Do You Hear What I Hear?

Lasee’s Notes

The state of the state is . . .

Good question, don’t you think? In Wisconsin, there are two significant events coming up, one of them will give us the Governor’s answer that question. Next Tuesday, the Governor will make his State of the State address to the Legislature. The Governor traditionally lays out his view of how the state is doing and what he wants to do to make the state better.

In mid-February, the Governor makes a second address to the Legislature (why this requires a second address is a topic for another Notes some day) to introduce his version of the budget. Both of these speeches will tell us how the Governor thinks Wisconsin is doing in 2007. The budget will lay out the Governor’s spending and taxing priorities.

What will the Governor say on Tuesday? No one knows yet, but I think we can make some educated guesses about the content of his speech.

One of the topics he is certain to talk about is health care. The Governor’s version of things is that taxpayer-funded, state health care coverage needs to be extended to more people in Wisconsin because health care is hard to afford. The Governor believes he can extend this publicly funded coverage to tens of thousands of residents without raising taxes. That would be a pretty good trick. Alternatively, maybe raising the cigarette tax by a buck a pack is not a tax increase in the Governor’s eyes.

You may also hear him support a version of the Wisconsin Health Plan, which is a Canadian-style, government-run, socialized health plan that would impose a job-killing tax on every employer in the state whether they intend to use the program or not.

What you will not hear the Governor say is that Wisconsin health care costs are among the highest in the nation and that he has done nothing to wean us off the traditional health care delivery methods to bring the cost down. Instead, his party will not support allowing health savings account (HSA) contributions to be state tax exempt (they are already exempt from federal taxes). HSAs allow consumers to make choices about how to spend their health care dollars and empower the individual and family. The Democrats prefer having the government (or an appointed committee) make health care choices for you. You will not hear the Governor say that.

Another thing you will hear the Governor say is that Wisconsin has a strong economic outlook. A recent report from a national think tank (CFED, a Washington, D.C., public policy group formerly known as the Corporation for Enterprise Development) put Wisconsin on its economic honor roll, as if that was the beginning and the end of the discussion on Wisconsin’s economy.

What you will not hear the Governor say is that the honor roll designation came with a disclaimer. Wisconsin ranked in the bottom 10 for a number of items related to employment, including the number of new companies, two measures of job creation, and businesses created because of research and development efforts at universities. Also, the Governor will not say that our regulatory scheme has been pushing businesses out of the state for years and the only thing he did to change that in his four years in office was to sign onto a Republican regulatory reform bill.

In addition, the Governor will not mention doing anything positive about Wisconsin’s standing as a high tax state. The non-partisan Tax Foundation released its 2007 State Business Tax Climate Index in October, ranking Wisconsin as the 13th worst business tax climate in the nation (down one spot from 2006). The Index ranks states on five major business taxes- the individual income tax, sales tax, corporate income tax, property tax, and unemployment insurance taxes. Wisconsin not only levies higher taxes than average, but riddles its tax code with complicated exemptions and bracketing. Our tax code makes Wisconsin less competitive than nearly three-quarters of all states. Wisconsin still has the 7th highest overall tax burden as a percentage of personal income in the nation.

One of these two speeches will feature a section about how the Governor balanced the state’s books and has submitted another balanced budget this year. That will be achieved while accommodating the $1.6 billion in additional spending on top of new tax monies the agencies asked for this year.

What you will not hear the Governor say is that the budget does not really balance if you use honest budgeting principles. He will not explain how he plans to eliminate the $2.15 billion budget deficit. He will also not explain how he plans to add $1.6 billion to the budget without raising your taxes. This will become more clear as we digest the Governor’s budget between its introduction in February and the Legislature’s finished product in June or July (keep your fingers crossed).

It will certainly be interesting to see what the Governor says and does not say over the course of the next couple weeks. I call on the Governor to show fiscal restraint and leadership when it comes to the budget and leading this state. We should not spend more than we take in and the Governor should lead the way.

