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sb44Act 33 >
State of Wisconsin
Office of the Governor

July 24, 2003

To the Honorable Members of the Senate:
I have approved Senate Bill 44 as 2003 Wisconsin Act 33 and deposited it in the Office of the Secretary of State.
Budgets reflect choices. When times get tough, budgets reflect tough choices. This budget – a very tough budget, more difficult than any in memory, perhaps more difficult than any in Wisconsin's history – should nonetheless rest firmly on the values Wisconsin has always stood for. It should reflect the priorities that Wisconsinites hold dear. Above all, this budget should embody the choices – the tough choices – that I told the people of Wisconsin I would make when they elected me as their Governor.
The following are the values, the priorities and the choices that should define Wisconsin's 2003-05 budget.
First, no state tax increases – in order to grow Wisconsin's economy.
Second, control state spending – in order to bring the budget into balance, both now and in the future.
Third, protect the state's core mission – educate our children; provide health care to our elderly and disabled and working families; support our police officers, fire fighters and other providers of vital local government services; and safeguard Wisconsin's unique and precious environment.
Fourth, distribute the sacrifices fairly – because we're all in this together.
Fifth, fix the budget right, and fix it once – so we can move beyond the ordeal of budget-cutting to the task of growing Wisconsin.
The budget bill I am signing, once the many vetoes I have been compelled to make are incorporated, reflects these values, priorities and choices. It includes many difficult decisions and tough trade-offs. All are necessary to avoid a tax increase, reduce spending and bring the budget into balance, meet our core responsibilities, distribute the burden of sacrifice, and do the job right.
Regrettably, Senate Bill 44 became a partisan document – one that strayed far from Wisconsin's values, our state's historic priorities and the tough choices that we needed to make – between the time I introduced the budget in February and the time it passed the Legislature in late June. While I commend all legislators for passing the budget in a timely manner, I am deeply troubled by the budget bill the Legislature sent back to me.
Wisconsin does not want a state tax increase. My budget proposed none. But the Legislature's budget would raise income taxes by $23 million on thousands of Wisconsin farmers.
Wisconsin needs an honestly balanced budget. My budget cut spending, and matched estimated revenues to expenses, to produce a truly balanced budget. But the Legislature increased state government spending – and then assumed fictitious revenue to pretend that the budget was balanced.
The people of Wisconsin want state government to assist in educating our children, providing health care for the most vulnerable, sustaining local government and protecting the environment. My budget did all this. But the Legislature's budget cut funding for four-year-olds to attend kindergarten, underfunded Medicaid and BadgerCare while pricing our seniors out of SeniorCare, slashed support for our police officers and fire fighters, and endangered Wisconsin's environment. These actions do not reflect Wisconsin's values.
Wisconsinites understand the need for shared sacrifice when times get tough. My budget carried through with this policy, making necessary reductions across all of state government. But the Legislature just didn't get it. Their budget tried to stick it our children, our seniors, our police officers and fire fighters, and our environment, while asking no sacrifice from special interests. Instead of sharing cuts equally, they picked winners and losers. They manipulated formulas to reward certain communities at the expense of others. They pitted low income farmers against those who own lots of land. They forced school districts to choose between small class sizes and special education. They devised an arbitrary and unfair scheme that raises educational benefits for a few veterans, but cuts them for others – including veterans who became disabled as a result of their service to our country.
Finally, all of us in Wisconsin need a state government that's stable and dependable – one that's not tearing up old budgets every few months because they don't add up, spreading confusion and pessimism among citizens and businesses. My budget aimed to give Wisconsin a balanced budget that would last: instead of one that would have to be tossed away in a few months. But the Legislature wrote its budget in a way that would have put us on the precipice of another deficit.
On every count – no taxes, less spending, solid priorities, shared sacrifice, and doing the job right – the Legislature failed. To make matters worse, the bill passed by the Legislature reflects secret deals concocted in the middle of the night rather than good faith bipartisan cooperation.
To do the job the people of Wisconsin elected me to do, I've had no choice but to make extensive use of my veto power to fix the numerous flaws that the Legislature built into this budget.
I ran a campaign to bring a new day to Wisconsin. When I became Governor in January, the state's finances were in shambles. We were $3.2 billion in debt and $454 million short in the immediate fiscal year. I immediately introduced, and the Legislature quickly adopted, legislation to address the immediate crisis.
