Budget Hearings Conclude, JFC Set to Begin Voting…Maybe

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Every budget year, the legislature’s Joint Finance Committee and its non-partisan budget office, the Legislative Fiscal Bureau (“LFB”), must complete a number of routine – if not ministerial – tasks prior to taking a single vote on the budget bill.  Typically, those actions are bookended by the JFC receiving budget briefings from major agencies and cabinet-level departments, (held March 2, 3, and 4), and a series of public hearings on the budget bill, (held March 18, 20, 23 and 25).  In between, however, a number of other important actions are completed, including the LFB’s release of a budget summary, and numerous other reports detailing tax and fee modifications, the use of fund transfers, and a general fund condition statement.   

This budget cycle, that process was completed nearly three weeks ahead of schedule as compared to recent budgets, and is consistent with the Governor’s and Legislature’s stated desire to complete budget deliberations no later than June 31, 2015, if not earlier.  However, four key issues have emerged that could prevent an on-time budget for the first time since Scott Walker was elected Governor.  Those issues include:

  • K-12 funding and the expansion of the statewide school voucher program.
  • Spending and revenue-generating alternatives for the state’s transportation fund.
  • Cuts to the University of Wisconsin System.
  • State-local financial support for a new arena for the Milwaukee Bucks. 

Although July 1, 2015 marks the statutory deadline for adopting a new budget, there are only minor consequences if the legislature fails complete its work by that date.  Unlike the federal government, which shuts down if a new budget is not adopted by Congress, state government continues to operate on a cost-to-continue basis until a budget is signed into law.  With few exceptions, most state programs can operate on a cost-to-continue budget for many months before facing a funding crisis. One exception is the Medicaid program, a sum-sufficient appropriation, which requires the government fund all program expenditures on a routine basis.   Oftentimes, the Medicaid program faces programmatic increases in the hundreds of millions of dollars from one biennium to the next and, without the authority to implement cost-saving measures, the Department of Health Services can quickly find that it lacks the resources to pay its bills. 

Still, the smart money is on the passage of an on time budget.  Late budgets have become somewhat of an anomaly, with the last one occurring in 2009 when Democrats controlled the Senate and Republicans controlled the Assembly and a stalemate emerged.   Already, legislative leaders have hinted at plans to reduce the cut to the UW System (while scuttling the Governor’s proposal to give it greater independence); identified alternative funding mechanisms for the Milwaukee Bucks’ arena; and, pledged to increase K-12 spending with the new revenue likely to be revealed by the LFB’s revenue estimates to be released in May. 

Despite this progress towards resolving some of the budget’s major issues, however, this year doesn’t have quite the same feel as recent budgets that, by comparison, seemed to sail through the legislature.  Democrats and Republicans alike have indicated that some of the Governor’s cost-saving proposals – like scaling-back Senior Care and revamping Family Care – are all but dead.  It’s unclear whether the Senate and the Assembly share the same vision for K-12 spending, UW System or the Bucks.  There has been little progress towards a palatable solution to the transportation funding crisis.  And, while the LFB’s revenue estimates are likely to produce additional revenue, it’s not likely to produce a windfall as it did during the 2013-15 budget deliberations. This year’s revenue estimates are expected to be more in the order of saving a few programs slated for elimination than authorizing historic property tax cuts. 

The bottom line is that there’s a lot in this budget that both parties want to change.  While the budget deficit facing the state isn’t as severe as it has been in recent years, there are more programs on the table to be saved---and that costs money, money that is yet to materialize. So, while a number of the JFC’s statutorily required functions may be behind it, the real heavy lifting is yet to begin.  And this year, that may mean that there is some extra time before the first vote is ever taken.

Proposed Wisconsin Budget Provision Potentially Impacts Municipalities

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As part of his 2015-17 biennial budget proposal Governor Scott Walker has recommended consolidating municipal (town, village and city) property tax assessment into a county wide assessment where, with limited exceptions for 1st and 2nd class cities, counties would administer the system.  The proposal would consolidate the state’s 1,851 taxing districts into a single assessment office in each of the state’s 72 counties.  In addition, the equalized value system of assessments would be eliminated in favor of annual full market value assessments.  Counties could charge municipalities up to 95% of the cost of performing assessments in 2015.  

To read the full post by Stafford's Government Relations Advisor, please click here.

Property Assessment Consolidation Proposal Raises Questions From Local Governments

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As part of his 2015-17 biennial budget proposal Governor Scott Walker has recommended consolidating municipal (town, village and city) property tax assessment into a county wide assessment where, with limited exceptions for 1st and 2nd class cities, counties would administer the system.  The proposal would consolidate the state’s 1,851 taxing districts into a single assessment office in each of the state’s 72 counties.  In addition, the equalized value system of assessments would be eliminated in favor of annual full market value assessments.  Counties could charge municipalities up to 95% of the cost of performing assessments in 2015. 

