fedgazette

Down a hole without a ladder

Wisconsin State Roundup

Published March 1, 2009  |  March 2009 issue

Down a hole without a ladder | fedgazette March 2009 | Federal Reserve Bank of Minneapolis

Wisconsin, like other states, is peering up from the bottom of a state deficit hole estimated at $5.7 billion, including a $500 million divot in the current budget that needs filling by the end of June.

The state budget is expecting about $2 billion from the federal stimulus package. A number of proposals are on the table to address the remainder of the deficit. For example, state agencies are being asked to tighten their belts. But a report by the state Department of Administration said that more than 2,800 existing state jobs were already vacant, including more than 10 percent in the departments of Children and Families, Health, Revenue and Natural Resources. Doyle has proposed bringing total state job vacancies to 10 percent across state government, or about 3,500 positions, through retirements, attrition and hiring freezes.

Elected officials are also expected to put sales tax exemptions under the microscope. The state currently permits a broad array of businesses, including legal services, veterinary care and health clubs to avoid paying sales tax on a large portion of their revenue. These exemptions are estimated to cost $3.7 billion in forgone tax revenue annually, close to the $4 billion the state currently takes in from existing sales tax. Republicans and Democratic Gov. Jim Doyle have resisted calls for higher taxes on businesses, and polls have suggested that state residents similarly oppose such a move.

However, Doyle is proposing an expansion of state health care programs and a new hospital tax—one which many hospitals actually like and might ultimately benefit the state financially as well. Doyle has proposed that some childless adults meeting low-income guidelines be covered by BadgerCare Plus, the state's health care program for poor households. The program is funded by state and federal dollars, and its expansion would trigger a significant increase in federal payments to the state—Doyle's office estimates as much as $925 million in three years—most of which would flow to state hospitals (which is why many hospitals like the proposal), but some of which would help the state finance its Medicaid program.

Ronald A. Wirtz

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