Progressive Thinking

This budget is $2.8 billion more than the last budget and is the largest in state history. While Gov. Walker has touted providing needed money for schools, roads, and the UW, some details didn’t make the headlines. The Legislature now begins reviewing the budget and people to need to make their priorities known.

MADISON - “Governors are a bit like salesmen,” I recently told a reporter. “They put good news in the headlines and bury bad news in the small print.”

Governor Walker recently released his two-year state budget. Amid much fanfare, he touted providing much needed money for schools, roads, and the UW. I went digging through budget documents released by the Governor. I knew there was more to the story.

First, I must say Wisconsin has one of the most opaque budgeting processes I have ever seen. For example, there is no clear table comparing actual spending in each fiscal year to budgeted spending.

We are still waiting for some details the Governor has not yet released. For example, his capital budget, which includes total proposed borrowing, is not yet available.

In the next month, the nonpartisan Legislative Fiscal Bureau (LFB) will compile an independent analysis of the budget proposal. The LFB will provide details on where money comes from and how it is spent.

Until then, we have documents prepared by the Governor’s staff and those who write our bills – the nonpartisan Legislative Reference Bureau (LRB). The small print I refer to came from the LRB, the Governor’s office, and state agencies’ requests.

How much will Wisconsin spend over two years? The total budget without borrowing is $76,097,880,600. (The final budget will likely be closer to $77 billion, as road fund borrowing and other building projects are added.)

This budget (without new debt) is $2.8 billion more than the last budget and is the largest in state history. Of course, EVERY new budget is larger than the previous budget.

Governor Walker made a special point of reminding people his school and road spending is the “highest ever.” Maybe someone should remind him, total spending is also the “highest ever.”

The budget includes money from state taxes and fees including gas taxes, as well as tuition and money from the federal government. The Governor’s structures his budget around the budget requests from each agency in state government. Governor Walker proposes spending $68 million more than the agencies themselves requested.

Almost one-third of the budget goes to Health, of which ninety-percent is the Medicaid program. This is the largest and fastest growing part of spending. We often think of Medicaid as care for poorer families (BadgerCare). But, roughly two-thirds of the Medicaid budget is spent on long-term care for the elderly and disabled.

Over the next few months, we will learn much more about the budget details. In the meantime, here are a few items of small print that didn’t make it in the Governor’s Budget Address.

The Department of Natural Resources lost 43 positions while Circus World gained ten new positions.

The new budget added almost 500 positions to the Department of Administration (DOA). All but one of these jobs listed were “Supervisory and Management.” This staff increase is almost half (47%) of the DOA workforce. Some positions are transfers to DOA from other agencies. Overall, the Governor increases net staff (some lost, some gained) by a little more than 400 full-time equivalents.

Buried in the small print is the elimination of the stray voltage program. This service helps farmers deal with stray electricity that has dire effects on animals and humans. The governor claimed the problems are mostly resolved. However, constituents tell me, in western Wisconsin, many problems remain.

The budget proposes eliminating the Wisconsin Natural Resources Magazine. The last issue of this ever-popular magazine is set for winter of next year.

The budget eliminates the Educational Approval Board. This agency oversees for-profit colleges. Eliminating state oversight of for-profit colleges is foolish when some colleges closed, fraud investigations of others are continuing, and students question the value of the education.

Budgets are plans to spend resources based on our priorities. The process must be an opportunity for us to discuss our ideas and concerns for our state and invest money in solutions.

Debate on our priorities for state spending will occur over the next four or five months. Please add your voice to the decision-making process. The state budget is the most important bill lawmakers will take up and it deserves the input of all Wisconsinites!

Voucher and charter school advocates want over $100M more for parity. Taking $100 million away from 867,000 public school students for 42,000 private students makes no sense.

ALMA, WI - For many years, voucher and charter school advocates sought funding parity while rural schools struggle to stay open. Now a new analysis done by the Legislative Fiscal Bureau (LFB) puts the parity price tag at over $100M.

I cannot sit idly by while voucher and charter school advocates ask for more money when my rural public schools can barely afford the basics.

Taking $100 million away from 867,000 public school students for 42,000 private voucher and charter school students is foolish. For the last three budgets, Republicans have given handouts to private voucher and charter schools at the expense of public schools. Legislators must not continue this trend with the new budget.

According to a recent estimate by the non-partisan Wisconsin Legislative Fiscal Bureau, increasing payments for private voucher and charter schools would take over $100 million dollars away from public schools and property taxes would be allowed to increase.

Specifically the LFB memo estimated the total cost to the two-year state budget at $110.4 million and an additional cost to property taxpayers at $45.7 million for private school vouchers and $30.5 million for independent charter schools.

When determining state aid amounts, privately-owned voucher and charter schools get the first-draw for funding. The remaining funds go to public schools through an antiquated and broken funding formula.

Wisconsin elected leaders should focus on improving equal public school opportunities for all children, regardless of where they live.

Gov. Walker’s recently released plan on school funding falls short of providing children with a great education regardless of where they live or to fix the school funding formula. Stable funding through an improved equalization aid formula is needed to provide children with a great education across the state.