In February, after only six weeks in office, I introduced a budget that was balanced, in both the short and long term. And, most importantly, I erased the largest deficit in state history not by raising taxes but by cutting state spending. I cut the budget requests of the previous administration by $1 billion. I eliminated almost 3,000 state jobs and instead of freezing the bureaucracy, I actually cut it by ten percent, or $400 million. These were difficult, but necessary, decisions to ensure that taxes did not increase. The people of Wisconsin did not cause this deficit and I was not about to take dollars out of their pockets to fix it.
The Legislature took the budget I developed in six weeks and spent three times as long to deliver a final product. The result of all that time? A budget that raises income taxes on farmers, spends more, imperils our children's education, threatens health care for seniors, slashes important local services, reduces our commitment to environmental protection, cuts benefits for disabled veterans and sets us on a path to future deficits. It is a budget that repeats the same fiscal bad habits that led us to our current $3.2 billion deficit.
The budget sent to my desk is not a bipartisan document. There were no meaningful discussions on the final product between legislative leaders and my administration despite my clear and repeated offers to compromise. This is a budget that reflects the politics of the past – caving in to special interests, attacking education, imposing mandates on local government and passing off tough decisions to another day. This is the kind of thinking that got us into this fiscal mess in the first place.
The budget the Legislature sent me was so unbalanced and out of step with Wisconsin's priorities that I seriously considered vetoing the entire budget, wiping the slate clean and forcing the Legislature to start over again. But we need to put this crisis behind us. We need to move on to growing Wisconsin's economy, improving our public schools, and addressing the health care needs of our citizens. Therefore, after carefully scrutinizing this budget line by line, I have determined that I can use my extensive veto power to put this budget back into line with Wisconsin's values.
My number one priority in addressing our fiscal challenge was to avoid tax increases. My budget did not include a tax increase. The Legislature's repeal of the Farmland Preservation Tax Credit Program increases income taxes on farmers by $23 million. I have vetoed this tax increase on Wisconsin's agricultural producers and preserved the important land use benefits associated with this program. In order to offset this tax increase, and at the same time improve the general fund balance, I have had to be very aggressive in identifying spending reductions.
My February budget sought to set clear priorities by investing in education and setting prudent funding levels for transportation. The Legislature ignored those priorities, slashed funding for four-year-old kindergarten, put at risk the successful SAGE small class size initiative, and increased highway spending by over $300 million above my February budget. The Republican majority took $60 million that I had permanently allocated to schools and diverted it to building more highways. The Republican majority took money used to fix potholes on local streets, and maintain our existing infrastructure, and diverted it to build more highways. Finally, the Republican majority took $300 million of general fund revenue over the next ten years away from education, health care and vital local services such as fire and police protection and diverted it to build more highways.
While I fully support maintaining our existing roads and making prudent investments in our infrastructure, the Legislature forgot that we are in a fiscal crisis when it came to the transportation budget. Wisconsin taxpayers value our children's education at least as much as they care about roads. They also believe that all parts of the state's budget should share in the sacrifices needed to solve this historic deficit. I have used my veto power to restore a more balanced transportation package and keep our limited resources focused on educating our children and providing health care to our seniors.
The budget I introduced in February sought to fix our fiscal problems once. It included the authority to refinance the state's debt in the event of weak revenue growth. It tapped into a huge surplus in the Patients Compensation Fund to protect health care services to the elderly, disabled and working families. It avoided significant new spending commitments in future biennia.
Unfortunately, the Legislature returned a budget to me that increases the chance of more fiscal problems in the near future. There are no mechanisms in the bill to address weaker than expected revenue collections. Health care for our most vulnerable citizens is underfunded. The future structural deficit is increased.
I cannot stress these last points enough. It is because of the Legislature's failure to rely on realistic estimates and its preference for protecting special interests at the expense of seniors that I am forced to cut spending through vetoes.
To pay for the Medical Assistance program and make sure our seniors, the disabled and working families receive the health care they deserve, my budget included two new realistic sources of revenue totaling $634 million. The first, an estimated $434 million in new federal revenue associated with securing Wisconsin's fair share of Medicaid support for home and community-based care for our elderly and disabled citizens; and the second, a transfer of $200 million from the $600 million surplus built up in the Patients Compensation Fund.
Both of these revenue amounts for Medical Assistance were conservative. Two years ago, the previous administration secured $1 billion in new federal funding to support Medicaid nursing costs. Given the nation's economic circumstances and the status of the federal budget at the time I submitted my budget in February, a much smaller $434 million estimate of new federal Medicaid funds – $366 million to pay for existing Medicaid services, plus $68 million for reinvestment in additional home and community-based care slots and higher rates – appeared reasonable.
