UW Finances: A Visual Guide

Note: the Joint Finance Committee debates UW System funding today (Update: JFC punted on UW funding; it’s unclear when they will take up those controversial votes). We over at the MacIver Institute spent a lot of time breaking down the UW budget as part of our Chart Smart series – so the busy taxpayer can keep up-to-speed on what’s going on. I’m reposting them here.

From the MacIver Institute:

These charts examine state support to the System, followed by the overall UW System budget, including federal dollars and gifts. Since the Governor’s proposed tuition freeze and tuition cut are on the docket for Tuesday, we also take a look at in-state and out-of-state tuition across public Big Ten schools. A history of program revenues offers a peek into the UW slush fund debate, sure to come up this week. Finally, we compare salaries for the average household in Wisconsin with employees of the UW System.

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Want more coverage? Head over twitter and check out @MacIverWisc for up-to-the-minute coverage of the UW budget debate and more!

Did Politics Trump Good Policy in Self-Funded Insurance Debate?

The following column originally appeared at the MacIver Institute.

At long last, the Legislature’s Joint Finance Committee will have to make a decision on whether to adopt a self-funded insurance system for state employees’ health insurance. The bad news is that Governor Walker’s proposal to make the switch and save $60 million is all but dead in the state Legislature.

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On Monday, the Group Insurance Board submitted contracts with third-party administrators for a self-insurance system. Those contracts spell out in black and white at least $60 million in savings over the biennium – that’s on top of $22 million in possible savings if Obamacare and its obscene tax burden is not repealed. With the contracts in hand, JFC now has about three weeks to convene a meeting and make a decision.

“Since taking office, we have sought to reform government to make it more accountable and cost effective to the hard-working taxpayers,” Walker said in a statement on Monday. “Moving to self-insurance is one of these reforms and we urge the Joint Committee on Finance to approve these contracts and invest these savings into the classroom.”

Unfortunately, it appears that JFC is prepared to leave this windfall for taxpayers on the table. Why? We’ve heard a carousel of arguments against self-insurance that have all stalled, but the final stand for self-insurance naysayers might boil down to pure politics.

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Early arguments by opponents of self-insurance breathlessly claimed that the move would gut state workers’ health insurance plans. Ignoring how out of step these lavish plans are compared with their private sector counterparts, it quickly became clear this doom-and-gloom claim had no basis in reality – especially after the actual proposals were received.

Next, the self-insurance doom-mongers portrayed the switch as a journey down a long, dark tunnel. The fact is that there’s nothing mysterious or scary about self-insurance; Wisconsin already partly self-insures its dental plan and its pharmacy plan.

At least 20 states completely self-fund their state employee health plans, including Minnesota, which moved to 100 percent self-funded insurance in 2002. Also, 46 states use self-insurance in some way.

In the upper Midwest, no states are fully-insured, meaning none completely rely on private insurance and all are self-funded at least in part.

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More than 90 percent of all large employers, companies that employ 5,000 or more employees, also use self-funded insurance. To say adopting this system would be risky and experimental is diametrically untrue. In fact, it would be routine and economical.

Critics then moved on to prophesizing that the switch could pose a potentially catastrophic financial risk to the state. True, the state would be directly assuming the risk rather than putting insurance companies in the middle. But barring an unprecedented epidemic sweeping state office buildings, the risk factor has been greatly hyped.

The risk would actually be low because of the sheer size of the state’s workforce, which means total annual payouts would be predictable and fluctuations minimal, according to insurance expert Dean Hoffman, who recommended the switch to the Governor’s Commission on Government Reform last May.

Legislative Republicans are also uncertain about the future of Obamacare, which imposes a variety of taxes and fees on the insurance marketplace that would be absorbed by taxpayers in Wisconsin.

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JFC co-chair Sen. Alberta Darling cited Wisconsin’s relatively low premium increases at a Tuesday press conference. “Why would we want to shift out of that and into uncertainty at this point?” she asked.

Caution isn’t unreasonable, but moving to self-insurance would actually protect Wisconsin taxpayers from uncertainty. Taxpayers should be the focus, not protecting the platinum health insurance of government employees.

Obamacare hits the insurance market, and thus taxpayers, in two big ways. The reviled Obamacare Cadillac Tax applies an exorbitant 40 percent tax on all employee benefits exceeding $10,200 annually for an individual, $27,500 for a family.