MADISON, WI - “Public education in Wisconsin should provide high quality learning for ALL children no matter who they are or where they live,” Eau Claire School Board President Chris Hambuch-Boyle recently told me.

Chris and education leaders across the state read with interest details of the Governor’s plan for our next state budget. Governor Walker gave money to a number of new initiatives and reaped the praise of some education leaders.

The plan picks and chooses among various proposals advanced over the last few years. Some new programs are funded and some existing programs get more money. The plan is a compromise.

However – as with any political compromise – we should know what is not included and what is not being done.

We fund schools primarily through a school aid formula. Its purpose is to “equalize” resources in school districts across Wisconsin so regardless of where a child lives in the state, the opportunities for learning will be relatively equal.

The equalized aid formula is broken. A number of plans were proposed to fix the formula including ideas I supported. But the Governor’s new plan does nothing to fix the formula.

Rather, most of the new money in the Governor’s plan gives the same dollars to property-rich districts as to property-poor districts.

This is a new direction for our state.

Since 1973, governors have supported sending money for schools through the equalized aid formula. The policy of both parties was to see that every Wisconsin child had the same benefit of equal opportunity for a sound education.

Board President Hambuch-Boyle expressed concerns that the Governor’s plan “Makes the inequity worse. Under the guise of ‘here’s some more money’ he extends the inequity.”

Consequently, children in property-rich schools have a better opportunity than children living in a property-poor district. School districts across state would be better served if the additional dollars recommended by the Governor were distributed through an improved equalized aid formula. Children would be better served if school leaders knew they could count on a steady partnership from the state.

President Hambuch-Boyle and many others across the state are working very hard to re-imagine public education for 21st Century students. Leaders in western Wisconsin encouraged legislators to learn about innovations. During a recent visit to an Eau Claire Middle School, I saw evidence of a new world in our public schools.

What do we want from our education system for our children? We want a place for our children to learn, to develop cognitive and social skills. We need our children to develop character and become responsible citizens. But we also want our children to find their passion and purpose.

Tony Wagner and Ted Dintersmith write in their book, Most Likely to Succeed, that students need to tackle the challenge of how to “leverage your passion and talents to make the world better.”

Most Likely to Succeed is both a book and a documentary. Local education leaders recently invited legislators to view the film and talk about changes in our classrooms. The film explores innovation in education and the possibilities for the 21st century school. After viewing the film and visiting the ARCTIC Zone classroom at Eau Claire’s Northstar Middle School, I am beginning to see the future of education.

“The world no longer cares how much you know, because Google knows everything. What the world cares about - what matters for learning, work and citizenship – is what you can do with what you know,” write Wagner & Dintersmith. Students need to learn in groups by practicing problem solving and navigating group dynamics.

Critical thinking, communication, and collaborative problem solving are skills actively taught and evaluated as part of the school day in pioneering programs. New ways of teaching and learning means many old ways must change. Resources are needed. Funding stability is critical.

Wisconsin schools can innovate. We can provide high quality opportunities for our children that live in Beloit, Black River Falls, Brookfield or Bruce.

To get there, school leaders must be confident they don’t have to worry about deep cuts in the next budget and we must fix the current school funding formula. This commitment is necessary to provide an equal opportunity education to every child.

The recent Legislative Audit Bureau audit of State Highway Program showed the estimated costs at the time of a highway project approval were much less than costs at completion. The LAB makes many recommendations to DOT to improve their practices.

ALMA, WI - “Let me see how much you spent,” my mother said when I returned from the store. As the oldest of five children, I was often sent to the store to buy groceries. When I returned home, my mother checked the grocery bag, the receipt and counted the change.

I knew I could buy no more than exactly what was on her list. She knew how much everything should cost. I needed to answer for every penny I spent. Everything needed to add up.

This simple accountability seems to be completely missing at our Department of transportation (DOT).

My mother has now gone to live with the angels. However, she would be appalled at the findings in a recent audit released by the nonpartisan Legislative Audit Bureau (LAB).

Auditors looked at spending on highways and found actual spending on individual projects much greater than the cost estimates provided to the Legislature at enumeration, which means legislative approval of the project. In some cases, actual costs for highways were four times more than the approved estimates.

Auditors examined highway projects completed from January 2006 to December 2015. At enumeration, cost estimates for none of the 19 completed projects took into account the increases in inflation during the life of the project. In every completed major highway project reviewed, actual costs were more than the cost estimates provided at enumeration. Over half of the projects had actual costs that were more than DOUBLE the cost estimates at enumeration. Two projects – including I-94 to Chippewa Falls were more than FOUR TIMES the cost estimates provided at enumeration.

The I-94 to Chippewa Falls project was enumerated in 1991 and the last bills were paid in 2011. Why did this information not become part of a public discussion before now?

Part of the answer lies in a lack of transparency and oversight.

This audit, just as prior audits, illuminated problems with missing paperwork and poor oversight. Because of prior audit findings, legislators changed the law to require DOT to report clear information on actual compared to budgeted costs.

Despite the new law, DOT did not provide complete information to the oversight body - the Transportation Projects Commission, which is made up of political appointees. The law required regular reporting by DOT to the Commission.

