The fiscal news keeps getting worse for Wisconsin. Revised estimates for this fiscal year, which ends June 30, 2003, shows a fund imbalance of $320 million. The problem with the current deficit will in all likelihood be addressed as part of the 2003-05 biennial budget, which will be introduced by Governor-Elect Doyle early next year. New revenue projections for fiscal years 2004 and 2005 led DOA to revise its estimate of the 2003-05 deficit to $2.5 billion, while Doyle estimates the upcoming deficit to be over $4 billion. (See article, below, for more details)
 
We continue to review agency budget requests. Generally, agencies followed their directive not to raise taxes or fees. Some agencies, however, such as DOT on vehicle registration fee increases, were sent back to the drafting room to eliminate tax proposals.
 
In addition to the fiscal implications of the agency requests, we are looking for significant policy initiatives. DNR, for example, has requested additional enforcement authorities and recommended numerous revisions to its brownfields programs. So far, we have uploaded to our Web site our analysis of the following three agency requests:

Department of Natural Resources --- http://www.hamilton-consulting.com/updates/dnr_fass.html.
Department of Transportation --- http://www.hamilton-consulting.com/updates/dot_boyer.html.
Department of Health and Family Services --- http://www.hamilton-consulting.com/updates/dfhs_osborne.html.

Please feel free to contact us if you have any questions on these developments.
 

Wisconsin Politics
Senate Confirmation Backlog Empowers Doyle
In an almost unparalleled manner, Governor-Elect Doyle has a powerful tool to immediately shape Wisconsin government. Of the 406 appointments presented to the Senate for confirmation during the 2001-02 Session, 210 remain unconfirmed.
 
Unlike bills, nominations generally carry over to the next legislative session, which convenes on Jan. 6, 2003. Doyle, however, could recall many of the pending nominations, creating the real possibility his nominees will immediately have substantial or majority control of important boards.
 
Former Senate Majority Leader Chvala can take credit for the unexpected appointment windfall. Many of the nominations breezed through committees with unanimous approval recommendations only to stall as they waited for Chvala to schedule Senate floor action. For example, four nominees for the Board of Agriculture, Trade and Consumer Protection were available for floor scheduling prior to the March 14, 2002 adjournment. None were scheduled. (Two others were nominated but were not available for floor scheduling.) Two nominations to the UW Board of Regents saw a similar fate. The delayed nominations combined with pending expiration of terms create a real potential for sweeping turnover at the various boards.
 
The Natural Resources Board is another case in point. Nominees Herbert Behnke, Dan Poulson, and Cathy Stepp were all available for Senate action in early 2001. None were acted upon. (Cathy Stepp has since been elected to the Senate.) In addition, existing board members Jim Tiefenthaler and Steve Willett’s terms expire May 1, 2003. Depending on how the Senate holdovers are treated, Doyle is in a position to appoint five of the seven Board members by as early as May 1 of next year.
 
New Senate Majority Leader Mary Panzer (R-West Bend) will certainly have an important role in the nomination process. 
 
Recount Continues in the 9th Senate District
The lead in the 9th Senate District changed hands briefly this week as canvassers conducting the recount plugged away at the ballots. Recall that Joe Leibham (R-Sheboygan) began with a 20-vote lead; that lead was whittled down, eventually giving the lead to Sen. Jim Baumgart (D-Sheboygan) for a day. On Wednesday, Baumgart was ahead in the recount by four votes. That lead has again changed hands as Leibham was reported to be up by nine votes on Thursday. Changes are likely to occur again as only Fond du Lac and Calumet Counties have completed their recount.
 
Representatives from both sides have been raising objections to certain ballots and recount procedures have hampered the recount process, which is expected to take up to two weeks. Last week, representatives for Sen.-Elect Leibham requested a temporary restraining order to stop the recount based on their allegation different counties were using different methods of counting ballots. That request was denied by a federal judge, and a hearing on Monday found that even though the counties were using different methods of counting ballots, the accuracy of the recount was not jeopardized.
 
 
Ethics Board Concludes Investigation
The State Ethics Board has completed its investigation into the role of elected officials and legislative staff in the challenge of Sen. Gary George’s gubernatorial nomination papers. The investigation centered on whether legislative employees were using state time or resources on the challenge. In its findings, the Ethics Board concluded that all state employees who worked on the challenge did so on their own time, with the exception of two – Joel Gratz and George Twigg. Gratz and Twigg claimed vacation time after the fact and were fined $300 and $100, respectively.
 
The Ethics Board also adopted a zero tolerance policy to rules the Legislature adopted last session that require state employees to clearly account for their work time. Employees who wish to work on campaigns may do so but only if they declare they will take vacation time before they take vacation to work on campaign activities.
 
