2011 Wisconsin Act 10 - Wisconsin Budget

The 2011 Wisconsin Act 10, also known as the Wisconsin Budget Repair Bill, was legislation proposed by Republican Governor Scott Walker and passed by the Wisconsin Legislature to address a projected $3.6 billion budget deficit. The legislation primarily impacted the following areas: collective bargaining, compensation, retirement, health insurance, and sick leave of public sector employees. In response, unions and other groups organized protests inside and around the state capitol. The bill was passed into law and became effective as of June 29, 2011. Public employees exempted from the changes to the collective bargaining law include firefighters and most law enforcement workers. The b ill was ruled to be constitutional by the Wisconsin Supreme Court in July 2014, after three years of litigation.

Legislation summary

• Pension contributions: The bill would require employees of Wisconsin Retirement System (WRS) employers, and the City and County of Milwaukee contribute 50% of the annual pension payment. The payment amount for WRS employees is estimated to be 5.8% of salary in 2011. Currently, state, school district and municipal employees who are members of the WRS generally pay little or nothing toward their pensions.
• Health insurance contributions: The bill will require state employees pay at least 12.6% of the average cost of annual premiums. In addition, the bill would require changes to the plan design necessary to reduce current premiums by 5%. Local employers participating in the Public Employers Group Health insurance would be prohibited from paying more than 88% of the lowest cost plan. The bill would also authorize the Department of Employee Trust Funds to use $28 million of excess balances in reserve accounts for health insurance and pharmacy benefits to reduce health insurance premium costs. Currently, state employees on average pay approximately 6% of annual health insurance premiums.
• Health insurance cost containment strategies: The bill directs the Department of Employee Trust Funds and the Group Insurance Board to implement health risk assessments and similar programs aimed at participant wellness, collect certain data related to assessing health care provider quality and effectiveness, and verify the status of dependents participating in the state health insurance program. In addition, it modifies the membership of the Group Insurance Board to require that the representative of the Attorney General be an attorney to ensure the board has access to legal advice among its membership.
• Pension changes for elected officials and appointees: The bill modifies the pension calculation for elected officials and appointees to be the same as general occupation employees and teachers. Current law requires these positions to pay more and receive a different multiplier for pension calculation than general classification employees. Under the state constitution, this change will be effective for elected officials at the beginning of their next term of office.
• Modifications to Wisconsin Retirement System and state health insurance plans: The bill directs the Department of Administration, Office of State Employment Relations and Department of Employee Trust Funds to study and report on possible changes to the Wisconsin Retirement System, including defined contribution plans and longer vesting periods. The three agencies must also study and report on changes to the current state health insurance plans, including health insurance purchasing exchanges, larger purchasing pools, and high-deductible insurance options.
• General fund impact: Authorizes the Department of Administration Secretary to lapse or transfer from GPR and PR appropriations (excluding PR appropriations to the University of Wisconsin) to the general fund estimated savings of approximately $30 million from implementing these provisions for state employees in the current fiscal year (2010â€"11). Segregated funds would retain any savings from these measures.
• Collective Bargaining: The bill would make various changes to limit collective bargaining for most public employees to wages. Total wage increases could not exceed a cap based on the consumer price index (CPI) unless approved by referendum. Contracts would be limited to one year and wages would be frozen until the new contract is settled. Collective bargaining units are required to take annual votes to maintain certification as a union. Employers would be prohibited from collecting union dues and members of collective bargaining units would not be required to pay dues. These changes take effect upon the expiration of existing contracts. Local law enforcement and fire employees, and state troopers and inspectors would be exempt from these changes.
• Career executive transfers: The bill would allow state employees in the career executive positions to be reassigned between agencies upon agreement of agency heads.
• Limited term employees (LTE's): The bill would prohibit LTE's from being eligible for health insurance or participation in the Wisconsin Retirement System.
• State employee absences and other work actions: If the Governor has declared a state of emergency, the bill authorizes appointing authorities to terminate any employees that are absent for three days without approval of the employer or any employees that participate in an organized action to stop or slow work.
• Quality Health Care Authority: The bill repeals the authority of home health care workers under the Medicaid program to collectively bargain.
