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Two new reports highlight fiscal challenges posed by COVID-19

The subject of the impact of COVID-19 on school funding and on state finances affecting school funding was highlighted by two reports released this week.

The first was a report by the Wisconsin Policy Forum entitled “Uncertainty Ahead: School Finances in the Face of COVID-19.” The report was covered by major media outlets throughout the state and will likely have an influence on the thinking of the public and lawmakers regarding the fiscal situation facing schools. The report also includes significant discussion of school fund balances.  We suggest school leaders should review it.

The report starts by noting that: “School districts have seen their operations upended by COVID-19, with classroom teaching canceled and districts scrambling to move instruction online. Districts have larger reserves than in 2012, yet they face great challenges and uncertainty as they draft preliminary 2020-21 budgets. That uncertainty includes potential cuts in critical state aid, particularly if federal relief for state revenue losses is not forthcoming.”

The second report came in the form of a memo from the non-partisan Legislative Fiscal Bureau (LFB), with sobering news that state tax collections dropped significantly in April 2020 as compared with the previous April.

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How likely is a state budget repair bill given the cost-cutting measures announced yesterday?

How likely is a state budget repair bill given the cost-cutting measures announced yesterday?

In an earlier blog post, we reported on steps outlined by Wisconsin’s Department of Administration Secretary to reduce expenditures by executive branch agencies in the current fiscal year (2019-20) to better position the state financially for an unknown future. In his email, Secretary Brennan acknowledged that “current economic indicators signal a national recession and weakness in state tax collections.”

When similar steps to curb state expenditures have been taken in the past, they have often been followed by a determination by the DOA Secretary that a revenue shortfall is to take place. Once the Secretary has reached that determination and the conditions of s. 16.50(7) of the Wis. Statutes are met—i.e., that  previously authorized expenditures will exceed revenues in the current or forthcoming fiscal year by more than one-half of one percent of the estimated general purpose revenue appropriations for that fiscal year—the Secretary has the responsibility under s. 16.50(7)(a), Stats., to immediately notify the Governor, the presiding officer of each house of the Legislature, and the Joint Committee on Finance of that determination. (more…)

State DOA Secretary outlines steps being taken to offset state revenue losses due to pandemic

State DOA Secretary outlines steps being taken to offset state revenue losses due to pandemic

Late yesterday, Wisconsin Department of Administration Secretary Joel Brennan emailed state employees updating them about steps the administration is taking to offset revenue losses caused by the COVID-19 pandemic.

The biggest step is to immediately implement a 5% reduction to state operations GPR appropriations in executive branch agencies for the current 2019-20 fiscal year.

Other steps being taking include:

  • Restricting all state-sponsored out-of-state travel unless deemed to be essential for COVID-19 response.
  • Maintaining a hiring freeze, with exceptions for COVID-19 related positions and those deemed essential for continuing business functions.
  • Suspending the Discretionary Merit Compensation Program.
  • Restricting the Discretionary Equity and Retention Award Program for the remainder of the year.

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U.S. Dept. of Education set to receive state applications for CARES Act funds

U.S. Dept. of Education set to receive state applications for CARES Act funds

In a conference call to education stakeholders U.S. Education Secretary Betsy DeVos announced today that her agency is ready to start accepting applications from states for the release of more than $13.2 billion in emergency relief available to state and local education agencies. State educational agencies (such as the DPI) will be awarded the funds for distribution to local school districts and independent charter schools.

This funding, known officially as the Elementary and Secondary School Education Relief Fund (ESSER Fund), comes from the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act approved by Congress and signed into law by President Trump in late March. It is meant to support continued learning for K-12 students whose educations have been disrupted by school closures due to the current public health emergency.

Wisconsin’s share of ESSER funding will total just under $177.8 million, of which $157.3 million is to be distributed to school districts and independent charter schools, and is to be allocated in proportion to the share of the state’s Title I, Part A allocation each receives. The DPI’s preliminary, rough estimates have suggested that districts are likely to receive supplemental funds totaling 75 to 80 percent of their 2019-20 Title I allocation.  In addition, nearly $17.5 million will be left to the DPI to distribute. The department is working on a plan for that, which will likely attempt to allocate funds to provide every school district with at least some minimal level of funding–creating a funding floor so to speak. (more…)

State DOA Secretary outlines steps being taken to offset state revenue losses due to pandemic

Gov. Evers projects $2 billion in revenue losses for state in letter to Pres. Trump seeking aid

Gov. Tony Evers has sent a letter to Pres. Trump (along with the governors of Michigan and Pennsylvania) seeking federal funding to combat the COVID-19 related losses to the State of Wisconsin which he projected to be $2 billion in lost revenue.

From the Associated Press:

“The governors, all Democrats, urged Trump in the letter to work with Congress to send $500 billion to states and local governments facing budget shortfalls. The letter was dated Wednesday, the same day that Evers signed a bill passed by the Republican-controlled Wisconsin Legislature that clears the way for spending about $2 billion the state is receiving in federal funds.

“But Evers said that doesn’t go far enough in addressing the crisis in Wisconsin. He told Trump that the state’s unemployment rate sits at about 15% and Wisconsin is expected to lose more than $2 billion in tax collections over the next year.”

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State DOA Secretary outlines steps being taken to offset state revenue losses due to pandemic

MJS: GOP COVID-19 legislation would allow state budget committee to cut spending, including aid to schools

The Milwaukee Journal Sentinel is reporting that state legislation being drafted by majority GOP lawmakers would include a provision giving the Joint Finance Committee unilateral authority to cut state spending, including funding to schools, in response to the COVID-19 pandemic and the impact it could have on the State’s coffers. 

“The new measure is aimed at responding to the coronavirus outbreak and the economic problems that come with it. The legislation would suspend a one-week waiting period to receive unemployment benefits, and allow the state to claim an extra $150 million every three months in federal aid for the state’s Medicaid programs such as BadgerCare Plus.  

“But the legislation also includes a provision that would allow the Legislature’s GOP-controlled Joint Finance Committee to reduce state spending — including aid to schools — on its own. Normally, the Legislature and governor have to agree on any cuts. (more…)