Likewise, the $200 million transfer from the $600 million Patients Compensation Fund surplus was a conservative proposal. The fund, whose expenses have averaged less than half of its income for its entire 28 year history, would still retain a $400 million (and growing) surplus. In addition, my budget proposed a GPR sum sufficient appropriation to protect the fund in the event of unforeseen liabilities.
In May, while the Legislature was still deliberating on the budget, Congress did in fact provide Wisconsin with over three fourths of the $434 million federal aid estimate: $333 million in federal fiscal relief, split between a $151 million increase in the Medicaid "matching rate" and $182 million in "flexible" money. My administration immediately proposed to use all $333 million of this federal payment for Medicaid. Dedicating the entire amount to health services for the elderly, disabled and working families through the Medical Assistance program, together with transferring $200 million from the Patients Compensation Fund, would go a long way to providing this program with the sum it needed to meet basic health care needs.
Unfortunately, rather than the total of $634 million in federal funds and Patients Compensation Fund transfers I had proposed to keep the Medical Assistance program in sound financial condition, the Legislature chose to allocate to the Medical Assistance program only $151 million of the federal funding provided by Congress (barely 45% of the federal funds provided). At the same time, the Legislature refused to transfer to the Medical Assistance program even a single dollar from the Patients Compensation Fund. Either decision by itself would have left the Medical Assistance program with a huge fiscal hole. Together, the Legislature's decisions left a truly giant hole of hundreds of millions of dollars in the financing of this essential health care program for Wisconsin's seniors, disabled, and working families.
The result of the Legislature's irresponsible action is that the Medical Assistance program faces a deficit of hundreds of millions of dollars in the next biennium, and Wisconsin's seniors and disabled and working families are at risk of losing their health insurance, while doctors keep every penny of their $600 million surplus and contribute nothing to balancing the budget. Overall, this budget imposes shared sacrifice in order to solve the state's $3.2 billion deficit. But when it comes to the Medical Assistance program, the Legislature has insisted that our most vulnerable citizens – seniors who've worked all their lives, disabled persons who can't work, and working families who can't afford health insurance – must bear the sacrifice, while Wisconsin's doctors are exempted from bearing their fair share of the burden.
I will not stand for the Legislature balancing the budget on the backs of our seniors, our disabled citizens and our working families. Let me put this as plainly as possible – I would not be making the cuts I have been forced to make through vetoes if the Legislature had acted responsibly regarding use of federal funds and the Patients Compensation Fund and health care for the elderly, disabled and working families. The Legislature chose a well-to-do special interest over our seniors. My vetoes will create enough savings to protect our seniors.
Since the Legislature chose not to sufficiently fund the Medical Assistance program, I have been forced to reduce spending in the Medical Assistance program related to prior authorization for certain drugs, support for graduate medical education, reimbursements to pharmacies and increases in daily rates paid to nursing homes. These are extremely difficult cuts, but the Legislature's unwillingness to confront these budget risks has left me with no choice.
To further protect key programs in the budget, I have also used my veto authority to transfer $145 million in savings due to a more responsible highway program to help combat future deficits. This transfer, along with vetoing many of the Legislature's GPR spending increases, will help offset the Legislature's unrealistic reliance on federal revenues and guard against weaker than expected revenue collections.
I would have preferred to use funds from the Patients Compensation Fund to accomplish these purposes and made my opinion very clear to the legislative leadership. While the veto authority is extensive, there is no language in the bill that would enable me to return to my original budget proposal on the Patients Compensation Fund. I believe the transfer from the transportation fund is the best option that was available to me through the veto power.
I have also removed through veto another partisan element of this budget – the distribution formula for shared revenue. I have reviewed the Legislature's new formula and can find no logical explanation for its impact, other than to punish some Wisconsin communities for the benefit of others.
My budget had a simple mechanism for reducing shared revenue – a $13 per person reduction for every community in the state. The Legislature responded with a formula that would have made Rube Goldberg proud in its confusion and dead-ends. Their formula is a stranglehold for many of the state's poorest communities, squeezing out any ability to invest in the economic growth critical to a properous Wisconsin. The Legislature's shared revenue formula benefits the haves at the expense of the have-nots.
I said when I introduced my budget in February that it was not a perfect document, but a work in progress. Since its introduction, I have heard from many local officials who argued with merit that certain communities, most notably rural towns, are disproportionately impacted by a per person reduction. In restoring the per person reduction formula proposed in my original budget, I have also used my veto authority to allocate the additional $20 million in shared revenue funds to implement a hold harmless provision to limit the reduction in shared revenue for every community to approximately 15 percent compared to current law. Some communities will receive larger reductions because of the cuts already in place from the budget signed last year before I became Governor.
