Fall Update

Wisconsin Insurance AllianceWisconsin Insurance Alliance

September 21, 2015

General Responsibilities

Prepare Governor’s biennial budget recommendations.

Provide accounting, budget, financial & policy analysis services.

Prepare various statutorily-required reports on behalf of the Administration(November 20th Report, AFR, CAFR, quarterly balances/cash flow).

Represent the Governor at all Joint Finance Committee hearings {s. 16.40(2)}.

Interact with legislative service agencies (LFB, LAB, LRB).

Recommend approval and/or veto of all legislation.

Manage biennial budget implementation in collaboration with executive agencies.

Division of Executive Budget & Finance

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Fiscal and Budgetary Updates

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Developing our Workforce Implements a drug screening, testing & treatment program for individuals receiving UI and certain public

assistance benefits. Reduces time limit for participants in Wisconsin Works from 60 months to 48 months.

– Encourage placements in jobs at a more rapid page. Invests $3 million to expand transitional jobs in high-need communities; Racine, Beloit, rural communities.

Investing in Infrastructure Invests total of $6.1 billion in Wisconsin’s transportation infrastructure.

– Provides $415 million for ‘Zoo Interchange’ and maintains scheduled completion date of Zoo Interchange.

– Invests in State’s harbor system, highway rehab & major highway development (total ~ $2 Billion); Legislature reduced Governor’s Recommendation.

Increases investment in broadband expansion by providing $18 million in grants to rural schools for technology infrastructure improvements.

Medicaid Entitlement Reform Increases State funding of Medicaid by $650 million. Implements integrated care reforms to slow expenditure growth & maintain essential health care services.

2015-2017 Biennial Budget

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Transforming Education

Increases State aid for k-12 schools by $192 million. Expands of many educational-related programs. Establishes MKE Opportunity Schools & Partnership Program to enhance opportunities & rebuild

underperforming schools. Continues a tuition freeze at UW System for State residents. Reforms UW System governance to provide Chancellors more authority and oversight; provides other

flexibilities for UW System Administration to maximize efficiencies.

Growing Our Economy Completes phase-in of Manufacturing and Agriculture Credit to stimulate these sectors. Establishes the Business Development Tax Credit to incentivize job creation and investment. Maintains the Badger Fund of Funds (venture capital program: $25 million). Reduces or freezes property taxes: six consecutive years of reduced or frozen property taxes for “MVH”. Simplifies the Wisconsin tax code; reduces the burden of AMT by mirroring federal tax code.

2015-2017 Biennial Budget

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Insurance Items of Interest

Consolidates Worker’s Compensation function.

Sunsets the Local Government Property Insurance Fund (deferred).

Maintains current law re: payday lending industry (veto #89).

Maintains current law re: chiropractic services and dispute resolution (veto #75).

Reduces State health insurance costs by modernizing health plan design and providing an opt-out option/stipend to State employees.

2015-2017 Biennial Budget

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Strong Statutory Budget Management Provisions Balanced the FY2015 Budget

January 2015: Legislative Fiscal Bureau (LFB) projected FY15 General Fund deficit of $283m.

Annual Fiscal Report for FY2015 will be released by October 15, 2015.

The mid-year FY15 projected deficit addressed through various measures, including:

– Previously withheld Gaming revenues from a tribal government;

– Conservative use of budgeted compensation reserves;

– Statutory authority of the DOA Secretary to reduce spending.

– Historic low interest rates that kept debt service low on State variable rate obligations.

FY2015 General Fund tax revenue may exceed January 2015 projections (LFB, May 2015).

General Fund FY15 revenues were still projected to increase by $532 million (3.7%) from FY14 based on LFB estimates of January 2015.

The Budget Stabilization Fund Balance will be $280 million at FY15 year-end.

Governor’s vetoes increase ending balance of 2015-17 biennium by $45 million.

FY2015 Budgetary Balance

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New bonding authorization in the 2015-2017 budget: lowest amount since the 1995-1997 biennial budget.

Outstanding General Obligations paid from GPR decreasing each calendar year since 2012. 2015 YTD outstanding GPR General Obligations fall further to approximately $4.6 billion.

Debt Service Levels Remain Manageable

General Obligation Debt Supported by GPR 2002-2014

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Fully Funded Pension and Minimal OPEBs Set Wisconsin Apart

Reduces Future Budget Stress

Source: Standard & Poor’s Ratings Services Ratings Direct; October 2014 and June 2015.

The Wisconsin Retirement System (WRS) is a sound and strong pension program.

– State’s component is fully funded. Investment losses do not create an unfunded liability but are addressed in adjustments to future contribution rates and benefit payments.

Minimal other post-employment-benefit liabilities.

– State proactively addressed sick leave conversion credit program in 2003.Wisconsin debt combined with unfunded liabilities is minimal compared to other states.

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Economic Highlights and Updates

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Growth and Strength in a Broad Array of Economic Factors

2015 YTD new housing permits at the highest level since 2008

Business registrations:

– 2014: 6.1% higher than 2003

– 2015: 3.4% ahead of 2014 (YTD through June)

Wisconsin’s unemployment rate remains lower than U.S. unemployment rate.

Wisconsin ranked 4th in U.S. in manufacturing job growth from June 2009 to June 2015.

Wisconsin ranked 10th in U.S. in per capita real GDP growth from 2010 to 2014.

Wisconsin's 2014 real per capita income was $43,392, 4% above U.S. average of $41,706. 

Growth in Wisconsin's per capita disposable income outpaces the nation & region.

Wisconsin’s Economy Exhibits Strengths

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“Wisconsin’s economy will steadily improve over the coming quarters as higher-paying service industries add to payrolls.”

Other highlights:

Financial and insurance services are expanding at an above-average pace.

Business and professional services are providing a steady stream of high-paying jobs.

Recovery on “sure footing”, with first quarter employment growth exceeding the Midwest average.

Source: Moody’s Analytics Precis Report, June 2015

Moody’s Analytics Notes Wisconsin’s Strengths

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Wisconsin’s unemployment rate has been lower than U.S. rate for 91 consecutive months.

Wisconsin unemployment rate remains below the U.S. rate

Source: Bureau of Labor Statistics.

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Wisconsin ranked 4th in the country in manufacturing job growth from June 2009 to June 2015

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Wisconsin Among the Strongest States in Philadelphia Fed’s State Leading Indexes

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Current Initiatives

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Major Undertakings Will Result in Future Benefits

Milwaukee Arena

– Development of public facility downtown for use by the Bucks and other public events.

• Will serve as cornerstone for other development in the City of Milwaukee.

• NBA team has a net positive impact on State’s General Fund tax collections, which grows over time (“jock tax” & NBA media agreements).

Asset Sales

– Reviewing certain state assets for evaluation and possible sale; initial group under review include Hillfarms property and State-owned power plants and related facilities.

– Long-term benefits to the State of not owning, operating, and maintaining such facilities in light of changing environmental requirements.

State Transforming Agency Resources (STAR) Project

– First phase goes live on October 1, 2015.

– Consolidate IT systems for improved effectiveness, efficiency, and consistency among state agencies. Modernization of the State’s IT infrastructure; the State is operating on finance, budget, procurement, business intelligence, and human resource systems developed in, or prior to, the 1980s.

Current Initiatives

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Q & A

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