• Child care labor relations: The bill repeals the authority of family child care workers to collectively bargain with the State.
• University of Wisconsin Hospitals and Clinics (UWHC) Board and Authority: The bill repeals collective bargaining for UWHC employees. State positions currently employed by the UWHC Board are eliminated and the incumbents are transferred to the UWHC Authority.
• University of Wisconsin faculty and academic staff: The bill repeals the authority of UW faculty and academic staff to collectively bargain.
• Debt restructuring: The bill authorizes the restructuring of principal payments in fiscal year 2010-11 on the state's general obligation bonds. These principal repayments will be paid in future years. Since the state is required to make debt service payments by March 15, the bill must be enacted by February 25 to allow time to sell the refinancing bonds. This provision will reduce debt service costs by $165 million in fiscal year 2010-11. This savings will help address oneâ€'time costs to comply with the Injured Patients and Families Compensation Fund state Supreme Court decision and make payments under the Minnesotaâ€'Wisconsin tax reciprocity program.
• Medicaid deficit: Medicaid costs are expected to exceed current GPR appropriations by $153 million. The bill would increase the Medicaid GPR appropriation to address this shortfall.
• Authorize DHS to restructure program notwithstanding current law: In order to reduce the growth in Medicaid costs, the bill authorizes the Department of Health Services to make program changes notwithstanding limits in state law related to specific program provisions. The department is expected to develop new approaches on program benefits, eligibility determination and provider cost-effectiveness. The proposed changes will require passive approval of the Joint Committee on Finance before implementation.
• Technical correction: Act 28 included language that required unused GPR expenditure authority in the Medicaid GPR appropriation at the end of the biennium to be carried over to the subsequent biennium. The bill repeals this provision in order to ensure unspent funds in Medicaid lapse to the general fund balance.
• Aging and Disability Resource Centers (ADRC): The bill transfers an estimated $3 million in savings in this appropriation to Medicaid. ADRC's are the intake and assessment element of the state's Family Care program.
• Corrections: The bill provides $22 million GPR to address shortfalls in the Department of Corrections adult institutions appropriation. These shortfalls are due to health care costs, overtime, and reductions in salary and fringe benefit budgets under Act 28.
• Temporary Assistance to Needy Families (TANF) Funding for Earned Income Tax Credit (EITC): The bill allocates $37 million of excess TANF revenues to increase TANF funding for the EITC from $6.6 million to $43.6 million in fiscal year 2010-11. By increasing TANF funding, GPR funding for the EITC is reduced by a commensurate amount.
• Income Augmentation Revenues: Allows the Department of Children and Families and Department of Health Services to utilize $6.5 million of already identified income augmentation revenues to meet fiscal year 2010-11 lapse requirements.
• Act 28 Required Lapses by DOA Secretary: Under Act 28, the Department of Administration Secretary is required to lapse or transfer a total of $680 million in 2009-11 from appropriations made to executive branch agencies to the general fund. The bill would reduce this amount by $79 million to ensure the lapses can be met in the next five months as this was ineffectively addressed by the previous administration.
• Lapse of Funding from Joint Committee on Finance (JCF) Appropriation: The JCF appropriation includes $4.5 million related to estimated fiscal year 2010-11 implementation costs of 2009 Wisconsin Act 100 (operating while intoxicated enforcement changes). This funding is not anticipated to be needed in fiscal year 2010-11 and the bill lapses these amounts to the general fund balance.
• Sale of State Heating Plants: The bill authorizes the Department of Administration to sell state heating plants. The proceeds from any sale, net of remaining debt service, would be deposited in the budget stabilization fund.
• Shift Key Cabinet Agency Positions to Unclassified Status: The bill creates unclassified positions for chief legal counsel, public information officer and legislative liaison activities in cabinet agencies. An equivalent number of classified positions are deleted to offset the new unclassified positions. These activities are critical to each cabinet agency's overall mission and should have direct accountability to the agency head.
• University of Wisconsinâ€"Madison flagship status: The bill separates the flagship University of Wisconsinâ€"Madison campus from the rest of the University of Wisconsin System.

Legislative history

On February 14, 2011, Republican Governor Scott Walker introduced the legislation to the state legislature. Initially, legislative Democrats and union leaders offered to accept the increased cost of benefits but not the limited bargaining rights, which was subsequently rejected by Walker. A couple days later, as a tactic to prevent passage of the bill, all 14 Democratic members of the Wisconsin State Senate fled Wisconsin and traveled to Illinois in order to delay a vote on the bill. With only 19 Republican members, the Senate would not have the 20 Senators required for a quorum in order to vote on the bill, since it was a fiscal bill.