 
Two Vying to Become Senate Minority Leader
The Senate Democrats, the only caucus that has not held leadership elections since the November elections, will likely wait until the recount in the 9th Senate District is complete. However, Sen. Jon Erpenbach (D-Middleton) and Sen. Gary George (D-Milwaukee) have emerged as frontrunners for the minority leader job. Sen. Russ Decker (D-Schofield), the current co-majority leader, wants to remain on the Joint Finance Committee and has said he will not seek the minority leader post.
 
 
Doyle Names Additional Transition Team Members
Gov.-elect Jim Doyle this week named more members to his transition team. Michael Morgan has been tapped to replace Susan Goodwin as the Transition Director. Goodwin was recently named incoming Chief of Staff in the executive office. Others appointed to the transition team include Darcy Luoma, Deputy Transition Director, and Kristine Martinsek, Inaugural Director.
 
Doyle’s transition office, which will be open from 8:00 a.m. to 5:00 p.m. Monday through Friday, is located at 149 E. Wilson Street, Madison. The phone number is (608) 261-0611, and the general e-mail address is transition@doa.state.wi.us.
 
Policy Developments
Bad Economic News Worsens Budget Woes
New figures released this week by the McCallum Administration show a worsening budget deficit, including a deficit projection for this fiscal year. According to Department of Revenue (DOR) Secretary Chandler’s Nov. 20 Press Release, a fourth quarter slowdown in the economic recovery is delaying previously anticipated revenue growth. They now expect that the January Legislative Fiscal Bureau general purpose (GPR) tax revenue projections will be missed by $304 million for the current two-year budget cycle that concludes June 30, 2003. The $304 million shortfall includes an actual $189.5 million shortfall for FY 2002 and the new $114.6 million projected hole for FY 3003. Based on these general purpose tax estimates, a deficit of $185.5 million is expected on June 30, 2003. This deficit, combined with the statutory balance requirement of $134.3 million, leaves the state’s general fund net balance at minus $320 million for the current biennium.
 
A Nov. 20 letter by DOA Sec. George Lightbourn to Gov. McCallum, Governor-Elect Doyle, and the Legislature puts the current $320 million imbalance in political perspective. He notes that: “It is anticipated that Governor-Elect Doyle and the new Legislature will address the projected fiscal year 2002-03 imbalance and any further spending pressures in the upcoming legislative session.”  Newly elected legislative leaders, John Gard (Assembly Speaker) and Mary Panzer (Senate Majority Leader), announced that same day that their continued commitment to work with Doyle is predicated on a fix using spending cuts rather that tax increases.
 
The current fiscal year’s deficit only adds to the woes of fixing the more daunting deficit projected for the next biennium. DOR’s projections for the upcoming 2003-05 Biennium are more optimistic, however. Their Nov. 20 Quarterly Economic Outlook concludes that the resumption of business investment will help propel the economy in the coming biennium, resulting in revenue growths of 5.3 and 5.8 percent for FY 2004 and FY 2005, respectively. Using these revised revenue growth projections; DOA estimates a general fund deficit of at least $2.5 billion on June 30, 2005.
 
Governor-Elect Doyle is not so hopeful over the prospects for the upcoming budget. Using zero growth projections, he states in his Nov. 20 Press Release that the actual deficit will be $4.3 billion. Critics suggest that his projections are overly pessimistic, possibly setting up tax or fee increase proposals. In any event, Doyle maintains his no-tax-increase pledge despite the increasingly difficult prospect of balancing the budget on spending cuts alone.
 
Formulation of the Budget Begins with Agency Requests
Coinciding with the new revenue and budget deficit projections was DOA’s Nov. 20 Report (169-pages) that outlines agency budget requests and revenue estimates. In the report, total requested expenditures equal $51.7 billion for the upcoming biennium, which amounts to a 9.3 percent increase over the adjusted base (FY 2003) doubled. Generally, agencies kept the line on tax and fee increases. But the close to double digit increase in overall spending will certainly exacerbate efforts to formulate a balanced budget.
 
Beyond the fiscal implication of the agency requests, we are closely reviewing the agency proposals for noteworthy policy initiatives. So far, we have uploaded to our Web site our analysis of the following three agency requests:

Department of Natural Resources --- http://www.hamilton-consulting.com/updates/dnr_fass.html.
Department of Transportation --- http://www.hamilton-consulting.com/updates/dot_boyer.html.
Department of Health and Family Services --- http://www.hamilton-consulting.com/updates/dfhs_osborne.html.
 
Federal Developments
Federal Terrorist Bill Advances
The Senate voted 86-11 late Tuesday to approve a multi-billion-dollar reinsurance "backstop," essentially capping the liability of the property and casualty insurance industry in the event of future terrorist attacks. The bill, approved by the Senate, which President Bush already has agreed to sign, would have the government pay up to $90 billion to cover terror-related claims in the first year of the three-year reinsurance program.
New Rules for Coal-Fired Plants
The Bush administration will release new rules today to give older coal-fired power plants more leeway to avoid costly maintenance to reduce emissions.