determining eligibility, and elimination of something called the family fiscal unit, which helps make more people eligible.

DHFS anticipates that BadgerCare Plus would yield net biennial savings of about $6.6 million GPR and $15.9 million in total funding, and the department proposes reinvesting those savings in a number of ways to improve access to health care. The largest chunk of the reinvested funding, $8.8 million (all funds), would be used for initiatives to improve access to dental care.

Other ways in which the anticipated savings would be reinvested include:

• $3.5 million (all funds) to promote healthy living behaviors;
• $2 million for HMO expansion incentives;
• $500,000 for marketing/outreach; and
• $200,000 for benefit counselors/navigators.

Family Care and Other Health Care Requests
In addition to the amounts discussed above, the DHFS budget seeks funds to expand the Family Care program to most of the state. Family Care is a community-based alternative for long-term care, currently operating in five pilot counties. The department seeks a Family Care increase of $85.7 million over the next two years, including $21.9 million in state GPR funds. Additional information about Family Care and its expansion can be found on the DHFS website at: http://dhfs.wisconsin.gov/managedltc/generalinfo/index.htm

Other health care spending increases include:

• an additional $754,000 per year (all funds) for Medicaid administration to fund costs incurred by counties and tribal income maintenance agencies to implement the new federal citizenship and identity documentation requirements; and
• an increase of $720,000 GPR (mostly in the second year) for the disease aids program, which makes payments to providers for disease-related services for individuals with chronic renal disease, adult cystic fibrosis and hemophilia.

Child Welfare
The DHFS budget includes a number of spending increases relating to child welfare, including:

• $2.2 million (all funds, including $1.7 million GPR) over the next two years for foster care rate increases of 5 percent in January 2008 and another 5 percent in 2009;
• a $103,100 per year GPR increase in Community Aids to compensate counties for their share of the 5 percent increase in foster care funding that took effect in 2006. Aside from that slight increase, Community Aids would essentially remain frozen, as it has been for many years.
• a boost of $11.1 million (all funds) for foster care and adoption assistance payments, resulting from the growing number of children in the adoption assistance program;
• an increase of $11.2 million GPR for the Bureau of Milwaukee Child Welfare. Much of that would be used to make up for a cut in federal funds, resulting from new restrictions approved by Congress and the President regarding the types of child welfare costs that are federally reimbursable. The GPR increase also stems in part from an increase in the proportion of complex and special needs children who need to be placed in higher cost settings, and from funding to continue case manager recruitment, retention and training efforts.
• about $12.6 million GPR for the increased costs of the State SSI Supplement, which provides a cash benefit to low income elderly and disabled children;
• a net increase of $306,000 from the TANF block grant for the Caretaker Supplement program, which provides a cash benefit to SSI recipients who have dependent children. Although the caseload is expected to decrease, the requested TANF funding would be used to replace one-time funding that was used for administrative costs of the program in the current biennium.

Department of Public Instruction

Equalization Aid and Spending Levels
The Department of Public Instruction's budget proposal seeks an increase of $662 million in 2007-09, and almost all of that would come from state GPR funding. About $422 million, or 64 percent, of the total increase would be used for general equalization aid and would help meet the target of providing state funds for two-thirds of school costs. Although the two-thirds standard is no longer a statutory requirement, Governor Doyle and Superintendent Burmaster have pledged to meet that goal in the next biennium. You can find the DPI budget at: http://dpi.wi.gov/sprntdnt/pdf/bcm06_gap.pdf.

Notwithstanding the magnitude of the total equalization aid increase, it amounts to just a 3.2 percent increase in those aids in FY 2008 and 2.5 percent in FY 2009. Those figures reflect the fact that the budget proposal does not make a broad change in school revenue caps. The smaller amount in the second year also stems from a significant increase that year in categorical aid, which reduces the amount of equalization aid needed to reach the two-thirds target for state support.

Although the DPI budget does not contain any across-the-board changes in school revenue caps, it does recommend a couple of changes that would provide relief from those caps for some of the hardest-hit districts. Many declining enrollment districts would be helped by a proposal to allow them to again use their prior year's base revenue limit if falling enrollment would otherwise cause the cap to fall below the previous level. In addition, DPI proposes raising the per pupil "low revenue ceiling" by $300 annually, which would allow about 100 of the lowest spending districts to narrow the current disparities with the highest spending districts.

Early Education
The DPI budget proposes a coordinated program over the biennium to support quality learning opportunities throughout the state. The proposal includes a financial incentive in the school funding formula for school districts to use community-based approaches for Four-Year-Old Kindergarten (4K). It also funds an additional position responsible for overseeing the review and approval of higher education programs in early childhood education and licensing of early childhood education professionals.

Categorical Aid Increases
Roughly a third of the increased spending proposed by DPI is for categorical aid. These increases in aid offer two potential advantages: They do not count against a district's revenue cap; and they can be targeted to accomplish specific objectives (such as promoting school breakfast programs or relieving the fiscal pressure on special educations programs). Among the many proposed increases in categorical aid are the following:

• $75 million more for special education aid.
• About $26.5 million in FY 2009 to create a new aid program for small, rural districts.
• An increase of over $21 million for the SAGE program, which helps schools hold down class sizes in grades one through three. The increase would primarily be used to raise the aid per low-income student to $2,250, from the current $2,000.
• An additional $17 million in segregated funds (from the Common School Fund) for school library aids.
• A new appropriation of $5 million in FY 2009 for before and after school programs.
• $3.1 million more to maintain the current 12 percent reimbursement level for the bilingual-bicultural aid program.
• $6.2 million in FY 2009 to create a new bilingual-bicultural aid program that would help districts that don't qualify for the current program.
• About $2.7 million to increase the school breakfast reimbursement rate form 10 cents to 15 cents per meal.
• $2.2 million to eliminate the reduced-price school breakfast fee.
• A new appropriation of $1 million per year to improve student access to school nurses. The grants will provide approximately 15 FTE school nurse positions, or may be used to provide additional nursing services to schools statewide.

