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Feb. 7, 2003

The Legislature begins in earnest its efforts to address the budget deficit with Joint Finance hearings next week on Gov. Doyle’s special session bill. The bill, Special Session Senate Bill 1, amounts to an $81 million down payment on the current fiscal year shortfall, estimated to be over $500 million. As previously reported, legislative leaders called on Doyle to provide additional cuts to fill the current budget hole.

The struggle to address the current deficit is a harbinger for the more difficult task to come – balancing the 2003-05 budget with its projected deficit of over $3 billion. Both the Governor and Legislature repeatedly commit not to balance the budget with tax increases. And, revenue growth alone can not bridge the gap. So reducing the size of state government appears imminent. As noted below, state employees are making it clear that denying them previously negotiated pay increases should not be part of the solution.

For a complete and updated discussion on the two pending budget debates, see Pat Osborne’s report at:

http://www.hamilton-consulting.com/updates/budget2_osborne.html

In addition, check out Jim Hough’s profile of the Doyle Administration and the new Legislature at: http://www.hamilton-consulting.com/updates/doyleadmin_hough.html

Jim also provided an overview of the important, but somewhat overlooked, upcoming Wisconsin Supreme Court race at:

http://www.hamilton-consulting.com/updates/supremecourt_hough.html

Wisconsin Politics

Gomez Tabbed to Head OCI; Other Appointments Announced
Gov. Jim Doyle announced this week that Jorge Gomez will serve as Commissioner of the Office of Insurance. Gomez is the vice president and general counsel of United Government Services, a subsidiary of Blue Cross and Blue Shield United of Wisconsin. The only major cabinet position not yet appointed is the Secretary of the Dept. of Financial Institutions. Other, second-tier, appointments announced this week include:

• Dept. of Revenue Secretary Michael Morgan named Gina Frank-Reece Deputy Secretary and Jason Helgerson Executive Assistant.

• Dept. of Health and Family Services Secretary Helene Nelson named Kenneth Munson Deputy Secretary.

• Public Service Chair Burnie Bridge named Donna Holznecht, Acting Administrator, Natural Gas Division; Gary Evenson, Acting Administrator, Telecommunications Division; and, David Sheard, Acting Administrator, Division of Water, Compliance, and Consumer Affairs.

State Employee Labor Unrest Rocks Capitol
The continued controversy over the status of state employee contracts has boiled over to the courts with suits filed by major state employee unions. The “sick-out” earlier this week by correctional employees escalated the labor/management tensions. The controversy arose when legislative leaders hesitated to approve the contracts, arguing that the pay increases exacerbate the state’s fiscal condition.

State employees negotiate contracts with the Department of Employee Relations (DER), which is required to maintain close contact with the Legislature and the Joint Committee on Employment Relations (JCOER). (See, Legislative Council Memo on responsibilities of JCOER) Currently, fifteen contracts have been agreed to between the various unions representing state employees and DER. These unions represent various state employees, including prison guards, teachers, state patrol, and engineers, and in some cases, doctors and dentists. In all, the contracts cover 31,146 state employees.

Once approved by  DER and ratified by the unions, the contracts are sent to the JCOER. Rep. John Gard and Sen. Alan. Lasee are committee co-chairs. Other members include Reps. Foti, Kaufert, and Kreuser, and Sens. Darling, Panzer, and Erpenbach. The committee must hold a public hearing on the agreements before approving or disapproving them. If approved by the committee, the contracts are introduced as a bill that must pass both houses and be signed by the Governor to become effective.

Due to the current fiscal crisis, some policymakers and legislative leaders believe the contracts need to be renegotiated to reflect the current challenges that face the state. Union representatives see this as a breach of the agreement and a distortion of the negotiating process. Governor Doyle has indicated he has built enough money into his upcoming budget proposal for the two-year period beginning July 1 to cover the contracts.