On February 20, all 14 Senate Democrats announced they would indefinitely remain in Illinois. Walker and the State Senate's Republicans tried to get the absentee Democrats to return. In late February, the Governor threatened to lay off state workers as the deadline to restructure the state's debt approached, however the deadline passed without incident. State Senate Majority Leader, Scott Fitzgerald, stripped Democratic staffers of their access to the copy machines if their representatives were absent without leave for two days or more, forcing staffers for the 14 legislators on the run to have to pay out of pocket for printing and photocopying. Senators were not allowed to receive their salary via direct deposit if they are absent for two days or more, which would have forced them to collect their pay checks in person, which none could do until they all returned from Illinois after the legislation was signed.

In early March, Senate Republicans voted to fine absent members $100 per day of absence. Wisconsin Senate Republicans ordered the arrest of those senators who had fled the state for "contempt and disorderly behavior", authorizing the Senate Sergeant-at-Arms to seek help from law enforcement officers and to use force to return the senators to the Capitol. However, Wisconsin State Patrol officers were unable to cross state lines into Illinois.

Assembly Republicans began procedures to move the bill to a vote on February 22. Hundreds of constituents had signed up to give testimony while Democrats submitted dozens of amendments and conducted speeches, all which delayed the vote. On February 25, following sixty hours of debate, the final amendments had been defeated and the Republican leadership of the Wisconsin State Assembly cut off debate as well as the public hearing and moved to pass the budget repair bill. The vote was 51 in favor and 17 opposed, with 28 representatives not voting.

In March, Walker offered a compromise to keep certain collective bargaining rights in place for state workers. Workers would be able to continue bargaining over their salaries with no limit as well as allowing collective bargaining to stay in place on mandatory overtime, performance bonuses, hazardous duty pay and classroom size for teachers. The Democratic Senators rejected the proposals as an inadequate compromise. The day after Democrats rejected Walker's compromise, Republicans held a joint Assembly-Senate committee meeting to discuss quorum requirements. The Senate requires a quorum to take up any measures that spend money, however by removing parts of the bill related to money, they had discovered a way to bypass the chamber's missing Democrats. After the meeting, the Senate passed the legislation 18-1. The next day, the Wisconsin Assembly passed the collective bargaining bill with a vote of 53â€"42.

On March 11, Governor Walker signed the bill and put out a statement rescinding layoff notices for 1,500 public workers. The next day, the 14 absentee Democratic senators returned.

Legal challenges

In response, Dane County Executive Kathleen Falk filed suit against the state regarding the bill, on grounds that it was unconstitutionally passed because the budget repair bill contained fiscal provisions. Judge Amy Smith recused herself from hearing the case, which was instead heard by Judge Maryann Sumi. A second lawsuit was filed against the state on similar grounds on March 16 by Dane County District Attorney Ismael Ozanne.

On March 18, 2011, Judge Sumi issued a stay on the bill because it had been passed without the required 24 hours notice to inform the public of the meeting. Attorney General J. B. Van Hollen then announced he was appealing the ruling. Despite this, on March 25, the Legislative Reference Bureau bypassed the Secretary of State's office and published the collective bargaining law, with Republicans declaring it to be the law, which they would enforce.

On March 29, Judge Sumi reiterated her judgment that the bill had not become law regardless of the entity which published it, and public officials who attempted to enforce it risked legal sanctions. On June 14, the Wisconsin Supreme Court overruled Sumi, declaring that the law was passed legally and that Sumi had overstepped her jurisdiction.

On March 30, 2012, a federal court struck down parts of the collective bargaining legislation, ruling that the state cannot prevent public employee unions from automatically collecting dues and cannot require that they recertify annually. However, Wisconsin Attorney General Van Hollen sued and the ruling was overturned by a federal court of appeals on January 18, 2013.

On September 14, 2012, Dane County Circuit Judge Juan Colas, a Democrat, ruled that a section of the budget repair bill was unconstitutional, leaving the law in force for state workers, but not for city, county and school workers. Governor Walker promised to appeal the decision. Under the repair bill, state and local governments were prohibited from bargaining with their workers over anything besides a cost-of-living salary adjustment, including health benefits, pensions, workplace safety and other work rules. The ruling restored local unions' ability to reach so-called "fair share deals" that require all workers within a given bargaining unit to pay union dues, even if they choose not to join.

