Wednesday, August 17, 2016

Delayed UW construction, maintenance costing taxpayers more later on

On the eve of the UW System’s finalizing their “Ask” of the Governor’s Office for the next 2 years, State Rep. Gordon Hintz took a look at the documents, and sent out a press release noting his concerns. In typical Hintz style, the press release has a graphic with it, one of a collapsing house of cards, as Hintz said a past strategy of Governor Walker and WisGOP not paying for building projects and repairs will cost Wisconsinites more in the long run.
This week, University of Wisconsin System President Ray Cross released the UW System’s complete budget request for the upcoming 2017-19 budget. While there has been plenty of attention on Republicans’ decision to cut Wisconsin’s universities by $565 million since taking control of state government, another crisis is looming: the Governor’s decision to all but halt the UW’s maintenance and infrastructure program. A Legislative Fiscal Bureau memo released today by Rep. Gordon Hintz (D-Oshkosh) shows that 7 capital budget items ignored by the Governor in the 2015-17 budget have now increased in cost by nearly $30 million.

“Budgeting is all about investing in priorities. Unfortunately, Republicans have refused to make the hard decisions when it comes to investing in our infrastructure,” said Rep. Hintz. “In order to put our roads on the credit card, Gov. Walker and Republicans put a halt on our whole capital budget. However, as this memo shows those needs don’t go away. Higher education in Wisconsin is already suffering historic cuts in Wisconsin, and delaying projects only compounds the cost.”

In addition to additional costs of construction, the Governor has also failed to fund key maintenance projects to existing buildings on UW campuses, known as “all agency” funding. For the first time, our universities had to specifically request this money in their budget just to make repairs. A separate memo prepared by LFB shows the cost of deferring these needs is expected to cost an additional $13.5 million in future budgets. These projects include repairs such as: ‘elevator replacements and fire alarm system upgrades; modifications for handicapped accessibility; replacement of emergency generators and worn-out heating; ventilating and cooling systems; major repairs to roofs, utility structures, walls and loading docks’.

To go further into this, let’s back up and understand the 2 parts to the UW’s budget request.

1. Operating budget- these are everyday expenses which are paid off as they happen. Keeping the lights on, paying faculty and staff, etc. It also pays for items such as debt that was taken on for projects that were paid for with General Tax dollars. This last item goes to what Rep. Hintz was complaining about, because an increasing part of the state funds that go into the UW’s budget is being used to pay off debt instead of actually go into the classroom and to pay the instructors and researchers in the classroom, as is pointed out in Page 3 of the UW’s 2016-17 Operating budget.
2016-17 GPR funding for the UW System, $1,048,705,300, is lower than it was in 2007-08 when the UW budgeted $1,128,380,267. When 2016-17 GPR debt service is removed, state funding of $832.9 million is lower than it was in 1998-99 ($842.1 million). Debt Service increased significantly since 2005-06, decreased in 2011-12 and then grew even more steeply afterwards, largely due to refinancing to support other state costs.
Tomorrow, the UW Board of Regents will consider passing ahead a request to the Governor’s Office to give it an additional $42.5 million for the 2017-19 biennium, much of which is earmarked toward specific programs, such as improving student advising and increasing the pool of healthcare professionals in rural and underserved areas of Wisconsin.

Now let’s go into the main part of Rep. Hintz’s critique- the Capital Budget.

2. Capital Budget- For both the UW and other forms of government, these are funds for specific projects, usually buildings and other forms of infrastructure (streets are a main part of a city’s Capital Budget, for example). Many of these items are designated into specific projects, and are often borrowed for, with the funds being paid back over time.

You can see where the two sides can work together. A new Capital item might change Operating Expenses, either through the debt required to pay back the Capital item (much like how your checking account pays back your home loan), or through lower expenses via the better usage of space and other efficiency gains. And one could argue that the large one-budget drop in Capital items at the state level can reduce debt service for future years at the UW, allowing for more funds to be freed up.

But the obvious trade-off is that the cost for needed repairs and buildings may be higher later on, leaving the double-whammy of worsening facilities now and needing to spend more money to take care of the same problem.

And that’s where Rep. Hintz’s request to the Legislative Fiscal Bureau comes in. Here's an example of the LFB's analysis regarding the major projects that were put off from 2 years ago.
The table below shows the seven capital projects that were included in both the UW System's capital budget request for 2015-17 and its proposed capital budget for 2017-19. As shown in the table, the Regents requested a total of $227.6 million in funding for the seven projects in their 2015-17 capital request. As proposed, the UW System's 201-19 capital budget request would include $257.3 million for these projects, or $29.7 million more than was requested for the UW System's 2015-17 budget request.
Granted, many of these projects seem to be items like athletics facilities and dorms, so those facilities may be likely to be paid off by higher student fees as opposed to taxpayers dollars, but there is also a second memo that mentions another $13.5 million in added cost for regular maintenance that was not budgeted for last time, half of which will come out of general tax dollars.

Just like with roads and other services, the Walker Administration's short-term budget stunts on refusing to pay for building upkeep and construction on the UW Campus is leading to bigger costs in the long run. And us in Wisconsin will be paying for the cost of those delays well after Walker and much of this WisGOP wrecking crew are out of office.

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