The legislature’s Joint Finance Committee (JFC) will begin taking votes on the 2017-19 budget on May 1. JFC plans to meet once the first week of May and then twice a week until they are finished. Typically, JFC begins their executive session with the less controversial budget proposals and saves the “big-ticket” items – transportation, Medicaid and education, for last.
As with most years, there are always several of the governor’s budget proposals that JFC decides to drastically change or nix entirely. This budget cycle the contentious issue list includes transportation funding, education (per-pupil aid and UW System) and the proposed change to state employee self-insured health care.
The transportation funding debate began last July, when Assembly Republicans began to talk frequently about revenue options. In response, Gov. Scott Walker announced—and reiterated many times and again this week—that he would veto any revenue increases (such as vehicle registration fees or gas taxes) without an offsetting tax cut elsewhere. However, Assembly Speaker Robin Vos (R-Rochester) has criticized Walker’s plan and expressed willingness to keep tax increases on the table.
Walker’s 2017-19 budget includes $6.1 billion for transportation during the biennium. The proposal included spending $325 million in general fund taxes to pay for transportation costs. Legislators have argued that using general fund dollars is not a long-term solution to the state’s estimated $1 billion road-fund shortfall. Walker’s budget also included $500 million in new bonding. Republican lawmakers have said they hope to lower that number and find other means of cost savings in the final DOT budget.
The JFC co-chairs announced earlier in April that it will work from base budget, or current law, instead of Walker’s proposal for just the Department of Transportation budget. This decision underscores the tension between the legislature and the governor on transportation funding.
Joint Finance Committee (JFC) member Rep. Dale Kooyenga (R-Brookfield) is set to release a transportation package in early May. According to JFC co-chair Rep. John Nygren (R-Marinette), the package would follow Walker’s expectations by offsetting any transportation revenue increases with tax cuts.
Education was one of the most highly discussed issues throughout JFC’s statewide public hearings. Walker’s budget invests an additional $649 million in K-12 education. While some legislators have criticized Walker’s proposal as too high, JFC co-chairs and other committee members have expressed interest in keeping the K-12 budget close to that number. Sen. Alberta Darling (R-River Hills) said that the per-pupil aids Walker’s budget proposed are the fairest way to divide up the money among districts. However, her fellow co-chairs are interested in directing more dollars to low-spending districts.
The University of Wisconsin System budget was also discussed frequently during the public hearings held across the state. Walker has proposed a five percent tuition cut, but Assembly Republicans are generally opposed to the cut because they think the money could be better spent on targeted aid, grants or raises for UW employees. Senate Republicans are split on the issue. Other sticking points in the UW budget include Walker’s proposal to let students opt out of certain fees, which JFC removed as a non-fiscal policy item, and performance-based funding for UW.
Self-Insurance for State Employees
In February, the state’s Group Insurance Board (GIB), which oversees health care for state employees, voted 10-1 to move forward with a self-insurance model for state employee health insurance. Under a self-insurance model, the state would assume the risk for claims and directly pay benefits.
In turn, Walker utilized the expected savings from this change in his 2017-19 budget. His budget assumes the state will achieve $60 million in savings ($20 million general purpose revenue (GPR) in 2017-18 and $40 million GPR in 2018-19). Walker invests it in K-12 education and uses it to offset increased salary and fringe benefits of UW-System employees.
JFC’s decision to accept the savings assumed in the budget is tied to whether they decide to vote on the self-insurance contract. Last session, the legislature passed a law (2015 Act 119), which requires the GIB to notify JFC if it intends to execute a contract to provide self-insured group health plans on a regional or statewide basis to state employees.
Under Act 119, JFC is provided 21 working days to review the proposed contract and schedule a meeting for consideration of the contract. If JFC notifies GIB that they intend to schedule a meeting, GIB cannot execute a contract without JFC approval. If JFC does not schedule a meeting, GIB may execute the contract. As of the writing of this article, GIB has not notified JFC of their intent to execute a contract.
It is expected that JFC will act on the proposed contract, however what action they take isn’t exactly clear. JFC members, including the co-chairs, have questioned the $60 million in savings assumed in the governor’s budget. During JFC hearings from agency heads in March, JFC members expressed concern about the governor’s proposal to move state employees to a self-insurance program model. Legislators including JFC co-chair Rep. John Nygren (R-Marinette) and Rep. Mary Felzkowski (R-Irma) were wary of the risk of tying uncertain savings from the self-insurance plan to K-12 school funding. Sen. Leah Vukmir (R-Brookfield) cited a previous study that showed the state could end up losing $100 million in the move.
The JFC member’s questions of the governor’s proposal seem to indicate that it will not be approved. However, the self-insurance proposal was a centerpiece of the governor’s budget and undoing the proposal has an impact on K-12 funding levels. JFC will need to allocate funds if they want to maintain the governor’s per-pupil aid levels and eliminate the self-insurance proposal.