Although this proposal may represent a dramatic shift away from the current property tax assessment system, it is not a new concept, nor is it a partisan one.  In 2009, under former democratic Governor Jim Doyle, state revenue Secretary Roger Ervin floated a similar plan.  Ervin cited inequity between state and local equalized values; lack of uniformity across jurisdictions; and inefficient administration as rationale for making the shift.  Local government groups, especially the Wisconsin Towns Association, objected and cited as a primary concern their inability to control the costs of providing the service if it was moved to the county.  Ultimately, the proposal was not adopted.

Just as in 2009, local government groups are once again raising questions about the proposal.  Following is a brief summary of some of the concerns raised by each of the three major local government groups, including the Wisconsin Counties Association, the League of Municipalities and the Wisconsin Towns Association as well as individual counties and municipalities.

Wisconsin Counties Association:

  • The proposal represents a new mandate.
  • The 2017 implementation date is not feasible. 
  • The funding mechanism is inadequate. 
  • Click here for the WCA release. 

League of Municipalities:

  • The 2017 implementation date is too ambitious. 
  • The cost of the county assessment should not be part of the municipal levy.
  • The cost of assessing all parcels at full market value is more expensive than the current system. 
  • Payments to counties from municipalities for the costs of assessments will be inequitable. 
  • The opt out provision should be more flexible. 
  • The provision could interfere with the long-term contracts between some municipalities and private assessors. 
  • Click here for the LWM release.

Wisconsin Towns Association:

  • The proposal erodes local control. 
  • Full market value assessments are more expensive than equalized value assessments for taxpayers and municipalities. 
  • The proposal reduces competition in the marketplace. 
  • Click here for the WTA release. 

According to Rick Chandler, the state’s current revenue secretary, the proposal would generate cost savings at the state and local level and result in improved quality of property assessments.  Now, it is up to the Legislature to decide whether the alleged benefits outweigh the concerns raised by local governments.  

2015-17 Biennial State Budget Introduced, Major Provisions Unveiled

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On February 3, 2015, Governor Scott Walker unveiled his $68.3 billion state spending plan.  The Joint Finance Committee subsequently introduced the appropriations bill, which is now known as Assembly Bill 21/Senate Bill 21.

Highlights of the major provisions of Governor Scott Walker’s spending plan include:

  • Proposed all funds spending of $35.9 billion in FY15 and $32.3 billion in FY16, including a decrease in GPR spending of 0.3% in FY15 and an increase of 6.7% in FY16.
  • Significant modifications to and expansion of the statewide school voucher program, including funding changes that will affect public school funding. 
  • No tax or fee increases to fund the state’s transportation programs, instead funding transportation-related programs with $1.3 billion in new bonding authority.
  • The governor estimates property taxes on the median-valued home will decrease by $5 in both fiscal years.
  • No modifications to sales or income tax rates.
  • Consolidation of and reform to state agencies and their operations.
  • Property taxes for the median-valued home will decrease by $5 in both fiscal years.
  • Elimination of approximately 400 state positions.

Representative John Nygren, Assembly Co-Chairman of the Joint Committee on Finance (JFC), recently laid out the timeline for consideration of the budget by that committee.  Co-Chairman Nygren has indicated that following the release of the budget overview by the non-partisan Legislative Fiscal Bureau (LFB) later this month, the JFC will receive budget briefings from cabinet-level agencies and hold four regional public hearings.  Co-Chairman Nygren expects that these preliminary actions will be completed by late-March, enabling the 16-member JFC to begin its deliberations on the budget in early-April.  He expects JFC action on the budget to be complete by Memorial Day, allowing ample time for both houses of the Legislature to complete its action prior to the end of the state fiscal year on June 31, 2015.

Co-Chairman Nygren has indicated that the JFC will likely meet two times per week, typically on Tuesdays and Thursdays.   In addition, the JFC will impose time limits on debate, with each member allowed to speak twice per issue for a maximum of five minutes each time.  Additionally, the JFC will refrain from beginning action on new topics after 10:00 p.m. on days the committee is scheduled for executive session.

Although Co-Chairman Nygren’s predictions for completion of the budget mirrors the timetable of the prior two budgets, this state budget comes with significant challenges that could push enactment of the spending document past the statutory deadline.  Major issues yet to be resolved include:

  • K-12 funding and expansion of the statewide school voucher program.
  • Spending and revenue-generating alternatives for the state’s transportation fund.
  • Spending for University of Wisconsin System, including setting tuition rates.

In addition to these provisions, a number of provisions in the Governor’s budget have a significant impact on the state’s municipal governments.

