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A Wisconsin turnaround: Reality v. Rhetoric

Published: May 22, 2013

Acquisition ReformBudgetContract AwardsEducation (Primary/Secondary)GovernorHealth CareJustice/Public Safety & Homeland SecurityPublic Finance

In his 2013 budget address, Wisconsin Governor Scott Walker outlined a clear and concise vision for the coming biennium: more prosperity, better performance and true independence. Based on Deltek’s cross-vertical analysis (below), it is clear that Walker’s vision is on display, though perhaps not as ideally as his budget address reads.

The economic condition in Wisconsin has improved exponentially since its $4 billion deficit and unemployment rate of nearly 8 percent in 2011. Now, America’s Dairyland has mounted a comeback toward a budget surplus, and unemployment is almost a point less than the national average. In these favorable conditions, the governor has focused his attention on maintaining and improving core government functions – most notably, corrections, K-12 education, and Medicaid.
 
From FY 2013 to FY 2014, the governor’s recommended budget increased by 8 percent, while the budget for corrections and education only increased by 0.2 percent and 3.4 percent, respectively. Medicaid outpaced overall budget growth with a 14 percent year-over-year increase.
 
In line with a focus on better performance, Governor Walker’s budgetary priority of investing in correctional infrastructure sounds promising, but the reality might be quite different. In efforts to reaffirm the state’s commitment to public safety, Walker highlighted plans to improve and expand the state’s criminal justice system, which includes ensuring that all resources are used effectively to provide oversight of correctional facilities and its operations, as well as ensuring that all IT systems are up to date with the latest enhancements. Current systems in place within the Department of Corrections are antiquated and could potentially compromise the safety of those imprisoned as well as those released on electronic monitoring devices.

The Department of Corrections (DOC) manages 18 correctional institutions, 16 correctional centers for adults, two holds facilities, and two correctional institutions for juveniles. Wisconsin’s prison population is expected to grow by the end of 2015 by roughly 3 percent; therefore, per-capital annual inmate costs are also expected to increase. Rise in prison populations are also coupled with an increase in the number of offenders subject to GPS monitoring through community corrections programs. The number of tracked offenders is expected to grow by approximately 37.5 percent by the end of 2015.
 
The DOC has been plagued with insufficient funding and FTE positions available to accommodate these projected increases; therefore, new commitments have been made to fund positions and provide solutions to upgrade department-wide integrated justice information systems. While Governor Walker projects departmental budget increases for IT purposes, the overall budget does not accurately reflect this projection. Instead, the budget for DOC remains relatively stagnant with a slight decrease (less than 1 percent) in departmental expenditures, which indicates the DOC is more focused on maintaining current operations.
Other notable justice/public safety and homeland security projects in the state of Wisconsin include a Department of Corrections livescan fingerprint system and driver’s license identification card issuance and production for the Department of Transportation.
 
Governor Walker started off the year making some lofty promises. In his 2013 budget address, he repeatedly expressed the importance of education in the upcoming fiscal year and the need to provide all children a better and more equal education, as well as more affordable options for higher education. Walker directly related education to the developing workforce: “Our educational institutions need to be focused on, and held accountable to, the education of the next generation’s workforce.”
 
The governor continued to stress the direct correlation between an educated youth and a successful workforce. With an “ever-changing labor market for manufacturing, technology, and health care” as the landscape, Walker insists investing in higher education today will result in a stronger workforce and economy tomorrow.
 
“Beyond traditional educational investments, we will make smart, targeted, performance-based investments in our University of Wisconsin System, the Wisconsin Technical College System and traditional K-12 education to ensure our citizens have the skills needed for the jobs of today and tomorrow,” he said in his budget address.
 
In the Budget in Brief, Governor Walker laid out a 17-step plan for transforming education, which includes providing funding for academic and career planning software, promoting a new educator effectiveness system, and parental input systems for lower-performing schools.
 