The Wisconsin Federation of Teachers (WFT) filed a lawsuit this week against the state of Wisconsin and the Joint Committee on Employment Relations (JCOER) asking the court to compel them to fulfill their statutory obligations to act upon the tentatively agreed upon contracts. The union alleges that the State violated the constitutional right of due process. Among other charges, the union also alleges that the state is engaging in unfair labor practices. AFSCME Council 24, representing other state employees, also filed a similar suit earlier this week.

Meanwhile, approximately 400 correctional officers at the Department of Corrections called in sick on Thursday, further escalating labor tensions. Employment Relations Secretary Karen E. Timberlake sent a strongly worded letter to union officials notifying them that this action constitutes the organization or engagement in strike activity. Timberlake estimated that the “strike” has already cost taxpayers over $72,000.

According to a recent Legislative Fiscal Bureau Memo, the contract extensions will cost an additional $66 million for the two-year period ending June 30 and $124.7 million during each year of the upcoming two-year budget.

Policy Developments

JFC to Hold Hearings on Budget Reduction Bill
Before the Governor and the Legislature tackle the biennial budget deficit, currently estimated at over $3 billion, they first have to deal with the current 2002-03 fiscal year shortfall. That shortfall is currently projected at $507 million ($373 million revenue shortfall, plus a $134 million statutory reserve amount). They must also address a projected shortfall of $64.4 million in the medical assistance and BadgerCare programs and find $16.5 million to fill the gap in the 2002-03 Department of Corrections budget. On January 30, 2003, Governor Doyle’s Special Session Senate Bill 1 was introduced to partially address the current deficit.

The Joint Finance Committee (JFC) will hold a public hearing on Special Session Senate Bill 1 (SS SB 1) on Tuesday, Feb. 11 at 11:00 a.m. in the State Capitol. The Committee invited DOA Secretary Marc Marotta to testify at the hearing. JFC is expected to take executive action on the measure before the legislature convenes on Feb. 18.

Earlier this week, the Legislative Fiscal Bureau (LFB) released its summary of SS SB 1. The bill reduces the $373 million deficit by net $81 million that includes $31.8 million in GPR reductions and lapses, $61.7 million in program revenue and segregated revenue reductions and lapses to the general fund, a $4 million transfer of GPR debt service from Stewardship to the SEG Forestry Account, and a $16.5 million GPR increase for Corrections. The bill also addresses the projected shortfall in MA and BadgerCare by borrowing $64.4 million from the Segregated MA Trust Fund so as not to affect GPR this year. (See the Legislative Fiscal Bureau Summary for additional details.)

See Pat Osborne’s updated Overview of 2003-05 Biennial Budget for a more complete analysis of the State’s fiscal quandary.

State Senate Reduces Its Budget
In an effort to help address the looming budget deficit, the State Senate took action last week to reduce its operating expenses. The reductions, outlined in a memo from Senate Majority Leader Mary Panzer, include the following:

• Elimination of 12 Policy & Budget positions saving approximately $725,000 annually.
• Reduction of Senate office budgets for each Senator by $15,660.
• Suspension of all Committee travel through June.

Federal Developments

Senate Will Address Medical Liability Reform
The U.S. Senate has scheduled a joint committee hearing for next Tuesday on the need for medical liability reform. Health, Education, Labor and Pensions Chairman Gregg and Judiciary Chairman Hatch will jointly gavel the hearing and are said to be working together to draft legislation.

Congressmen Say States Should Use Unspent Children’s Health Funds
House Energy and Commerce Chairman Tauzin and ranking member John Dingell, D-Mich., unveiled a joint proposal allowing states to keep for the State Children's Health Insurance Program $2.7 billion in unspent funds that otherwise would go back to the federal treasury. The bill would extend through FY04 the availability of $1.2 billion in unused SCHIP funds from FY98 and FY99 that expired last Oct. 1. It also would extend for one more year the availability of another $1.5 billion in expiring funds from FY00 and FY01. Sens. John (Jay) Rockefeller, D-W.Va., and Olympia Snowe, R-Maine, are introducing a companion bill in the Senate. The FY04 Bush administration budget proposes to make the funds available, but only for one additional year.

