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The expression “better late than never” understates our feelings about enactment of the long overdue 2007-09 budget bill, when we compare it with the hardships that would have resulted if the Legislature had failed to pass a budget and simply continued the previous funding levels. Although there were some disappointing compromises, children’s issues generally fared well in the final budget, which is now Act 20. The most worrisome aspect of the budget is that the state remains in a very precarious fiscal position. In the negotiations that led to Act 20, Democrats got their way on many of the spending items, but Republicans prevailed in their efforts to block most of the new tax revenue proposed by the Governor. That paradoxical outcome was made possible by continuing to rely on short-term solutions and by deferring much of the new spending and tax cuts to future years, thereby negating the progress the Governor’s budget would have made in reducing the state’s structural deficit. The net result is a budget where programs for children and families came out better than we had anticipated. On the other hand, it is a fiscal blueprint that fails to establish a firm foundation for the 2009-11 budget. This article summarizes some of the key parts of the budget relating to programs for children and families. A much more comprehensive WCCF summary of the budget, tracking the changes over each stage of the process, can be found on our website at: Health Care One of the key areas of this budget for children is health care. Although the Legislature rejected the Senate’s proposal to provide health insurance for all state residents, Act 20 does include the Governor’s BadgerCare Plus initiative. Beginning in February 2008, BadgerCare Plus will do the following:
A second phase of BadgerCare Plus, slated to begin in 2009, is expected to provide coverage for low income childless adults. Currently, childless adults are not eligible for Medicaid or BadgerCare, no matter how poor they are. That portion was not funded in the budget, but the adoption of the statutory authority allows DHFS to continue to seek a federal waiver and attempt to find a way to finance the phase-in of that new category of coverage. The state might be able to get it started by using funding for the General Assistance Medical Program (GAMP). A longer summary of BadgerCare Plus, including a chart illustrating the expanded categories of coverage, can be found on our website at: Some of the other health care related measures in the bill include the following:
The Legislature did not approve the proposed hospital assessment that would have leveraged federal funds for a hospital rate increase, while also helping to balance the Medicaid budget. However, Act 20 does include a $200 million transfer from the Patients Compensation Fund to the Medicaid trust fund, and the State Medical Society has filed a lawsuit to try to block that funding shift. Early Care and Education One of the more contentious areas of the budget was the funding for early education. Because of a significant structural deficit in the budget for welfare reform programs, such as Wisconsin Works and the Wisconsin Shares child care subsidy program, the Governor had recommended a number of changes to reduce child care subsidy spending substantially below the 2006-07 level. Those measures included a lower income-eligibility ceiling, changes in the reimbursement policies for providers, higher co-pays for families, and instituting waiting lists. The final budget package increases Wisconsin Shares funding by $69 million increase over the base, and $65 million more than the Governor’s original budget. It does not authorize waiting lists or change eligibility levels, but child care provider payment rates are frozen at 2006 levels. Although there are no statutory changes to family co-payments or the absence policy, the Department of Workforce Development (DWD) retains the ability to address those issues administratively. Some of the other significant budget measures relating to early education include the following:
Proposals the Governor made to improve child care quality did not make it into the bill. Instead, the bill cuts funding in that area. It does not prescribe exactly where the cuts will be made, but Act 20 directs DWD to spend not more than the minimum amount required by federal law for quality. That was one of the tradeoffs resulting from the Legislature’s efforts to preserve the child care subsidy program. W-2 and TANF Work and public assistance programs like W-2 and child care subsidy are funded primarily from the federal block grant know as Temporary Assistance to Needy Families (TANF). The TANF-funded portion of the state budget has been hard to balance in recent years because the block grant funding level has been frozen for more than a decade and child care subsidy use has been growing steadily. Perhaps an even more important reason is that the state began in 1999 to use upwards of $50 million of TANF funds each year to replace state GPR dollars for the Earned Income Tax Credit (EITC). The new budget takes a major step toward ending that unsustainable practice. It restores $82.7 million GPR for the EITC over the next two years, in order to free up TANF funds that are needed to fill the shortfall in funding for the child care subsidy program. Other noteworthy appropriation changes in the DWD budget include:
Also noteworthy are some of the proposals that did not make it into the final budget bill. Those include:
Juvenile Justice and Child Welfare
K-12 Education Funding for K-12 education was the first major area of the budget agreed to by the Conference Committee, after Republicans accepted most of what the Democrats were seeking for schools. Although this seemed to be an area where the Senate and Assembly weren’t nearly as far apart as was the case for other parts of the budget, matters got a bit more complicated after the budget process continued beyond the date when the Department of Public Instruction (DPI) had to notify districts what their equalization aid will be in the next year. The upshot of the delay was that the increase in general school aids had to be by $79.3 million per year because DPI had already officially notified districts that general aid in 2007-08 would be the same as in the 2006-07 school year. In response to that problem, Act 20 adds the $79 million to the School Levy Credit, with the idea being to accomplish essentially the same result through the relief that shows up directly on property tax bills. However, a problem has arisen because the formula for dividing up the increased funding for the levy credit was not changed to make it consistent with the school aids formula. As a result, about 69 percent of school districts – specifically, the less affluent districts – will get less tax relief, unless the Assembly approves a Senate-passed bill (SB 299) that would correct this apparent oversight. Other parts of the K-12 budget include the following:
Other Property Tax Relief Issues There were a number of disappointments in the portions of the budget relating to local aid and property tax relief. The bill puts a fiscal squeeze on local governments, particularly municipalities and counties, who must cope with the following:
Another disappointment is that a provision to adjust the Homestead Tax Credit for inflation, which was proposed by the Governor and had strong Senate support, was removed from the bill. Funding for the credit is cut by $13.1 million because inflation continues to erode the program. A much less progressive form of property tax relief, the School Levy Credit, is increased by almost $327 million relative to the base. Fortunately, the bill also commits $75 million for a new First Dollar Credit, which is similar to the School Levy Credit but uses a more equitable formula for allocating property tax relief. It will begin in 2009 but does not actually get funded until the next biennium. Conclusion On balance, Act 20 is a good budget for Wisconsin’s children and families. We are particularly pleased that it protects the Wisconsin Shares child care subsidy program and includes the Governor’s BadgerCare Plus initiative, which will provide access to health insurance for nearly all children in the state. As to be expected of any compromise, there are parts of the bill that are disappointing. For example, we are sorry to see that Homestead Tax Credit funding declines by $13 million because the proposal to adjust the credit formula for inflation was not approved. We are also disappointed that there is little aid for state-mandated human services provided by the counties, and we are concerned that local revenue caps will continue to squeeze schools and other local services. We also worry about the implications of a large structural deficit for the next biennial budget. Despite those reservations, there are many very positive things in the budget and we commend all the parties involved for making children a high priority.
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