The ruling appeared to strike down for local workers a requirement that they pay half of the contribution to their pensions and, for workers within the state of Wisconsin health insurance system, pay at least 12% of their premiums. Those cost savings had been crucial for local governments and school districts to deal with the more than $1 billion in cuts in state aid over two years that Walker and GOP lawmakers passed last year to close a state budget hole. Governor Walker's appeal (# 2012AP002067) of Judge Colas' ruling in Madison Teachers, Inc. v. Scott Walker was heard by the Supreme Court of the State of Wisconsin on November 11, 2013. Act 10 was upheld by the State Supreme Court on July 31, 2014.

District and municipal savings

In Kaukauna, school officials put in place new policies they estimate will turn a $400,000 deficit into a $1.5 million surplus. In April 2011, the union had offered healthcare and pension concessions as well as a wage freeze, which it projected would save $1.8 million, but the offer was rejected by the school board. "The monetary part of it is not the entire issue", said board President Todd Arnoldussen. "It was in the collective bargaining agreement that we could only negotiate with them", said Arnoldussen referring to the past, when Kaukauna's agreement with the teachers union required the school district to purchase health insurance coverage from WEA Trust â€" a company created by the Wisconsin teachers union. This year, the trust told Kaukauna that it would face a significant increase in premiums. According to the conservative, Virginia-based Washington Examiner, with the collective bargaining agreement gone, the school district is free to shop around for coverag e. Kaukauna can reduce the size of its classes â€" from 31 students to 26 students in high school and from 26 students to 23 students in elementary school. In addition, there will be more teacher time for one-on-one sessions with troubled students. The money saved will be used to hire a few more teachers and institute merit pay.

The city of Milwaukee projects it will save at least $25 million a year and possibly as much as $36 million in 2012 from health care benefit changes due to not having to negotiate with unions. This is offset by about $14 million in cuts in state aid. This contrasts with Mayor Tom Barrett's initial comments in March, after the Walker administration and the nonpartisan Legislative Fiscal Bureau released figures on the extent of the aid cuts in the state budget. Regarding Milwaukee Public Schools, the Thomas B. Fordham Institute completed a study in 2012 of the effect on the school district due to the implementation of Act 10 and found that the school system will save $101.1 million by 2020.

The results have been mixed for school districts that had long-term labor contracts in place, how much they already were charging employees for health insurance, their enrollment trends, their fiscal situation, and local political factors. Act 10 allowed for the possibility for districts to re-open union contracts to take advantage of the tools available in the act if the union membership chose to do so up to three months after the bill was signed into law.

Reductions in state aid

The budget repair law reduced state aid to K-12 school districts by about $900 million over the next two years. 410 of Wisconsin's 424 districts will get about 10 percent less aid than the previous year. The biggest losses in dollar amounts will occur in the Milwaukee, Racine and Green Bay districts; Milwaukee will lose $54.6 million, Racine $13.1 million, and Green Bay $8.8 million. State aid to schools is computed by a complex formula based on property values, student enrollment and other factors. Property-poor districts get more aid than property-rich districts because they have lower property taxes. A provision in the budget repair law restricts the options of what districts can collect in property taxes and other revenue by requiring a referendum to prevent them from trying to replace their losses in state aid without first going to the citizens of the district. In Milwaukee, district officials announced they have eliminated 514 vacant positions and laid off almost 520 employ ees, including 354 teachers, mostly from elementary schools, which will result in larger class sizes. The Milwaukee School Board asked its teachers' union for a side agreement requiring teachers to contribute 5.8% of their pay toward pensions, as the union contract extends through 2013. This concession would have saved about $20 million and 200 jobs, however the union refused to make the concession. The Racine district has saved about $18 million from a wage freeze and larger employee contributions to pensions and health care, but the loss of state aid required the elimination of 125 positions (although a larger than usual number of retirements and resignations, as well as soon-to-be eliminated vacant positions meant the district needed to actually lay off 60 employees) and the closing of all but one swimming pool for the summer.

Green Bay district froze wages and required greater employee contributions to pensions and health care, but the district has stopped filling vacancies and may have to combine elementary grades into single classrooms. Almost 70% of state school districts will be eligible for special adjustment aid, due to the decrease in the state's share of support. The special adjustment aid is intended to provide school districts with 90% of the state general aid from the previous year.

Effect on unions

Public employee union membership dropped significantly after the law passed, with AFSCME reporting a drop from 62,818 in 2011 to 28,745 in February 2012. In some cases, the union members were removed by the union after they declined to have dues collected by the union.