You cannot buy a vacation home in the north woods if you are having trouble making your mortgage. Hopefully, the Governor will come to his senses and realize that continued deficit spending will make our state weaker, not stronger.
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Lasee’s Notes is a weekly column by Representative Frank Lasee, 2nd Assembly District, covering events in the Legislature and statewide.

Medicaid Cost-Shifting

Lasee’s Notes

Last week, I met with the Manitowoc County Board of Health concerning Medicaid access for dental services, a major problem (I know that sounds exciting). Access to providers, as well as Medicaid reimbursement, are important issues because, annually, the state spends $1.65 billion, the federal government spends $2.58 billion in Wisconsin, and those tax dollars pay for 652,000 Medicaid and BadgerCare recipients in Wisconsin.

Medicaid and BadgerCare reimbursement is the amount of money the state pays a hospital, doctor or dentist for the medical services provided. The state of Wisconsin is only reimbursing providers for about 38% of their medical charges. To make up for that, the providers charge everyone else more. This is the hidden health care tax.

If a business is losing money on a particular product, they drop that product, or they make up for it by charging more for another product. If a doctor (hospital or dentist) is losing money on a patient, they do the same thing, charge everyone else more.

This means higher costs for those 63% of us with private insurance in Wisconsin. That means higher premiums for those who are paying for their own health insurance and for the employers who pay for their employees’ health insurance. Wisconsin health insurance premiums are well above the national average. A good part of that is caused by under-reimbursement of Medicaid, BadgerCare and Medicare. Higher premiums mean that fewer people can afford their own insurance and fewer employers will continue to offer it. It also increases the cost of having employees in Wisconsin if the company pays for all or part of health insurance.

This means that we are all paying a hidden Medicaid tax; our taxes are even higher than we thought. Our tax-funded, government-provided health care is not fully funded and this is a major problem.

On top of the existing hidden Medicaid tax, the Governor wants to add more users to BadgerCare and Medicaid rolls without increasing the funding. He says we can add tens of thousands of people and somehow become more efficient so it will not cost more. I am not making this up. He said that in his inaugural address and the media seems to be taking his word for it.

That increase means the reimbursement rate is likely to drop, which will drive the hidden Medicaid tax up even more, increasing the cost for the majority of citizens and businesses. Is this responsible fiscal leadership?

Because of the shortage of dentists willing to see Medicaid patients, the patients are going to the emergency room for toothaches and other dental needs. This expensive emergency room visit is charged to Medicaid, costing the taxpayer a lot more than it should. This is caused because our state will not compensate providers more fairly for the work they do.
When I wrote about this subject five years ago, I ended by talking about our structural deficit and the need to reduce state spending and start paying these providers more reasonably. Well, five years later, our honest budget deficit has grown to $2.15 billion dollars (Wisconsin is one of only three states running a deficit) and things have gotten worse with reimbursement (we have not increased our rate for years). For the foreseeable future, we need to do everything we can to reduce new state spending. At the very least, we must stop adding more programs and more people to the under-funded Medicaid system.

In other states, not only are dentists refusing to take patients on Medicaid, doctors are starting to do the same thing. I do not want to see this happen in Wisconsin. Raising Medicaid reimbursement rates will help keep more providers willing to see Medicaid patients. This increases access to health care for low-income families.
Health care is a major issue in this state and this country. We believe that access to good health care is one of the most important things we can have. The more expensive it gets, the harder it is for all of us to afford it.

Maybe that is what those who want a government takeover of the health care delivery system want. I believe we must be careful. The grass is not always greener on the big government/socialist side of the fence. Someone still has to pay for fertilizer, weed, feed and cutting. That is just a fact of life. If the government pays, the taxpayer pays.
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Lasee’s Notes is a weekly column by Representative Frank Lasee, 2nd Assembly District, covering events in the Legislature and statewide.

In for a Nickle, out for a Dime

Politicians and school referendum proponents have more in common than you might think, both make promises they can't keep and for which they likely won't be held accountable. While a politician can vow to cut your taxes, a school referendum proponent can infer not to raise your taxes ... too much.

Trusting proponent's referendum numbers is risky at best, but whether spending $75 million, $65 million or even $60 million these are big debts to ride the numbers on. And when $9 million or so is a backlog of picayune projects like roofs and heat ... well, no biggee, right, we can afford it?