Sadly, the AHCA healthcare bill that passed the House last week retains the Cadillac Tax, although it pushes off the starting date of the Cadillac tax until 2026. Self-insurance would help mitigate that cost by eliminating the middle man in the current setup.

Then there’s the insurer tax, a special levy charged to private insurance companies that’s tied to the insurer’s premiums collected in the previous year. In 2016, the insurer tax ranged from 1.5 to 3.5 percent, with future rates yet to be decided. As the state’s deputy commissioner of Employee Trust Funds, Lisa Ellinger, pointed out last year, the state pays out about $1.4 billion annually in premiums.

Self-funded insurance systems are exempt from this tax. Quick cocktail-napkin math shows that switching to self-insurance would conservatively save tens of millions on top of the $60 million outlined in the contracts.

Despite ongoing uncertainty about Obamacare, keeping the status quo is precisely the wrong decision. Assuming Obamacare’s taxes are here to stay, seizing the $60 million moment would be responsible management of taxpayer dollars. Keeping the status quo and hoping Washington politicians do the right thing would not.

Instead, legislative leaders are considering “finding” $60 million in savings within the existing system. “We’re not saying no to savings. If we do that we’re going to find a similar amount of savings in some way, shape or form,” said JFC co-chair Rep. John Nygren on Tuesday.

If that’s actually possible, it begs the obvious question: how much taxpayer money has been wasted by not finding these supposed savings years ago?

With most of the arguments against self-insurance out of gas, opponents’ final stand may betray the truth: self-insurance is good policy, but protecting the status quo is even better politics. Or protecting the status quo is better politics for any politician worried more about the next election and less about taxpayers. Unfortunately for taxpayers, just about every politician in Wisconsin fits in that category.

The fact that self-insurance is good policy is evident from how many states and large employers use it successfully.

The likely end result is that Wisconsin taxpayers will get a watered-down half-measure that goes through the motions of saving taxpayer money while keeping the bloated and expensive existing system in place. That’s bad public policy.

MacIver Summarizes Key Parts of Walker’s Budget

Over at the MacIver Institute, we’ve published a series of resources for Wisconsinites who just can’t scrape up the time to read Governor Walker’s entire 691-page budget proposal.

Yesterday afternoon, Walker delivered his budget address before a joint session of the legislature. Here is a video summarizing the governor’s speech.

The actual budget proposes significant new spending on K-12 education and the UW System, as well as major tax cuts. Here’s a summary of the budget overall.

Possibly the most significant element of Walker’s budget is the $649 million increase in funding for the K-12 system. However, it’s not a simple across-the-board increase. Get the details here.

Finally, the governor is going up against legislative leaders by holding the line on a gas tax or registration fee increase. Instead of lavishing DOT with more money, Walker re-prioritizes how money is spent and delays several southeast Wisconsin mega-projects. Get the rundown here.

Previewing the State Budget

As Wisconsin gears up for another monumental and contentious budget debate, the MacIver Institute posted a preview of the upcoming excitement – including summarizing the budget requests of the major state agencies, new “201” budget items, and the major battles that lie ahead:

Wisconsin state agencies are requesting more than $69 billion in total funding for the 2017-2019 biennial budget, a debate that is quickly taking shape as Governor Scott Walker prepares for his State of the State address Tuesday.

While most Madison insiders and the phalanx of lobbyists hovering about believe that the transportation debate will dominate and may even hold up the passage of the 2017-2019 state budget, the Governor has signaled that he is, once again, looking to make significant long-term changes to state government and the way it operates. Might we see the next big Act 10-like reform that will fundamentally change our state for generations to come? We will soon find out.

As we begin the ’17-’19 budget debate, we take stock of where Wisconsin stands and highlight for you, the taxpayer, all the important upcoming debates – from important policy discussions to petty back-biting and everything in between. While we are not sure where Gov. Walker and the Legislature will end up on the gas tax, tax reform, welfare reform or a whole host of other important issues, we are sure that the budget debate itself and legislative deliberations as the budget moves through the process will prove to be highly entertaining and completely mesmerizing.

This year, agencies have also been required for the first time to submit budget scenarios for a zero percent increase and a 5 percent decrease – named the “201” requirement after the 2015 Act 201 law that forced agencies to submit the different scenarios. Some agencies took the requirement seriously, while some listed shock-value cuts and others barely made an effort at all.

It’s a thorough analysis. Read the whole thing here.