One of the casualties of the Legislature's crusade against Wisconsin's environment was the state's bipartisan Warren Knowles-Gaylord Nelson Stewardship 2000 Program. While the Legislature spent $300 million more than my budget for highways, it cut $245 million of previously authorized bonding authority over the next six years critical to preserving Wisconsin's natural beauty and scenic areas. Wisconsin's tourism industry is built around that natural beauty. Indeed, one of the fundamental reasons for our highway system is to help our tourism industry prosper. Without the bipartisan Knowles-Nelson Stewardship 2000 Program, we will all have less nature to enjoy and to attract tourists from other states. This reduction is inconsistent with Wisconsin's values. It's contrary to our economic self-interest. I have vetoed the reduction in the Stewardship 2000 program to restore the current law capability to preserve and protect Wisconsin's natural wonders.
In total my vetoes will reduce appropriations from all funding sources by $315 million compared to the Legislature's budget. I also exercised my veto authority to increase the size of the general fund balance to $205 million. This amount will help fill the shortfall in the Medical Assistance program created by the Legislature's unwillingness to tap the reserves of the Patients Compensation Fund and their unrealistic estimates of future federal Medicaid funding.
This balance will also protect us from any further downturns in the economy. My budget proposal wisely included the option of up to $350 million in savings by structural refinancing of the state's debt in the event of revenue shortfalls during the biennium. Unfortunately, the Legislature rejected this option, leaving the state unprotected in case of future economic downturns. Given the softness of recent state sales tax receipts, and the weakness of the national economy, I believe increasing the size of the balance is a fiscally responsible measure to help minimize the chances that we will need a budget repair bill later in the biennium.
From general purpose revenue, net spending will be $10.7 billion in fiscal year 2003-04 and $11.7 billion in fiscal year 2004-05, for a biennial total of $22.4 billion. These figures represent a spending decrease of 2.4 percent in fiscal year 2003-04 and an increase of 9.2 percent in fiscal year 2004-05, primarily due to increases in spending for Medical Assistance costs for our low-income citizens. Compared to the previous biennium, spending in the 2003-05 biennium will be less than one percent higher – a record in fiscal restraint. Total spending under the 2003-05 budget, will be $24.0 billion in fiscal year 2003-04 and $24.6 billion in fiscal year 2004-05, for a biennial total of $48.6 billion.
I am signing this budget with a total of 131 vetoes. Many of these vetoes were needed to reduce spending by a total of $315 million. These vetoes will also reduce the structural deficit confronting the state in the next biennium. A number of these vetoes are technical in nature and were required to make provisions workable. Many of the vetoes curb attempts by the Legislature to micromanage the day-to-day operations of state agencies by eliminating burdensome new reporting requirements. The Legislature has a legitimate interest in knowing how state programs are working, but at a time when we are trying to streamline state government and make it work more efficiently and cost effectively, it is counterproductive to impose unnecessary new reporting requirements.
The budget I introduced in February was balanced without tax increases. The Legislature's partisan budget raises taxes, increases the structural deficit, blames schools and local governments for the state's budget mess, threatens environmental protection efforts, and leaves Wisconsin seniors at risk. The budget I am signing puts Wisconsin back on the right track – no tax increases, continuing educational excellence, support for key local services, a better environment and economic prosperity for all of Wisconsin.
Restoring Fiscal Discipline
· No increase in income, sales or corporate taxes. No change in exemptions or deductions.
· Erases the $3.2 billion deficit and leaves a $205 million balance in fiscal year 2004-05.
· Restores fairness to the shared revenue program by removing provisions which would have forced many of the state's poorest communities to absorb disproportionately large reductions in state aid.
Economic Development and Transportation
· Improves highway safety and enhances economic development by providing almost $1.6 billion of state and federal funding for highway rehabilitation and construction projects over the biennium. Despite the record state budget deficit, highway rehabilitation and construction spending will be $77 million higher in this biennium than in the previous one.
· Enumerates four new major highway projects: USH 14 in Vernon County, USH 18 in Crawford County, USH 41 in Winnebago County and USH 41 in Brown County.
· Provides $244 million over the biennium for the reconstruction of the Marquette Interchange in the city of Milwaukee and ensures sufficient funding for critical projects on the Southeast Wisconsin freeway system.
· Provides $400,000 for grants to local units of government, including regional transportation authorities and transit commissions, for the development of commuter rail transit systems.
· Provides $94,000,000 of revenue bonding authority for the petroleum environmental cleanup fund award (PECFA) program to meet projected claims over the biennium.
· Provides $9,200,000 SEG annually for brownfields assessment, remediation and green space grants.
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