Where are the 2,000 kids coming from? Why does the district drop 120 or so alternative H.S. students from the rolls? "Cause they can". For whatever reason, proponents do not include the full count for alternative students, and distrust for their numbers grows.

Some say built it and they will come. We need an upscale school to attract people. But look at the backdrop: real estate sales, home values and home starts down, which is just peachy for home loan originators like me. Ha, ha. Many indicators show continued slowdown, while not dramatic, do we need a new school now? Are we trying to hit bottom so we have no where to go but up?

The actual increase for 2005/2006 was 42 students. The first semester 2006 showed a drop in enrollment; I wonder how the second semester count goes. Let's not see a free Pizza lunch on count day, let truancy work it's magic.

Well it's better than the original $75 million proposal, which had been set to crush the state record for plumpest turkey, er, referendum. The school board reconsidered, and reduced the figure to a mere $65 million or so. I still feel like we're getting the short end of the wishbone.

In taxpayers terms we will be paying an additional 10-cent per thousand right away and forgoing a 37-cent per thousand reduction from retiring debt. And in 2010 or so we should expect another 18-cent per thousand bonus from the School district for a grand total of around 65-cent per thousand, if their numbers hold up.

Now, let's toast our magnanimous Gov. Diamond Jim Doyle for the extra $850 mil he gave schools in his last budget to implement his version of a tax freeze. Think how much more we'd have to ask for if he didn't rob the transportation fund for us. Now everyone's crying about gas tax increases, well slap my mouth shut.

Here's the topper; Referendum Proponents filled the courage of their convictions, want a strong vote of confidence from the community, so they proposed a February referendum - these February Referenda votes need to be outlawed due to the historic low turnouts.

One last question. Why no Open Community Forum with all sides invited? Former East High Principal, Terry Fondow, is holding two Forums in January that the District and the Board will not attend. Is is because the numbers just don't square up?

Pusillanimous. That is the only way to describe the approach to and the flight from one of the largest school expenditures in the history of Wisconsin.

Looks like in for a Nickle, but it's really a Krugerrand.
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Richard Parins, President of The Brown County Taxpayers Association

Your Deficit-Cutting Governor Shows His True Colors - Red, Red and More Red

Lasee’s Notes

Last week I explained that Wisconsin has a budget deficit of $2.15 billion using honest accounting standards. To get out from under this deficit, state government has to go on a diet. Instead of cutting out trans fats and calories, this diet requires $430 million less in each of the next five biennial budgets (ten years) to get back to a positive balance in the budget using honest accounting standards.

Considering the critical need to get the state’s financial house in order, what do the Governor’s state agencies do when they submit their budget requests? Do they take a hard look at their budget and see where they can trim to contribute to the overall fiscal health of the state? Do they come up with a comprehensive plan to cut this deficit? No.

Unfortunately, state agencies submitted proposals that read like the state has a two billion dollar budget surplus instead of a deficit. The combined agency wish list adds $1.6 billion in new state spending on top of anticipated new tax dollars when we are already two billion dollars in the red.

The agency heads tell us that the $1.6 billion in new spending is a wish list and not what they expect to get. The fundamental problem with that approach (asking for more than you expect to get) is that the agencies obviously expect to increase their spending in this budget. None of them are talking about how to cut spending or eliminate our budget deficit. This is not surprising, since the agencies are in the business of spending tax dollars, not conserving them.

According to the Governor’s inaugural speech. He intends to expand BadgerCare’s free, government-provided health insurance (Medicaid) to every child in the state. He claims he can add a huge number of new users to the state’s Medicaid rolls without increasing costs. You and I know that huge expansions to state programs cost money. Lots of money. It is hard to cut a deficit when you are adding spending.

Another of the Governor’s priorities is greatly increasing funding for education. This is not a surprise since 80 percent of the cost of education is union employees. WEAC, the state teacher’s union, is one of the Governor’s biggest campaign supporters.

The Governor is also proposing, and I support, a tax deduction on health insurance premiums. This means a $50 million savings for premium-paying taxpayers, and $50 million less coming into the state.

