Initial Summary of Governor McCallum's Budget Reform Act
& Comparison With Other Legislative Republican Plans

Prepared by the WEAC Political Action, Legislative, Federal and Agency Relations (PALFAR) Campus

Background

The state of Wisconsin faces a $1.13 billion deficit. The governor called the Legislature into a special budget adjustment session on Tuesday, January 22, to address the fiscal crisis. Governor McCallum released his budget reform act outlining how he intends to solve the deficit problem before a joint legislative session.

This memorandum contains an initial analysis of the governor's treatment of K-12 schools, state agencies and the WTCS. The final section of the memo outlines proposals previously released by Republicans in the Senate and Assembly. The Democrats have not released any detailed plans for dealing with the budget deficit at this time.

Governor's Budget Plan Maintains Investment in K-12 Schools but Cuts Funding for State Agencies and the WTCS

Governor McCallum's budget proposal keeps Wisconsin's investment in K-12 public education a priority. The governor's budget plan recognizes that every kid in every Wisconsin community deserves a great school by fully funding two-thirds of school operating costs and requesting that all categorical aid programs like SAGE be spared from any cuts. Even in grim economic times, we cannot ignore the need to provide classrooms that work for children throughout Wisconsin. Cutting education would harm the entire state, because great schools benefit everyone: children, parents, grandparents and taxpayers.

Senate and Assembly Republican budget proposals to freeze state spending and reduce the state's overall commitment to fund two-thirds of school operating costs would endanger the high quality of education in Wisconsin public schools. Local school boards would be forced to cut programs and staff in Wisconsin's great schools under those plans. These shortsighted plans would cause long-term damage to schools, children, and our economy. The long-term growth of Wisconsin's economy demands a solid investment in our public schools. WEAC is calling on the Legislature to agree with the governor and prioritize support for K-12 public schools and pass a budget adjustment bill as soon as possible.

Talking Points on K-12 Proposals in Governor McCallum's Budget Reform Act

· Even in grim economic times, we cannot ignore the need to ensure that every kid attends a great school. Cutting education would harm the entire state, because great schools benefit everyone in our state; children, parents, grandparents, business and taxpayers.

· Governor McCallum agrees that any freeze or rollback of the state's 2/3 commitment to fund schools will jeopardize the ability of districts to maintain quality staff. There are more than 300 unsettled contracts across the state and the Republican legislative proposals to reduce funding for schools have only served to disrupt teacher and support staff contract negotiations. The governor's executive budget summary says, "Furthermore, protecting schools from drastic reductions in state support recognized that many school districts have settled contracts with teaching staff for both the 2001-02 and 2002-03 school years that, if state funding were reduced, would be difficult to maintain without reducing teaching staff or increasing property taxes."

· Budget-cutting measures that harm public education are unacceptable, especially since public schools have already been forced to make budget cuts for eight years under the state-imposed revenue caps and QEO law. As the Legislature prepares for a budget adjustment session, it is time for WEAC members to speak openly about accomplishments in K-12 public education and get ready to meet the challenges that lie ahead. We must renew our strong commitment to maintaining high quality public schools that benefit everyone in the community. We will defend public education at the state and local levels because the future success of Wisconsin's great schools is at stake.

· Maintaining the high quality of Wisconsin's public school system remains a top priority for the governor. Even in periods of economic uncertainty, it is no less vital that schools be provided adequate resources to help students acquire the knowledge and skills needed in an increasingly knowledge-based economy.

· The long-term growth of Wisconsin's economy demands a solid investment in great schools. WEAC is now calling on the Legislature to agree with the governor and prioritize support for K-12 public schools and pass a budget as soon as possible.

Detailed Summary of K-12 Provisions in Governor's Budget Reform Act

Maintain Two-Thirds Funding

• $5.1 billion in school aids in 2001-2002
• $5.3 billion in school aids in 2002-2003, including $115 million that was part of the education veto that maintains two-thirds without increasing the state's structural deficit
• Act 16 total increase in state school aid will be $453 million
• There will be a slight modification to the 1st tier guarantee in the funding formula
  • The $2 million guarantee will be reduced to $1.9 million causing a slight adjustment in the definition of two-thirds which will affect the wealthiest school districts.

Fully Fund SAGE

• The budget reform act continues a commitment to fully fund the SAGE class-size reduction initiative. This program will allow more than 500 schools to reduce class sizes in grades K-3 to no more than 15:1. (More than $170 million for the biennium). Smaller class sizes have proven to be an effective learning environment for K-3rd children.

No Cuts to Categorical Aids

• The governor recommends that funding for all categorical aids be maintained at the levels appropriated in the 2001-2003 biennial budget (Act 16).
• All funding for special education, school breakfast, English as a Second Language, Minority Group Precollege Scholarship and other tuition payments are spared from any cuts.

No supplanting of federal dollars to offset state spending

• Approximately $60 million in federal dollars is expected for WI as a result of passage of the federal Elementary and Secondary Education Act (ESEA). All federal money to local school districts is delivered outside of the revenue caps.
• The budget reform bill will not use any of the new federal money to offset state budget cuts.