The DPI budget also contains a few other increases in earmarked funding that are not technically part of categorical aids. These include:

• an additional $26.9 million for the Milwaukee Parental Choice Program, reflecting both a higher cost-to-continue estimate and a proposal to raise the state's share of the cost (while decreasing the portion that is redistributed from public schools);
• about $15.4 million more for the state share of the Milwaukee/Racine Charter School Program; and
• $20 million more for public library systems, to bring the reimbursement level to the statutory standard of 13 percent.

Department of Workforce Development

The state continues to face a significant TANF and child care deficit as it heads into the next biennium. DWD estimates this deficit for the 2007-09 biennium on a cost-to-continue basis to be over $35 million. This "structural deficit" could mean serious challenges for a range of programs, including the Wisconsin Shares child care subsidy program, Wisconsin Works (W-2), the Earned Income Tax Credit, the SSI Caretaker Supplement program (in DHFS), and Kinship Care.

Because TANF block grant funds are used for programs in several departments, DWD chose not to make the significant decisions that will be necessary to balance the TANF budget as a whole. Those difficult decisions will have to be made by DOA and the Governor office. The following, however, are some key issues and initiatives included in DWD's 2007-09 budget request:

Implementation of a transitional jobs program
DWD proposes a pilot project titled "Real Work Real Pay," which would be tested in Milwaukee and two other counties over two years. It would move approximately 500 W-2 participants (400 this biennium, 100 in the next) into trial jobs in which the employer receives a subsidy for paying real wages to the employee, who remains eligible for case management and other W-2 services. Especially important is that the "real" earnings would make participants eligible for federal and state Earned Income Tax Credits, which is not the case for the cash benefits from other W-2 work placements.

Child Support deficit
A deficit of over $30 million is projected in the child support program, due primarily to recent federal law changes, but also because of reduced state funding over the last few biennia and the implementation of a debit-card system. The loss of federal funds is largely a result of cutbacks in the FY 2006 federal budget, including the prohibition by Congress of the practice of using performance incentive dollars as a source of matching funds.

W-2 cash benefit for women with no kids and in at-risk pregnancies
Currently such women are only eligible for case management services, even though federal regulations allow such a cash benefit to be part of a state's TANF work programs.

Department of Corrections

The Department of Corrections requested an increase of $247 million GPR (13 percent) to meet current operations and commitments, including the addition of 311 positions by the end of the biennium.

The Division of Juvenile Corrections (DJC) has not proposed any new initiatives in their budget proposal. Previously, DJC was budgeted for 660 kids over the past two biennia, and had an actual average daily population of 596 kids in the last full fiscal year. In this budget request, the cost-to-continue estimates for the juvenile correctional facilities are based on an average daily population of 575 kids, including 29 at the Mendota Juvenile Treatment Center.

Falling populations create significant challenges for DJC because they have to cover various fixed costs with less rate revenue from the counties. As a result, population reductions often lead to rate increases; however, DOC has not proposed any increase to the daily rate charged for youth in juvenile correctional facilities in 2007-2009. There is an outstanding requirement that the Department develop a plan to lower the daily rate of juvenile corrections to the counties, which must be submitted to the Governor and Legislature by January of 2007. In light of this requirement, the budgeting process for DJC will have a significant overlay with whatever initiatives may be developed as a result of the January daily rate proposal.

Conclusion

The budget proposals contain a number of positive initiatives for children. Among these are:

• The BadgerCare Plus plan, which would make health insurance available to almost all children in the state, while also improving coverage for farmers, caretaker relatives and pregnant women.
• Increases of 5 percent per year in foster care rates.
• Continuation of the state's two-thirds funding commitment for schools.
• A financial incentive in the school funding formula for districts to use community-based approaches for Four-Year-Old Kindergarten.
• Significant increases in funding for special education aid.
• A new $5 million appropriation for before and after school programs.
• Funding to encourage more schools to implement breakfast programs.
• Implementation of a W-2 pilot project titled "Real Work Real Pay."
• A new $1 million per year appropriation to improve student access to school nurses.

There are also a number of worrisome aspects of the budget. These include potential shortfalls in the area of W-2 and child care spending (where recommendations for the funding levels have yet to be made), the continuation of flat funding for Community Aids, and continued spending constraints for schools and other local government bodies.

Of course, this is still a very early stage of the budget process, and not all of these agency proposals will make it into the Governor's budget bill or through the Legislature. In addition, the shape of the budget will be heavily influenced by the outcome of the gubernatorial election. Anytime a new governor is elected, substantial changes are made in the budget bill. That would be particularly true for the 2007-09 budget, in light of the commitment that candidate Green has made to impose TABOR-like spending constraints on the next budget bill if he is elected.

WCCF will continue to provide updates on the status of children's issues at each stage of the budget process.