Requiring honest budgeting in state government, would be a good start to get Wisconsin back on track. It does not cut spending, but it makes it a lot harder for legislators and the Governor to sign bills that increase spending when the taxpayers know we are already in the red.

In Fiscal Year 2005, Wisconsin was one of only three states carrying a GAAP deficit and our deficit was the largest of any state by a wide margin. This is one of the reasons we have one of the worst bond ratings in the nation (which means it costs Wisconsin more to borrow money than it costs other states). Wisconsin should be working to regain our tarnished reputation for clean and honest government. Requiring honest budgeting and admitting that we have a deficit problem would be the first step toward solving the problem and rehabilitating our reputation.

The bottom line? The state is broke and this Governor is not helping it get better. Taxes are high and getting higher; what is this Governor doing to help the situation? He proposes increases in funding and new programs.

Running up deficit after deficit is not going to help citizens, taxpayers or businesses in Wisconsin. Hopefully, the deficit-cutting Governor (self-proclaimed) will re-appear before the budget address and not wait for the next re-election campaign.
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Lasee’s Notes is a weekly column by Representative Frank Lasee, 2nd Assembly District, covering events in the Legislature and statewide.

Smoke and Mirror-Style Accounting in Madison

Lasee’s Notes

Happy New Year to you and your family.

If you lived in the state of Wisconsin during the 2006 election cycle, chances are you saw an ad with Governor Doyle telling you how he eliminated Wisconsin’s $3.2 million dollar budget deficit. Touting his fiscally conservative credentials helped get the Governor re-elected.

What if it turned out that the Governor was using accounting tricks to eliminate the deficit? Would the voters still be so eager to put him back in office for another four years? He isn’t the first governor to add to our budget deficit while claiming there is no budget deficit.

It turns out that the Governor is using the state’s way of balancing the books to make his deficit-cutting claim. If he used the same accounting principles businesses are required to use, Wisconsin would have a $2.15 billion general fund deficit.

Newly released financial statements show the state of Wisconsin closed its 2005-06 fiscal year with a $2.15 billion general fund deficit, according to the Wisconsin Taxpayers Alliance (WISTAX). This is $8 million more than in 2004-05 and $231 million more than in 2003-04. That $2.15 billion deficit was 12.6% of the $17 billion in general fund spending officially reported for fiscal year 2005-06.

The Comprehensive Annual Financial Report (CAFR) was released in December. Unlike state budgets enacted by the Governor and Legislature, the CAFR follows generally accepted accounting principles (GAAP) prescribed by the nation’s Governmental Accounting Standards Board.

GAAP is required of all publicly-traded companies. All certified accountants must use GAAP. The federal government requires it for its internal auditing and most states and local government entities are moving towards GAAP. What about Wisconsin? Why does the budget not reflect the actual state of our financial health according to the principles that any CPA would use if they were doing our books?

If a private company cooked their books the way that the State of Wisconsin does, someone would be in jail.

A more responsible approach is using GAAP for all state accounting. This is one of my legislative priorities and I will be introducing a bill to require GAAP standards for state government over the next five budget cycles. We should eat this 2.15 billion dollar elephant one biennial budget at a time ($430 million in each budget cycle). It would be great if this was included in the budget being proposed by the Governor next month. But with the state agencies asking for increases in spending and the Governor is proposing new taxpayer-funded health care programs (when we are not funding the existing programs as well as we should), it seems unlikely that the Governor will be leading the charge for more responsible budgeting. After all, who is demanding a change?

Why do the Governor and the Legislature cook the state’s books to spend more and do more than they are willing to tax all of us for? Because your state government can and it has made some well-liked.

Until we get a clearer picture of Wisconsin’s financial health, taxpayers will never know whether to believe their elected officials when they throw around claims to have balanced budgets and eliminated deficits. When there is only one set of books, taxpayers will be able to elect leaders who cannot hide their own overspending with creative accounting.
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Lasee’s Notes is a weekly column by Representative Frank Lasee, 2nd Assembly District, covering events in the Legislature and statewide.