Major provisions in the Governor’s proposed budget affecting municipalities include:

                                 Shared Revenue & Government Operations

Local Government Property Insurance Fund:  The Governor recommends closing the local government property insurance fund (LGPIF) to new policies and not renewing existing policies. The fund was originally created to ensure local governmental units had access to affordable property insurance.

Shared Revenue: The Governor’s proposed budget maintains current funding for shared revenue.

Levy Limits:  The Governor’s proposed budget leaves levy limits unchanged.  Municipalities may only increase their tax levies by the change in property values due to net new construction.
All current law exemptions to the levy limit program are maintained.

School Levy Tax Credit: The Governor’s proposed budget increases funding for the school levy tax credit by $211.2 million in the biennium to reduce property taxes by $105.6 million, or $5, annually.

Property Tax Bill Disclosure:  The Governor’s proposed budget requires property tax bills to disclose debt service and fees from each taxing jurisdiction, including their impact on the property tax.
The Governor’s proposed budget also requires that property tax bills explicitly inform taxpayers of the impacts of additional amounts levied pursuant to a referendum to exceed a tax levy limitation.

Property Assessment:  The Governor recommends beginning the transition from the current system of municipal property assessment to countywide property assessment in 2016 and requiring completion of the transition for the 2017 property assessment year. All properties will be required to be assessed at 100 percent of fair market value by the 2017 assessment year.  Multiple counties may form consolidated assessment regions at their discretion.
First- and second-class cities may choose to maintain municipal assessment provided they meet certain requirements.

Municipal Boundary Recording:  The Governor’s proposed budget consolidates the process related to recording all changes in municipal boundaries by transferring responsibility from the Secretary of State to the Department of Administration.   The Governor’s proposed budget provides funding to the Legislative Technology Services Bureau (LTSB) to create and manage a statewide database of changes to municipal and ward boundaries for the purposes of enhancing the precision of calculating state and federal aid.

                                                   Health & Human Services

Mental Health Funding:  The Governor’s proposed budget provides funding to assist counties with creating mental health crisis services programs pairing law enforcement with mental health professionals to create a best practice model.  The Governor’s proposed budget consolidates mental health funding into the community aids program for the state purpose of providing flexibility and creating efficiencies.

Emergency Detention Processes:  The Governor’s proposed budget would require Milwaukee County to align its emergency detention processes in a manner similar to other county processes throughout the state. 
The proposal also requires counties to provide community-based crisis assessment by a mental health professional (physician who has completed a residency in psychiatry, a psychologist, or a licensed mental health professional) prior to an emergency detention and allocates $1.5 million to assist counties with this effort in FY 16.

Family Care:  The Governor’s proposed transitions the program to an outcome-based model providing long-term care, primary care and acute care services, including self-directed care; creates operational efficiencies for managed care organizations; and streamlines operations in the Department of Health Services, and makes the following recommendations:  Services will be provided to participants through managed care organizations (MCO) operating statewide; Provides members with a choice of MCOs in order to determine which best meet their needs; Regulates MCOs as insurance entities under the jurisdiction of the Office of Commissioner of Insurance.

Dementia Care:  The Governor’s proposed budget provides funding to support dementia care specialists in selected aging and disability resource centers across the state.

                                                                  Courts

Surcharges: The Governor’s proposed budget eliminates exemptions from the circuit court fee for four offenses (failure to wear a seatbelt, violations related to smoking in a public place, failure to carry proof of motor vehicle insurance, and failure to carry a handicap permit) to ensure equity among similar violations.

Surcharge on Felony and Misdemeanor Convictions:  The Governor recommends creating a $20 crime prevention funding board surcharge for each felony and misdemeanor conviction.

                                                          Transportation

Mass Transit Operating Aids:  The Governor’s proposed budget funds Mass Transit Operating Aids at current levels.

General Transportation Aids:  The Governor’s proposed budget funds the increase to General Transportation Aids adopted in the 2013-15 budget and retains current level funding for General Transportation Aids based on funding in fiscal year 2014-15.

Elderly and Disabled Specialized Transportation Aids:  The Governor’s proposed budget renames the program “Seniors and Individuals with Disabilities Specialized Transportation Aids.” Funding is increased for the program by $438,000, a 1% increase in funding in each year of the biennium.

Bicycle and Pedestrian Facilities (Trans 75):  The Governor’s proposed budget proposal repeals state requirements that exceed federal law related to whether bicycle and pedestrian facilities be included in the construction of new highway projects.

Community Sensitive Design:  The Governor’s proposed budget proposal prohibits WisDOT from funding Community Sensitive Design on highway projects resulting in $7 million in savings.

For more information on how Governor Walker’s biennial state budget affects your municipality, contact your Stafford Rosenbaum attorney or any member of the firm’s Government Affairs practice.