Since teachers' unions were no longer able to automatically deduct dues from teachers' paychecks because of the new budget repair law, unions are using a variety of methods including using a combination of meetings, emails, phone calls and home visits to get teachers signed up for dues collection. Some school districts are primarily signing members up for electronic funds transfers so they can deduct money monthly. The latest IRS filing available shows that The Wisconsin Education Association Council collected about $23.5 million in membership dues in fiscal year 2009 from its approximately 98,000 members.

Most of the membership dues go to pay salaries and benefits. The organization employed 151 people and paid them $14,382,812 which is an average compensation total of $95,250 per employee. This figure includes not only professional staff, but also lost wages paid to union bargaining team members, officers, and delegates to conventions. The Wisconsin Education Association Council (WEAC), announced that it would lay off about 40% of its workforce. The layoffs and budget cuts are based on a projected loss of revenue as a result of the budget repair legislation.

The UW-Madison teaching assistant union, which was at the forefront of the protests against the new budget repair law, voted not to recertify their union in August 2011 in protest over the law's recertification procedures. Union leaders for state and local government workers said they also are leaning toward not recertifying. The Wisconsin Education Association Council (WEAC), the state's largest teachers union, is the only state union to date that has indicated it plans to seek official union status with the state. The Wisconsin Education Association Council (WEAC) announced it would allow local union affiliates to possibly drop certification and that the agency would accept whatever the local unions chose.

These issues will be re-determined after the State's appeal of Judge Colas's decision that part of the repair bill is unconstitutional (see above) has been ruled on by the Supreme Court of the State of Wisconsin, which calendared those appeal hearings for November 11, 2013.

"Double dipping" controversy

According to a report by radio talk show host Mark Belling, Tom Maki, the Vice Chancellor for Business and Finance at University of Wisconsin-Green Bay, retired in March 2011 due to the reforms proposed in the budget repair legislation. In April 2011, the Vice Chancellor was re-hired without a search and screen process. He returned to his previous salary of $131,000. This permits him to collect both his state pension payments and his salary. State Representative Stephen Nass (R-Whitewater), Chairman of the Assembly Colleges and Universities Committee, expressed outrage at the report that the Vice Chancellor is being allowed to "double dip" by retiring and then being re-hired for his position.

Nass announced he would cancel a public hearing on a bill supported by UW-Green Bay that would allow it and two other campuses to adopt a differential tuition system despite the current tuition cap. He has said he wants to determine if any state laws and UW System hiring rules were violated in this arrangement between the Vice Chancellor and Chancellor Thomas Harden as well as a request that the UW System conduct a review of all campuses to determine how many of these arrangements have been authorized since February. State law prohibits agencies from making an arrangement to rehire someone who is planning to retire before that person leaves.

About 1,100 retirees were rehired in 2011. Maki refused to comment and resigned in disgrace from the vice chancellorship in December 2011. In October 2011, it was discovered that another UW-Green Bay administrator (Timothy Sewall) retired in March and returned to his $110,000-a-year position a month later, collecting both his salary and about $44,000 in annual retirement payments.

Other opinions and reactions

One proposal seeks to diminish legislative oversight of the implementation of, and eligibility requirements for, state Medicaid programs. A clause that would have allowed the state to sell up to 37 heating and cooling plants across the state without requiring competitive bids generated controversy. After certain journalists expressed concerns that this provision could be part of a larger plan to sell state assets at bargain prices to business interests controlled by Charles and David Koch, who supported Walker's bid for governor. Koch Industries issued a statement denying any interest in purchasing any state owned power plants in Wisconsin. Generating controversy also was a proposal, backed by University of Wisconsin Chancellor Carolyn Martin and promoted as the "New Badger Partnership", to separate the flagship University of Wisconsinâ€"Madison campus from the rest of the University of Wisconsin System.

Wisconsin Supreme Court ruling, 2014

On August 1, 2014, it was reported in The New York Post ("Wis. gov wins union battle") that the

Wisconsin Supreme Court on Thursday [July 31, 2014] upheld the 2011 law that effectively ended collective bargaining for most [Wisconsin] public workers ... [the] 5-2 ruling upholds Walker's signature policy achievement in its entirety and is a major victory for the potential 2016 GOP presidential candidate, who is seeking re-election this year. The ruling also marks the end of the three-year legal fight over the law, which prohibits public-employee unions from collectively bargaining for anything beyond wage increases based on inflation. A federal appeals court twice upheld the law as constitutional. "No matter the limitations or 'burdens' a legislative enactment places on the collective-bargaining process, collective bargaining remains a creation of legislative grace and not constitutional obligation", Justice Michael Gableman wrote.