Cap Debt Service for School Construction at FY '01-02 Level but Allow Local Override

• Impose a cap on construction related debt service cutting $20 million out of two-thirds funding
  • The calculation of partial school revenues is estimated at $520 million for next year
  • The state will recognize only $490 million of that amount which becomes the base of two-thirds
  • This represents less than a 0.3 percent reduction to expected fiscal year 2002-03 levels
  • Districts still capture 90 percent of the revenue increase allowed under current law
  • School districts that passed referenda will still get aids but at a slightly lesser amount
  • This is a one-year cap and will not impact eligibility of future debt service costs aid
• The construction cap requires an adjustment in revenue caps, impacting all 426 school districts
• The allowable per/pupil increase in the revenue caps will drop by $23 per student.
• Local school boards will be allowed to override the cut by a super majority vote. This option will allow local school districts to make up the entire cut without going to referendum.

Delay Implementation of the HSGT

• Request a two-year delay in implementation of the high school graduation test to reflect additional savings over the biennium.

Talking Point

• Cuts to state agencies must be measured against the harm such cuts will do to children and to our communities. The Department of Public Instruction and other state agencies must maintain quality services to local school districts and citizens. These services and programs benefit everyone.

Detailed Summary of State Agency Provisions in Governor's Budget Reform Act

3.5% Cut in 01-02 & 5% in '02-03 to All State Agencies

• The budget reform bill requires most state agencies to reduce their program expenditures beyond the cuts already imposed in Act 16. Therefore, state agency budgets will be cut 10 percent this fiscal year and 11.5 percent in fiscal the year beginning in July 2002. This is in addition to the hiring freeze also approved in WI Act 16.
• It is assumed that the cuts in DPI and other agencies will come out of agency operations.
• Any cuts to the state residential schools would need to be approved by the Joint Finance Committee.

Talking Point:

• A great technical college system is the solution to the economic downturn in Wisconsin. During recessions, enrollments traditionally increase as Wisconsin workers seek education and training. WTCS will not be able to meet the increased demand.

Detailed Summary of WTCS Provisions in Governor McCallum's Budget Reform Act

1% Cut in '01-02 & 4.5% Cut in '02-03 to WTCS

• This represents a nearly $6.2 million cut to the WTCS system
• General aid and categorical aids to technical colleges cut by 4.5% in FY 02-03
• State operations appropriations for the WTCS cut by 1% in FY 01-02 and 4.5% in 02-03
• Cap tuition increases at 10% & TOP grant funding is redirected to displaced workers.

Limit WTCS tax levy to CPI

• Limit the WTCS tax levy to the Consumer Price Index or the 1.5 mill limit cap, whichever is lower. If the inflationary adjustment results in the district's levy rate exceeding 1.5 mills, the 1.5 mill limit would apply
• This will essentially freeze districts' tax levies because it is anticipated that the change in the CPI between March 31 2001 and March 31, 2002 will be less than 1%
• The cap does not apply to debt service
• All WTCS districts would be allowed to exceed the cap if approved by the voters through a referendum.

Cap WTCS Tuition at 10% and Boost WHEG Grants by $800,000

• Current law allows tuition to cover 14.0% of WTCS costs
• Recent tuition increases have not exceeded 5%
• The WHEG grant increase will help students with financial need attend the WTCS.

Shift TOP Grants to Displaced Workers

• Shift $4.5 million in TOP grant funds, providing an estimated 2,000 to 2,500 Wisconsin workers with full tuition grants.
  

Talking Point on Senate and Assembly Republican Budget-Cutting Plans

• Republicans in the Senate and Assembly support plans calling for a freeze in state spending and to reduce the state's overall commitment to fund two-thirds of school operating costs. These plans also prohibit school districts from raising their property tax levies to offset cuts. If these budget-cutting plans prevail, local school board officials will be forced to cut programs that place kids in classrooms that work, maintain quality staff and benefit everyone in the community.

Detailed Summary of Senate and Assembly Republican Budget-Cutting Plans

Senate Republican Plan

• Cut a total of $344 million by adjusting school district revenue payments to 2001-2002 levels for 2002-03
  • Cut $190 million by reducing state aid to school districts
  • Cut $115 million by prohibiting schools from raising their property tax levies
  • Cut $39 million by eliminating TEACH block grant and training funds in 2001-03
• Freeze technical college spending at the 2001 level
  • Cut $35.4 million by reducing state general aid to technical college districts (29.9%)
• Cut $170.9 million by requiring a 10% across-the-board cut in state GPR employees
  • 10% of the total positions in each agency that are GPR financed would be eliminated
    • Cut $219,343 from Employment Relations Commission
    • Cut $10.8 million from Health and Family Services
    • Cut $1.7 million from Public Instruction
    • Cut $323,940 from WTCS.

Assembly Republican Plan

• Cut a total of $441 million by reducing general fund appropriations to maintain 2002-2003 spending at 2001-02 levels and cap property tax levies at the amount levied in 2001
  • Provide exemptions for Birth-to-Three, prescription drugs for the elderly and SAGE
  • Freeze all state bond programs with debt service paid from GPR issued after 12/31/01
• Impact of Assembly Republican freeze on certain state agencies
  • Cut $92,000 in '01-02 & $92,000 in '02-03 from Employment Relations Commission
  • Cut $6.5 million in '01-02 & $19 million in '02-03 from Health and Family Services
  • Cut $412,300 in '01-02 & $186,231,600 in '02-03 from Public Instruction
  • Cut $124,200 in '01-02 & $124,200 in '02-03 from WTCS.

Note: The Senate and Assembly Democrats have not released any detailed budget adjustment proposals at this time.

Stay tuned to OnWEAC for additional analysis and talking points as the budget adjustment session continues. Please feel free to contact Bob Burke, WEAC Legislative Program Coordinator, with any questions on this summary. Bob can be reached at 800-362-8034 ext 254 or by e-mail at burkeb@weac.org.

Posted January 24, 2002