It's July, and the state still doesn't have a budget

Disagreement about key issues in the budget among Senate Majority Leader Scott Fitzgerald, R-Juneau, left, Gov. Scott Walker and Assembly Speaker Robin Vos, R-Rochester, have pushed budget negotiations past a July 1 deadline.

MORRY GASH, ASSOCIATED PRESS

The start of the state’s fiscal year, July 1, has passed without lawmakers and Gov. Scott Walker enacting a new state budget.

What does that mean for most Wisconsinites?

In the short term, very little. Spending levels from the previous two-year budget cycle carry over into the new one, enabling state agencies to continue operating.

If a budget stalemate drags on for months — as has happened a few times in recent decades — highway projects now under construction could be affected, Walker has said. That could mean projects get delayed, adding millions in costs to taxpayers, said Craig Thompson, director of the Transportation Development Association of Wisconsin.

“If this does continue for months, it’s going to have an impact,” Thompson said. “The money won’t be there.”

Wisconsin school districts also could struggle to craft their own budgets since they won’t know how much state aid to expect.

The budget impasse is happening because Walker and his fellow Republicans can’t agree on one. They’re deadlocked on how to fund road projects, how to increase funding for K-12 schools and how to cut taxes. Walker and legislative leaders hinted at progress in budget talks Wednesday, but no deal appears imminent.

If the parties reach a deal in coming weeks, Walker and others have said Wisconsinites would see few impacts.

But in the case of a protracted standoff, road projects would feel the pinch more acutely than other areas of the state budget. That’s because road projects in the last budget relied heavily on borrowing — a one-time measure that, unlike regular spending, doesn’t carry over into the new budget cycle.

How long would the standoff have to continue before road projects would be affected? The Wisconsin Department of Transportation hasn’t said.

But it’s clear something would have to give eventually. The state’s highway improvement program would see a funding reduction of nearly $900 million over the next two years if no new budget were enacted, according to figures provided by the state’s nonpartisan Legislative Fiscal Bureau.

Assembly Speaker Robin Vos, R-Rochester, told reporters last week that this scenario, described as a “base” budget for transportation, could be an option if Walker and lawmakers can’t agree on a new budget.

Impact on roads

The major highway development program, which funds large highway expansions, would see a 45 percent funding cut in the next two years, from $641 million to $352 million, if no new budget is enacted.

Two such projects currently under construction are in Dane County: the Interstate 39-90 expansion from the Madison area to the Illinois state line and the Verona Road expansion from Raymond Road to McKee Road, also called Highway PD. Others include expansions of Highway 15 in Outagamie County and Highway 10/Highway 441 in Winnebago, Outagamie and Calumet counties.

The southeast Wisconsin freeway megaprojects program, which funds the reconstruction and expansion of Milwaukee’s Zoo Interchange and of Interstate 94 south of Milwaukee, would take an even bigger hit with no new budget. Its funding would decline by nearly 93 percent, from about $415 million in the last budget to just $30 million in the new one.

Walker, speaking about these scenarios last month, said it would be up to DOT officials to decide which projects were affected, and how.

DOT officials didn’t address a State Journal inquiry about what it would do in this circumstance. DOT spokesman Patty Mayers acknowledged that “it is safe to say that this scenario is creating a high level of uncertainty within specific programs.”

Schools play it cool

Most school districts in Wisconsin are working on finalizing their budgets for the upcoming school year — which includes setting how many teachers and other staff members they can pay for in the 2017-18 school year.

Department of Public Instruction spokesman Tom McCarthy said because districts aren’t facing a cut in state funding it’s not immediately significant. In other words, school districts will likely end up with more money to spend instead of less, eliminating the prospect of laying off teachers after the school year begins.

Not knowing exact aid levels on July 1 isn’t that big of a deal for districts unless budget deliberations are expected to extend beyond August, he said. School districts often settle their final spending plan after July 1 and don’t receive their first payment from the state until the school year is under way.

Nov. 1 target date

“Things start to get serious in terms of a budget not being in place the closer you get to Nov. 1,” McCarthy said.

The Madison School District in its preliminary budget includes a projected state funding level that nearly matches DPI’s mandatory July 1 preliminary estimate, released Friday, and this year included no change in state funding levels from what districts are currently getting because the budget has not yet passed.

“If things come out far from what’s in our preliminary budget, we would possibly have to come back and make changes, or it’s possible that our overall levy would change,” said Rachel Strauch-Nelson, spokeswoman for the Madison School District. She also said a referendum the district passed recently also gives the district “a little more ability to plan than we would otherwise have with all of the uncertainty at the state level.”

But lawmakers also have indicated they plan to include in the 2017-19 state spending plan an increase in how much money some school districts can take in through property taxes and state funding.

The boost in revenue is designated for districts limited in how much revenue they can receive at a level that is lower than the state average.

Those districts may be more interested in seeing a budget pass sooner rather than later, McCarthy indicated.

Greg Gaarder, business manager for the Tomah School District, which has a low revenue limit, said even if lawmakers raise their limits on how much they can raise in property taxes, he plans to write a budget that keeps in mind what is palatable to taxpayers regardless of what the Legislature allows.

“They can give us the authority to increase our levy by $10 million and that’s all fine and dandy, but I’m not sure our community will think that’s all fine and dandy,” Gaarder said.

Budget history

Under one-party control of state government by both Democrats and Republicans, the state budget was completed by July 1 in three of the past four budgets.

In 2015, Walker signed the budget July 12 and it was published the next day after a protracted debate over transportation, the prevailing wage and funding for a new Milwaukee Bucks arena, which was taken up in a separate bill.

In the 20 previous budgets, nine were completed sometime in July, including two by July 1, three were completed in June, four were completed in August and four wrapped up in October, November or December.

Budget debates that extended for months after the deadline were usually the result of different parties controlling the Assembly and Senate.

What’s unusual about the budget stalemates of the past two cycles is that Republicans have controlled both chambers and the governor’s office.

Mark Graul, a Republican political strategist, said the budget impasse will be a blip on the public’s radar by the time elections roll around next year, “assuming it doesn’t drag out for months upon months.”

“It certainly doesn’t help anybody if this is a protracted situation,” Graul said, adding that the point at which it becomes problematic would be Labor Day.

“If kids are going back to school and school districts are trying to do their budgets next fall, then it starts to become much more problematic.”

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Matthew DeFour covers state government and politics for the Wisconsin State Journal.

Mark Sommerhauser covers state government and politics for the Wisconsin State Journal.

Molly Beck covers politics and state government for the Wisconsin State Journal.