All of these initiatives seem well and good, correct? Well, as the old parable goes, actions speak louder than words. While Governor Walker did increase the K-12 education budget from FY 13, he decreased spending from the agency’s request. In the Wisconsin FY 2014-2015 Educational Communications Board budget, the General Purpose Revenue Fund agency request increased by $151,700 for FY 2014, yet the governor’s recommendation decreased by $105,900. This not only denies the agency request for an increase necessary for the projected year, but falls $257,600 below the requested amount. All the while, the federal revenue remains constant, so there is no aid to new projects.
 
Governor Walker did stick to his promises by increasing the program revenue budget. While an increase of $562,400 was requested, the governor increased it by $567,900. This will allow a little extra room to grow projects or even add a few new measures. Additionally, Walker added a performance-based funding incentive to encourage schools to perform better and potentially earn $30,000 a year.

 

Total spending for education increased by 3.4 percent, which leaves room for some of these lofty goals to be accomplished. It may not be feasible to accomplish all of them in the fiscal year, but it will lead Wisconsin in the direction of more prosperity.
 
Critical to attaining the goal of true independence is the governor’s plan for state-administered entitlements. This independence rests on his budgetary pronouncements regarding the optional expansion of Medicaid contained within the pages of the Affordable Care Act (ACA). Walker, like many governors across the United States, chose not to opt-in to the ACA Medicaid expansion requirements. That expansion to eligibility for individuals at 138 percent of the federal-poverty level would affect the state’s bottom line to varying degrees in the near term.
 
According to sources including the Legislative Fiscal Bureau, expansion of Medicaid eligibility would actually save the state $65 million; however, the Kaiser Family Foundation fixes the bill at $725 million over the next nine years. With such varying information and the logically inconsistent position that adding millions to an entitlement program would save the state money, Walker opted for a middle-ground position. 
 
Citing the unreliability of a federal government saddled with a $16.5 trillion debt that grows daily, and the virtue of an independent and free populace unencumbered by dependence on government, the governor opted for a slight expansion of Medicaid to include all impoverished Wisconsinites by lifting the enrollment cap for childless adults. This plan would make 82,000 more individuals eligible. However, the governor also places emphasis on the health insurance exchange as critical to reducing the number of uninsured individuals in the state. With the exchange, 87,000 people currently on Medicaid would be eligible for subsidized insurance through the exchange or a private plan. The net effect would be a reduction of the total number of Medicaid enrollees by 5,000, with a simultaneous reduction in the number of insured by 224,580.

As with all political statements, the Medicaid priorities espoused by Governor Walker must be examined within the context of the actual numbers proposed in his budget draft. As part of Deltek’s analysis of the Wisconsin budget, Medicaid spending was collected from FY 2006 through FY 2015. That data shows a 72 percent increase in proposed Medicaid spending – an increase from the FY 2011-2013 biennium of 14 percent per year. As with many other states, Medicaid spending is a main driver in funding growth and far outpaces the 8 percent increase from the FY 11-12 biennium to the FY 14-15 biennium.
 
Also on par with other states, Medicaid accounts for nearly a fourth of the entire state budget. For the past two biennia, that number (approximately 21 percent) has been holding steady, but is expected to rise to 22 percent of the total budget through FY 13-15. The governor’s decision to reduce the overall enrollment in Medicaid while covering more citizens through the use of insurance exchanges seems to be a responsible budgetary move that will allow the state more freedom and flexibility. For the purposes of analysis, it is too early to evaluate the governor’s cost-saving claims.
 
The economic position of Wisconsin has undoubtedly improved over the last few years; however, it has been described by some as still treading water. The budget proposal submitted by Governor Walker for the 2014-15 biennium reflects this reality, which bodes well for vendors conducting future business with the state.
 
Wisconsin has outlined an extensive list of opportunities that will most likely come to fruition in the coming years. The preceding vertical analysis of the corrections, education and health care markets provides an excellent in-depth backdrop by which vendors may position themselves toward achieving the Walker administration’s goals: more prosperity, better performance and true independence.
 
Vendor Takeaways:
  • There is a focus on corrections, education and Medicaid in the upcoming fiscal year.
  • Detailed projects (as outlined above) have been forecasted for the year.
  • The governor's increase in budget will allow for bountiful procurement in the state.

Written by: Joanna Salini, Stephen Moss and Alexandra Howden