Republicans, Meet Thine Enemy

Attorney General Brad Schimel came out swinging against an abominable budget provision that shuts the blinds on access to information that belongs to the public. The AG took to Twitter making it clear he does not support the changes to our state’s Open Records laws.

He didn’t stop at one.

Schimel also used his office’s Twitter feed to make an official two-part statement lambasting the “Darkness Provision” (as I call it).

The Darkness Provision was included – perhaps in a lame attempt to keep it secret, or something – in the state budget that passed the Joint Finance Committee. The State Journal reports here.

The Republican members of the committee disclaim any knowledge of how the language got in the budget, ostensibly meaning none of them are particularly married to it.

While nobody thinks the media is fair in its treatment of Republicans versus Democrats, members of the media are rightly shocked.

“This is the single most sweeping and outrageous affront to Wisconsin’s tradition of open government that I have seen in my quarter-century of involvement with the (Wisconsin) Freedom of Information Council,” council president Bill Lueders said.

Lueders, like the vast majority of the media doubtlessly a liberal, has a solid case. Unlike most statements from adherents of The Leftist cause, this one isn’t outrageously hyperbolic – it’s justifiably hyperbolic.

Democrat Senator Jon Erpenbach commented, “Deals will be done in secret…Corruption will happen. And nobody’s going to know about it.” Rep. Chris Taylor said, “It’s in the cloak of darkness that you want more darkness.”

It’s painful to admit: Taylor and Erpenbach are right. Worse, the GOP put the Democrats in their Suburban, drove them to the high ground, and dropped them off. It’s an obscene and a terrible mistake.

So what does the Darkness Provision actually do? According to the State Journal report, it:

  • Exempts from the definition of public records “communications and other materials, including opinions, analyses, briefings, background information, recommendations, suggestions, drafts, correspondence about drafts, and notes, created or prepared in the process of reaching a decision concerning a policy or course of action.” So everything except press releases?
  • Gives legislators “legal privilege” which amounts to broad discretion in what records can and should be released. “Wow, that’s embarrassing…I’m deciding the public doesn’t have to see it.”
  • Requires the Legislative Reference Bureau to keep “drafting files” confidential and lifts a requirement to retain files from previous legislative sessions that are often used to research the birth of legislation, including the intent behind the introduction of a bill. Water under the bridge…nothing to see here…fire up the shredder.
  • Similarly, “The motion also eliminates the requirement that the LRB maintain all drafting files for legislation during the current legislative session and release those files for public view once the Legislature adjourns.” Mind=blown.

Schimel isn’t the only person on the right to oppose the Darkness Provisions. Orville Seymer of Citizens for Responsible Government, which typically leans conservative, said the provisions “are just terrible,” according to the WSJ.

If every Joint Finance Republican was so quick to disown the Darkness Provisions, ditching them should be a cinch.

But if Republicans in the legislature have suddenly morphed from reform-minded crusaders on behalf of taxpayers to a hoard of power-hungry dictators in the tradition of Barack Obama and they pass the budget with these provision included, then Gov. Scott Walker will need to use his line-item veto. If he doesn’t, he’s become a coward.

(Interest-of-fairness statement: On the other side of the rift, if members of the media are truly interested in openness and transparency to hold accountable more than just Republicans, then they will surely begin a systematic campaign to make the public aware of just how the Obama Administration is the least transparent administration since Nixon, and maybe worse…but I’m not going to hold my breath and wait for that to happen).

Its hypocrisy aside, the old ivory towers of mainstream media are still the arbiters of public opinion and therefore their concerns – the concerns of openness of information that belongs to the people of Wisconsin – are legitimate.

The Democratic Party in Wisconsin at the moment does not present much of a threat to Republican control. The election of a virtual noob to chair their party won’t lead to a renaissance, and their bench consists of a very lonely Jennifer Shilling. Therefore, the biggest threat to GOP control is…

The GOP itself. And the hubris that comes with power and that inevitably leads to decline, defeat, and humiliation.

Ironically, leading Republicans like Assembly Speaker Robin Vos bent over backwards to backpedal on important legislation like the repeal of Prevailing Wage, the Bucks Arena, and road funding, perhaps believing moderating a reform agenda is the way to avert a rough election cycle in 2016.

The “Darkness Provision” is a shift from thoughtful and courageous reform to cowardly wagon-circling. It must be removed, or I fear the Republican Party will pay a price far greater than the market value of being legally able to reply to an open records request with a middle finger and a smarmy grin.