Not What We Need

For months Governor Tony Evers and the Republican leaders of the state Senate and Assembly traded barbs over the 2025 – 2027 budget. There were no obvious significant points of agreement between them and it looked like we were in for a long and ugly process. The Governor threatened to use his veto pen to carve up Republican plans and the Republicans did him one better with their own threat to not pass a budget at all, leaving current spending in place unchanged.  Suddenly and without warning, a 421-page, $111 billion budget materialized, passed in both Houses and was signed by the Governor at 1:30 in the morning on July 3. It had been more than 50 years since a budget passed both Houses in one day and Governors typically take at least several days to review approved budgets before signing. What motivated such unprecedented legislative bipartisanship and speed?  The answer: The very likely prospect that President Donald Trump was going to get his Big Beautiful Bill signed into law on July 4.

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What Passed?

The $111 billion budget increases spending by more than 12% over current law. Republicans tried to defend the increased spending as a push to spend the $4.4 billion surplus from the last budget (2023 – 2025). The massive surplus is a clear indication to rational taxpayers that we are overtaxed. In an even more outrageous defense of spending, Devin LeMahieu, Senate Majority Leader, argued that if we consider only the general-purpose revenue, which is the main source of state spending, the appropriations are only going up by 7.7%, which he claims is in line with inflation.

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5 Democrats voted for the Bill in the Senate and 4 Republicans against.  7 Democrats voted for the Bill in the Assembly and 1 Republican voted against.  This was enough to drag the legislation over the finish line, with Democrats complaining there wasn’t enough spending and Republicans complaining there was too much spending.  Consistent with what we have come to expect, most went along to get along.

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There are some big winners in this budget as a result of the horse-trading politicians were willing to do to get it done.  The budget contains $1.4 billion in tax cuts which will come largely from expanding the second-lowest tax bracket to include more taxpayers with a higher earnings threshold and excluding the first $24,000 of retirement income from taxable income for seniors 67 and older. Sales tax is being eliminated on residential electric bills. $500 million is going to better reimbursement for special education costs incurred by school districts and, despite the declining student enrollment and questionably ridiculous salaries of some administrators, the Universities of Wisconsin System will see a net increase of $239 million, the largest increase in nearly 2 decades. Republicans had been pushing an $87 million cut for the System.  The budget also contains $840 million in capital projects for the System in exchange for faculty and staff meeting minimum teaching loads. Transportation spending will increase by $1.2 billion, a more than 16% increase.  Lawmakers plan to use some of the surplus to pay for projects in cash and they are increasing fees for driver’s licenses and license plates as part of their transportation actions.

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The budget includes nearly $332 million in new funding for child care. $110 million of the payments to child care providers will be covered by the interest earned on COVID-19 funds the state received from the federal government. Taxpayers take note: if the state was able to invest enough COVID funds to generate more than $100 million in interest, we can reasonably conclude we did not need the funds for COVID to begin with.  Government waste never ceases to amaze and disgust.

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We are told there are 300 state positions being cut from the budget though Evers wanted to add 881 positions to state government.  It’s impossible to know what the real number is since playing games with math is fundamental to how government works.  Some of the eliminated positions are currently vacant and some coincide with the ends of projects that were time limited.

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The Motivator

It turns out bipartisanship and legislative speed can be bought with a $1.5 billion motivator.  Wisconsin has an assessment (also called a provider tax) of 1.8% on hospital revenues. That money qualifies for matching grants from the federal government and much of it flows back to the hospitals. The intended use of the federal matching funds is to help fund Medicaid in the states.

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Here’s how it works. The total collected from hospitals currently is about $420 million per year.  The funds are used to leverage federal funds that are split between the hospitals and the state.  The hospitals get almost $680 million ($260 million more than they paid) and the state gets $150 million that goes into the Medicaid Trust Fund.

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As Trump pressured lawmakers to get the reconciliation bill to his desk by July 4, it contained a cap on how much states could assess hospitals of 6%. It also put a moratorium on new or increased provider taxes which meant if Wisconsin’s assessment remained at 1.8% when Trump signed the Bill, it could not be increased for the foreseeable future. 

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The Legislators and the Governor immediately realized that the difference in matching federal revenue to the state between the 1.8% assessment and the maximum allowable 6% was a windfall for them to help cover the increased spending in the budget. Assembly Speaker Robin Vos described it this way, “We all understand that once the signature goes on at the federal level, it really limits the options for us to capture that federal revenue. I think that’s one area we found pretty widespread agreement.” 

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With the 6% assessment, the hospitals will pay $1.5 billion in assessments and get back nearly $2.7 billion, netting more than $1 billion. The money hospitals pay in assessments comes from the charges paid by patients.  What’s wrong with this clever manipulation of the system?

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When it came time to vote state Senate President Mary Felzkowski chose to break from the pack. Not only did she vote no on this state budget, she spoke up about the hospital assessment scheme.  She publicly exposed the travesty of the Governor and Legislators taking no action on the cost of health care while delivering a billion dollars in new revenue to hospitals.  Felzkowski called healthcare affordability the number one concern for Wisconsinites and cited Wisconsin for having the 5th highest hospital costs in the country.  Wisconsin Manufacturing and Commerce reports that Wisconsin is one of 7 states where hospital costs are 3 or more times the cost of Medicare.  Felzkowski would not support the Governor and Legislators delivering this windfall to hospitals without providing the taxpayers a single substantive healthcare reform in return.  She issued the following statement:

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“Healthcare costs are the largest financial concern for most Wisconsin families and businesses.  Instead of addressing these costs, Governor Evers sold out to hospital lobbyists and willingly turned down a golden opportunity to enact bipartisan healthcare reforms that would have lowered costs for our constituents.”

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Felzkowski missed the mark by not publicly blasting the Legislators in her own Party right along with Evers for the gamesmanship and disregard of their constituents’ health care burdens.

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If Not Now, When?

In the early 1980’s the country first became concerned about the rising cost of health care as it approached 10% of the Gross Domestic Product (GDP), the market value of all the goods and services produced in a year.  Since that time, despite unrelenting focus on the cost of healthcare including major restructuring of health delivery systems and payment systems, we have made no progress. Costs continue to rise and outcomes are poor.  We are a chronically ill nation now spending $4.9 trillion annually, nearly 20% of our GDP, on healthcare.  By contrast, most developed nations spend between 9% and 12% of their GDP on health care and have healthier people than we do.  Health care in the United States offers, without question, the best technological capabilities and most extraordinary clinical expertise in the world, but we are poorly managed.

Tony Evers, Robin Vos, Devin LeMahieu and all the Legislators willing to follow them like sheep expose who they are every day.  As Trump aggressively works to deliver on his promises to the American people, it will be obvious who the pretenders are and who the reformers are at all levels of government.  Once Evers, Vos and LeMahieu decided to slither through the federal loophole before it closed, they had the perfect opportunity to set their games aside and demand improved healthcare value for the people of Wisconsin.  They took a pass. They are not what we need.