State Rep. John Nygren, co-chair of the Legislature’s powerful, budget-writing Joint Committee on Finance, appeared this morning on a Zoom webinar sponsored by the Badger Institute to address the state’s fiscal condition. It was the most candid look at state finances we have had in a long time.
While Rep. Nygren indicated that state revenues have stabilized and the fiscal reality is better than he would have thought likely when the pandemic began back in March, the veteran Marinette Republican emphasized that most of the negative impact on state revenues due to the COVID-19 pandemic will be felt in the second year of the current 2019-21 biennium.
Rep. Nygren repeatedly noted that any decisions that can be made now to reduce spending in the second year of the current two-year state budget will make the next biennial budget easier so lawmakers will not have to make cuts (or such big cuts).
Addressing his comments at one point specifically to school leaders, the longtime JFC chair said, “My advice to schools is to reduce expenditures in the current school year so that you have cash on hand… so you have some cushion going into the next budget.”
Rep. Nygren noted that although he holds out hope that Governor Evers’ actions to cut administrative agencies’ spending may prevent the need for the state to have to adopt a budget repair bill in the current biennium, they will do little to improve the outlook for the next (i.e., 2021-23) biennial budget state budget.
In response to a specific question, Rep. Nygren described conversations he has been having with his local school leaders and offered comments about K-12 education during the pandemic generally, which you can view in this video clip provided courtesy of WisconsinEye. (Rep. Nygren’s comments about schools go on for about two minutes.)
The longtime JFC co-chair still expects a revenue update from the non-partisan Legislative Fiscal Bureau by the end of August. In a bit of a surprise, Rep. Nygren observed that from a timing standpoint, a budget repair bill, if needed, would be more likely to be debated in late October or November but not in the next two months.
Rep. Nygren said increased enrollment in the state’s Medical Assistance program (a/k/a MA or Medicaid) for low-income Wisconsinites is the biggest “wild card” the state faces in terms of budgeting. (Medicaid is a joint state-federal program and Medicaid spending is the biggest competitor for schools in terms of state funding.)
According to Nygren, school aids and Medicaid together accounted for about 75 percent of state general fund spending in the 2019-21 budget and Medicaid costs are likely to rise, even with additional federal assistance through the CARES Act, which raised the federal match rate (or FMAP–the percentage at which the federal government reimburses states for Medicaid spending).
Nygren noted Medicaid enrollment increased by 13 percent from March to July and is expected to increase by 22 percent by the end of June 2021. A big question, according to Nygren, is how long the feds will continue to maintain the higher FMAP match rate and how much the state may have to spend to keep the MA program solvent if enrollment remains at high levels and Congress reduces the FMAP match rate. According to Nygren, the last time Wisconsin faced this situation (during the Great Recession), the state had to spend over $1 billion in state funds to keep Wisconsin’s Medicaid program solvent.
Nygren also remarked that based on what he is hearing out of Washington DC, future rounds of federal assistance are unlikely to provide more money for states, but instead will provide assistance to individuals. He expressed frustration that Governor Evers was given unilateral control over the $2 billion in federal CARES Act funding Wisconsin received, saying that allowing a single authority to spend those funds was probably not the best way to ensure the best allocation of those funds. He would have preferred the Legislature have a say in how those funds were allocated and spent. He also noted CARES Act funds must be spent by December 31 of this year; however, about $100 million of those funds have still not been allocated.