Auditors also examined current DOT highway projects and found similar problems. In every project reviewed, cost estimates in August 2016 were higher than the cost estimates at enumeration. Of the sixteen major ongoing highway projects, eight are more than double the cost estimates at enumeration, with one – Highway 10 from Marshfield to Appleton – over four times greater.

Why have project cost estimates increased so much?

Auditors mention two reasons: unexpected costs and inflation. DOT did not sufficiently consider the effects of inflation. They also made major errors (my words, not the auditors) in their cost estimates due to unexpected cost increases.

An example may help explain these unexpected cost increases.

In planning construction on I-39/90 from Madison to the Stateline, DOT used five-year-old traffic counts. They updated the project with new counts in 2012. DOT then decided to increase pavement thickness and add two more additional lanes near Janesville. DOT bought additional real estate, moved power lines they had not anticipated, increased the shoulder width and provided alternate routes to avoid delays and accidents. These changes explained about three-quarters of the nearly half a billion of the increase in the project’s cost estimate.

All of these changes may appear reasonable. However, serious problems exist in the system when cost estimates increase from about $700 million to over $1.2 billion with no public accountability or legislative authority.

Auditors recommend legislators and the public are kept better informed. In its report, the LAB makes 45 separate recommendations. In response to the audit, Speaker Robin Vos called on DOT to provide details related to all DOT projects and actual cost.

But how is it the Department of Transportation has paid more –sometimes four times more – on projects than cost estimates provided at enumeration?

There are more details in the audit, which provide insight into the current budget problems facing the state as we contemplate the next budget. I will be reporting on these details and the activities of the audit committee. This is our opportunity as thoughtful citizens to say, “Let me see how much you spent.”

The Legislature’s Joint Audit Committee scheduled a public hearing on the Wisconsin Retirement System pension fund after recent audits revealed it's performance fell to 9th among ten comparable state pension plans.

MADISON - “GOOD NEWS” read the text with a short article about how our pension funds grew 8.5%. My friend forwarded the article with a cryptic note, “apparently the lies keep working.”

In what seems to me to be an effort to get ahead of a bad story, the agency responsible for investing almost $100 billion in pension funds – the largest single pot of money anywhere in state government - issued a press release touting an 8.5% increase in its core fund.

As radio commentator Paul Harvey used to say, here’s the rest of the story.

Yes, things are better in 2016. However, in 2015, the state pension funds lost money. An increase over a loss is good but not nearly as good as continual year-to-year growth. Especially when the fund is assumed to return over 7% a year!

Recently the nonpartisan Legislative Audit Bureau (LAB) released several audits related to the Wisconsin Retirement System (WRS). Among many findings, auditors reported 20-year returns fell from over 10% in 2006 to about 7% in 2015.

To understand how well Wisconsin is doing compared to other states, auditors contrasted performance in ten comparable state pension plans. Wisconsin’s performance ranked 9th of ten states in nearly every measure. Wisconsin’s core fund 5-year return was also considered 3rd most volatile of all of ten plans.

Wisconsin had a history of ranking well compared to other states. For example, in 2013, Wisconsin ranked 4th of nine states in 5-year returns.

The State of Wisconsin Investment Board (SWIB) oversees management of WRS and five other state insurance and trust funds. The governor appoints seven of the nine member board – 6 members directly and the governor-appointed secretary of administration.

In 2011, the governor and legislative majority gave SWIB authority to set its own budget and positions. No other state agency has this authority. Since 2011, the operating budget of SWIB grew by 78% and the number of positions grew by 48 or a 38% increase.

Some out-sourcing of fund management was brought back in-house. It is still unclear if this practice saved money.

Despite the fact the fund lost money in 2015, the board waived its own policy of not giving bonuses when the funds lost money. The board awarded bonuses of $1,100 to $468,300 to employees.

One of the reasons the funds lost money was poor performance in high-risk investments. Over the past few years, Wisconsin increased investment in risky financial devices like hedge funds and derivatives. These investments are among the speculative instruments that led to the financial crash in 2008.

Hedge funds, managed by an outside firm, cost the funds a staggering $57 million for a meager .6% return – about what you might get from a savings account. Auditors note that several other large public pensions eliminated the use of hedge fund investments.

Wisconsin also uses a risky strategy of borrowing to leverage assets. The use of debt to leverage assets lost money in all periods as of December 2015 including a negative 30% return in 2015. The leverage strategy contributed to the fund losses in 2015. Despite this, SWIB still has a goal of leveraging a staggering 20% of its funds.

Other audit findings raise questions about the structure and oversight the board provides the funds. Especially concerning is a finding that the board does not review final budget-to-actual expenses.

In addition, a recent audit of the Department of Employee Trust Funds, which manages the operations of the WRS, found a number of accounting errors, including mistakes in reporting over $90 million and bank reconciliations that were not done on a monthly basis for several months.

The state investment board oversees the retirement benefits of over 600,000 public employees and is now largely out from under legislative oversight. These recently released audits give us red flags about how things are going. Legislators have a responsibility to ask hard questions and insist on responses to protect the investments made by employees and retirees.