Budget deal would put $1.2 billion into education, child care, cut taxes $1.5 billion

Dem Gov. Tony Evers and legislative leaders announced they have reached an agreement to pump an additional $1.2 billion into K-12 education, child care and the UW System.

The deal also includes a $1.5 billion tax cut package, adding two of the guv’s priorities to what the GOP-controlled Joint Finance Committee had already approved.

Evers hailed the deal as a “pro-kid budget that’s a win for Wisconsin’s kids, families, and our future.” 

Meanwhile, GOP legislative leaders touted the tax cuts in the deal along with adding changes to the Universities of Wisconsin such as new requirements for increased teaching loads in exchange for the $256 million in additional state aid the system would receive.

And Senate Minority Leader Dianne Hesselbein, D-Middleton, offered her praise as well. Her caucus is considered key in getting a budget through the state Senate, where Republicans have an 18-15 majority. Several GOP members have already publicly expressed reservations about passing a budget negotiated with Evers.

The biggest piece of the package is a boost of more than $500 million to special education funding compared to current law.

The GOP-controlled Joint Finance Committee had earlier approved taking the reimbursement rate to 37.5% in the second year of the budget, up from the current level of 32.1%. The committee also approved going to 90% to reimburse districts for high costs of special education students, those who incur expenses of $30,000 or more in a year. 

The deal would take the reimbursement rate to 45% by the second year of the budget while keeping the committee’s move on high-cost kids.

Evers had earlier threatened to veto the budget unless GOP lawmakers included a commitment to address childcare costs, and the deal calls for $331.6 million in new funding on that front. 

That includes $110 million in direct payments to child care providers to help cover costs as the state winds down the Child Care Counts program.

Evers had used federal COVID-19 funds to cover those subsidy payments through Child Care Counts. The deal calls for using $110 million from the interest off the federal COVID-19 money to cover the new subsidy program.

The childcare portion also includes:

• $123 million to boost a state child care subsidy program for the working poor. The increase would help ensure families that qualify receive payments large enough to afford 75% of the available child care slots in their area.
• $66 million for a new “Get Kids Ready” initiative that would provide payments to child care providers that are serving 4-year-olds and participate in a curriculum designed to get them ready for school.
• $28.6 million to increase reimbursement rates for those serving toddlers and infants.

The deal also includes policy changes Republicans had proposed such as allowing large family care centers to serve up to 12 kids and lowering to 16 the minimum age for assistant child care teachers. They now must be 18 or 17, depending on the qualifications they meet.

“This compromise will provide meaningful tax relief for retirees and the middle class, stabilize the child care system without making pandemic-era subsidies permanent, and strengthen our schools by reimbursing special education services at a higher rate,” said Senate Majority Leader Devin LeMahieu, R-Oostburg, and Senate Finance Co-chair Howard Marklein, R-Spring Green.

GOP lawmakers had been considering an $87 million cut to UW. Instead, the system would get a $256 million increase in state aid.

The package also calls for $840 million for capital projects across campuses. That includes $194 million for a science center at La Crosse, $189 million for a health sciences building in Milwaukee and $137 million for a new library on the Oshkosh campus.

As part of the package, UW employees would see $94 million in raises over the two-year budget.

In exchange, instructional staff would be required to increase their teaching loads or use outside resources to buy out their time, and it would be easier to transfer general education credits from UW colleges to other institutions, according to Speaker Robin Vos, R-Rochester, and Assembly Finance Co-chair Mark Born, R-Beaver Dam.

“This budget delivers on our two biggest priorities; tax relief for Wisconsin and reforms to make government more accountable,” Vos said. “This deal brings those investments and reforms together and creates a Wisconsin that works for everyone.”

The deal also calls for $1 million for UW-Green Bay’s Rising Phoenix Early College High School Program that enables high schoolers to earn college credits. Like with the child care subsidy payments, that cost also would be covered by interest off federal COVID-19 funds.

The guv and GOP lawmakers have been at odds over those interest earnings, estimated to be $172 million. 

Republicans have argued Evers was obligated to deposit that money into the state’s general fund, which the guv has disputed. Earlier this year, Republicans pushed a bill seeking to force the guv to transfer the money and suggested legal action could be necessary to resolve the dispute.

The deal includes adding Evers’ call to exempt residential utilities from the sales tax.

That’s expected to reduce state revenues by $178 million over the biennium. 

The guv also called in his budget for a film tax credit, while GOP lawmakers have been advancing standalone legislation on the proposal. The deal includes a new credit capped at $5 million annually and patterned after the bill now before the Legislature.

That is in addition to the $1.3 billion tax cut package the Joint Finance Committee has already approved. That component seeks to increase the amount of income covered by the state’s second-lowest tax bracket while creating a new exemption for retirement income.

The agreement between the guv and lawmakers also calls for $200 million in revenue increases for transportation.

During a briefing with reporters yesterday, the guv’s office said details of the increase were still being worked out.

Other provisions in the deal include:

• Taking the state’s assessment on hospital patient revenues to 6%. That assessment is now 1.8%, and Evers had proposed in the budget upping it to 5.4% with the backing of the state’s hospitals. The state uses the assessment to generate additional federal matching funds, and the Evers administration estimates hospitals would see more than $1 billion more under the proposal. The state would retain 30% of the funds, which would go into Wisconsin’s Medicaid trust fund. Republicans at the national level had proposed a crackdown on that assessment as part of the reconciliation bill. The two houses have had different language on the assessment.
• Implementing a fee schedule for the state’s workers compensation program. The guv’s office said the proposal mirrors changes proposed in an Assembly bill last session that sought to impose maximum fees that a health care provider may charge when treating an injured employee through the worker’s compensation system. The Wisconsin Hospital Association and the Wisconsin Medical Society opposed that bill last session, as did other providers, while business groups such as Wisconsin Manufacturers & Commerce had pushed for it.
• A general wage adjustment for state employees, including those at UW, of 3% in the first year of the budget and 2% in the second.

The guv’s office provided an overview of the deal yesterday with representatives from the legislative caucuses other than Assembly Dems present.

Afterward, Hesselbein said the participation of Senate Dems in the discussions had made the agreement better.

“Through tough negotiations, compromise and spirited discussion, we now have an agreement that, while not perfect and not the budget Democrats will craft when we are in the majority, addresses the priorities that Wisconsinites have clearly addressed: fund our public schools, make child care more affordable, and invest in the UW System,” she said.

The guv’s office said as part of the deal, Evers wouldn’t veto anything addressed by the agreement. But he was free to use that authority on other areas of the budget.

See highlights of the deal in the guv’s statement.