On Wednesday, Feb. 8, Governor Walker presented his 2017-19 budget. Overall, the governor’s $76.1 billion budget invests in education and provides tax relief. The governor increased K-12 funding by $649 million and put $140 million in the University system, including $35 million to offset a five percent tuition cut. Balancing his other major priority, the governor’s budget provides $592 million in tax relief by eliminating the state’s portion of the property tax and reducing income taxes. Below are some of the major provisions in his budget. Visit Hamilton Consulting Group’s 2017-19 Budget Issue Update page for more information on the state budget process.
Although expected, one major policy change proposed by the governor was to move the state to a self-insurance model. Hours before the governor’s budget address, the Group Insurance Board (GIB) voted 10-1 to move forward with a self-insurance model for state employee health insurance. Under the proposed self-insurance model, the state will pay employee health insurance claims directly through a third-party administrator.
GIB voted to give the Department of Employee Trust Funds authority to enter contract negotiations to move the state to a self-funded health plan effective Jan. 1, 2018. The Joint Committee on Finance (JFC) will need to approve the contract before it is finalized. The governor’s budget assumes $60 million in savings from the shift to self-insurance. The governor in turn invests in K-12 education and to offset increased salary and fringe benefits of UW-System and state employees.
In addition to eliminating the state’s portion of the property tax, the governor proposed cutting individual income taxes by nearly $100 million in each year of the biennium. His plan also includes a back-to-school sales tax holiday for two days in August on which certain school supplies will be exempt from sales tax, saving families an estimated $11 million each year. As part of his Wisconsin Works for Everyone initiative, Walker’s budget increases the Earned Income Tax Credit, creates a Young Adult Employment Assistance Credit for those who have aged out of foster care or lost Supplemental Security Income benefits and restore the Homestead Credit for seniors and disabled Wisconsinites.
Walker’s budget also eliminates a provision that currently allows businesses to claim the manufacturing and agriculture credit and the taxes paid to other states credit on the same income. The plan also would expand the eligibility under the capital gains exclusion for Wisconsin businesses to allow businesses that use professional employer organizations to include those employees in their employee counts. The governor’s budget also increases WEDC funding in FY 2018-19 by over $6 million.
In the Department of Health Service’s budget, the state’s Medicaid program includes a $280 million increase, or “cost-to-continue.” This is the lowest cost-to-continue in recent years, where the Medicaid cost-to-continue was typically upwards of $600 plus million. In terms of policy changes, the governor proposed requiring childless adults in Medicaid to participate in job training and employment assistance services. Walker also increased Medicaid reimbursement for Birth to 3 by allowing the Birth to 3 allocation to be used for the nonfederal share of any newly-implemented Birth to 3 Medicaid services.
As anticipated, Governor Walker included no revenue increases for the Department of Transportation’s budget. Specifically, Governor Walker stated in his budget address, “We should not raise the gas tax.” His budget provides more funding to local governments for local roads than ever before in state history, increasing general transportation aids by $40 million. In total, $6.1 billion is invested in transportation during the 2017-19 biennium. According to recent-cost estimates, this improvement of the Transportation Fund provides sufficient funding to keep major highway development projects on-time and will contribute to highway safety and maintenance. The budget also repeals the prevailing wage requirements for state construction projects. The governor’s budget includes $500 million in new bonding, the lowest amount of transportation bonding since the 2001-03 biennium. However, many legislators would like to bring down this number and find other means of cost savings in the DOT budget.
Walker’s budget provides the Department of Justice with additional funding to combat opioid and methamphetamine abuse across the state and provides more funding for state crime laboratories. The budget plans to increase the minimum fee for inattentive driving or texting and driving from $20 to $40. The budget includes one-time funding for pay progression for assistant district attorneys and deputy district attorneys. Additionally, Walker’s proposal also eliminates the Judicial Council – a proposal the governor included two years ago, but did pass through the Joint Finance Committee.
In addition to the above provisions, the governor’s budget:
- Adopts a state version of the REINS Act that requires the legislature to approve all administrative regulations that have an impact of $10 million or more on regulated individuals and entities
- Eliminates the Parole Commission and transfers those functions to the Department of Corrections.
- Eliminates the Labor and Industry Review Commission.
- Increases expenditure authority for the broadband expansion grants in FY18 to account for a $6 million transfer from the universal service fund reserves and a $5 million transfer from the Department of Administration e-rate reserves.