Lawmakers Unveil Measure To Stop 'Unfair' Class Action Settlements
As mentioned last week, senators. Charles Grassley, R-Iowa, and Herb Kohl, D-Wis., along with Judiciary Chairman Hatch today unveiled legislation to stop "unfair and abusive class action settlements that ignore the best interests of injured plaintiffs. The cornerstone of the bill is a provision making class actions removable from state to federal court by a defendant if the total damages exceed $2 million and parties include citizens from multiple states. The measure also proposes to require that all class notices and notice of proposed settlements be written in easily understood terms and include the amount and source of attorneys' fees. It also would require that courts scrutinize class action attorneys' fees in settlements where the plaintiffs get non-cash relief to ensure that the settlements are fair to plaintiffs.

Nickles Drafting Measure to Restrict Asbestos Litigation 
Senate Budget Chairman Nickles' is drafting an asbestos litigation reform bill. Nickles' decision to enter the fray on asbestos reform, raises the profile of the issue, and comes as an encouraging sign, reform proponents said.

DOE Announces Plan to Allow Funding Expansion for Yucca Mountain
The Energy Department announced a financial plan this week that would allow a substantial funding expansion for the planned Yucca Mountain nuclear waste repository.

President's 2004 Budget 9.8 Million for Wisconsin's Low-Income Families
President Bush's 2004 Budget includes $9,841,518 in weatherization assistance for Wisconsin to improve the energy efficiency of hundreds of low-income households. Wisconsin's grant will be handled through the Wisconsin Division of Energy in Madison. The National Energy Policy made the Weatherization Assistance Program a priority, recommending that it be increased by $1.4 billion over 10 years. (See, DOE Feb. 5 Release for additional details.)

Political News

Judges here spurn local candidates: Madison Capital Times, Feb. 7, 2003. Five on record supporting Barron County's Brunner.

Lawmakers order audits of 3 state programs: Madison Capital Times, Feb. 7, 2003. DNR, DOT, UW to get look.

Hundreds of state workers call in sick: Wisconsin State Journal, Feb. 7, 2003. State threatened union leaders with sanctions and two unions took the Legislature to court.

Doyle: No state aid cuts in first year: Eau Claire Leader-Telegram, Feb. 7, 2003. Chippewa Valley officials brace for future budget slashing.

UW's Lyall says Chvala requested donations: Wisconsin State Journal, Feb. 6, 2003. Tried to pressure her for campaign cash when she approached him for help on university business.

Agencies brace for action by state workers: Wisconsin State Journal, Feb. 6, 2003. union employees frustrated at the slow pace in approving contracts.

State might buy back some tobacco payments: Milwaukee Journal Sentinel, Feb. 5, 2003. Move would help pay for tobacco control, governor and staff say.

States' budget troubles worsening, report finds: Milwaukee Journal Sentinel, Feb. 5, 2003. Combined deficit 47% higher than projected.

3 candidates for high court tout credentials at forum: Milwaukee Journal Sentinel, Feb. 2, 2003. One renews no-PAC vow, while others decline to join him.

Supreme Court candidates present their cases at forum: Wisconsin State Journal, Jan. 31, 2003. Sparred over judicial campaigns and whether judges should express opinions on abortion rights

Upcoming Fundraisers

Monday, Feb. 10:

• Rep. Mark Gundrum (R-New Berlin), New Berlin, 7:30 a.m. 
• Mike Anderson (Dane County Circuit Court candidate), Madison, 5:30 p.m.

Tuesday, Feb. 11:

• Paul Higgenbotham (Supreme Court candidate), Madison, 5:30 p.m.

Wednesday, Feb. 12:

• Republican Assembly Campaign Committee, Lake Mills, 5:00 p.m.
• Paul Higgenbotham (Supreme Court candidate), La Crosse, 5:00 p.m.