Initial Findings of Wisconsin Shares Audit Released

From Rep. Samantha Kerkman's Capitol Insight

This was certainly a busy week both in Madison and in the 66th Assembly District, which prompted me to draft a special edition of Capitol Insight to keep you better informed on what took place. First of all, the Joint Legislative Audit Committee, on which I serve, held a public hearing this week to review the initial audit findings of the Wisconsin Shares program. The audit was launched early in the spring by the Legislative Audit Bureau, with additional support provided by the Department of Children and Families (DCF).

You may recall the Milwaukee Journal Sentinel investigation back in January that ultimately revealed cases of fraud detected within Wisconsin Shares. The newspaper's investigative reporter uncovered child care "rings" in which participants who were related to each other provided care to each other's children while falsely claiming employment on their enrollment papers and other documents required by the program. Combined with other cases of fraud, these particular participants and providers cost Wisconsin taxpayers more than $13.7 million in subsidized child care overpayments during the past couple of years.

In response to the Milwaukee Journal Sentinel investigation, my colleagues and I on the Joint Legislative Audit Committee instructed the Legislative Audit Bureau to conduct a full-scope audit of the Wisconsin Shares program in two separate phases. The first phase, intended to identify cases of fraud and other loopholes within Wisconsin Shares, was completed in June and the results were presented to us by the bureau during this week's public hearing. Throughout the duration of the audit, it was discovered that in 2008 alone, between $16.7 and $18.5 million in improper subsidized child care payments were made to providers. The recipients of these payments included ineligible participants, participants with no recorded wages, and participants in possession of inadequate documentation of self-employment (such as "owning" their own daycare business). Additionally, the case reviews conducted as part of the audit's first phase determined the statewide error rate within Wisconsin Shares to be 11%, based on a random sample of 400 child care providers.

The first phase of the audit also included an in-depth analysis of the October 2008 attendance records for 50 child care providers within Wisconsin Shares. This review found 21 of the providers to be in receipt of excess payments for care they never provided while another 22 providers had submitted fabricated documents, yet were still paid by the state. The remaining five providers simply refused to submit any of their records for the audit. It is estimated that these 50 providers alone cost the taxpayers $4.0 million in improper subsidized child care payments in 2008.

The second phase of the audit is underway and should be completed by December 1, 2009. This phase will closely examine improvements currently being implemented to deter further incidents of fraud and abuse within the Wisconsin Shares program, and what further adjustments need to be made. The improvements were passed earlier this year as provisions of both 2009 Wisconsin Act 2 (the state's stimulus bill) and 2009 Wisconsin Act 28 (the state's 2009-2011 biennial budget). The adjustments we on the audit committee are looking at right now include improving provider and participant compliance with the program's requirements and improving the overall process of employment and wage verification in determining the eligibility status of prospective enrollees.

Following the enactment of 2009 Wisconsin Act 2, the Department of Children and Families created a Program Integrity Unit comprised of five staff members to monitor and detect cases of fraud within Wisconsin Shares. This unit provided integral assistance during the first phase of the audit. Upon the enactment of 2009 Wisconsin Act 28, the reimbursement rates for child care providers within Wisconsin Shares were frozen, DCF began developing a Quality Ratings System for participating child care centers, and new restrictions were placed on providers and participants of the program.

Moving forward, the Joint Legislative Audit Committee will hold another hearing on Wisconsin Shares upon the completion of the second phase of the Legislative Audit Bureau's audit of the program. At that time, I am hopeful my colleagues and I can work together in developing a reform plan that will hold Wisconsin Shares participants and providers accountable for their record-keeping and quality of child care. We need to make sure that everyone involved with Wisconsin Shares is providing accurate and truthful information when enrolling into the program and when filling out additional paperwork for taxes and other purposes. We also need to have well-trained staff monitor the program and follow a standard protocol of reporting any hint of fraud when they see it. Then, there needs to be a tough penalty issued to the individuals who are caught trying to scam the system. At a time when Wisconsin taxpayers are struggling to make ends meet in this economy, we cannot tolerate any further abuse of their hard-earned money like that which we have seen in recent years with Wisconsin Shares.

Rep. Kerkman's Capitol Insight

Governor Doyle Signs 2009-2011 State Budget into Law

On Monday, Governor Jim Doyle signed into law the 2009-2011 State Budget, also known as Assembly Bill 75, after several months of late night and early morning debates, and behind-closed-doors negotiations from the Joint Finance Committee up through each house of the Legislature. The final votes were taken on the state budget late last week by the Senate and then the Assembly, following the recommendations announced by the Conference Committee. Comprised of members from both the Senate and the Assembly, the Conference Committee reviewed each house’s version of the budget before selecting which provisions should be included in the final document that was signed by the Governor.

I was pleased to learn that the Conference Committee chose not to include the provision granting driving cards to illegal aliens within the final version of the budget. For one thing, as I’ve said before, this is a policy issue that has nothing to do with our state budget; and for another, the government should not be rewarding illegal behavior. I am glad that on this issue, the Governor chose to put the safety of our legal, law-abiding residents ahead of those who chose to break our laws by coming here.

Despite my satisfaction with the outcome of the provision regarding driving cards for illegal aliens, I am still disappointed with a number of other items the Governor chose to keep in the state budget. In his veto message, Governor Doyle said, “This budget protects the middle class,” which I find to be a very misleading statement considering the negative impact his budget will actually have on the middle class in the long run. Here are a few of the items that deeply concern me:

• Rental car fee of $18.00 for the Southeastern Regional Transit Authority, including KRM: I fought hard to have this provision removed from the budget and replace it with a referendum for the voters of Kenosha, Racine and Milwaukee counties to approve. Unfortunately, rather than allowing the affected residents to decide how they want to spend their transportation dollars, the government will force them to pay a steep price every time they rent a car within these counties.

• Additional funding for subsidized childcare (for programs like Wisconsin Shares) in the amount of $67.8 million while providing only $900,000 in additional funding for oversight of how this money is managed: As a member of the Legislative Audit Committee that helped launch the investigation which uncovered the rampant fraud of the Wisconsin Shares program and abuse of taxpayer dollars, I am appalled by the Governor’s decision to commit even more funding for this failed program. Until the Legislative Audit Bureau completes the second phase of its investigation of Wisconsin Shares this fall and offers recommendations as to how future fraud can be deterred, we should not be increasing the amount of taxpayer dollars used for subsidized childcare in Wisconsin.

• In-State Tuition for Illegal Aliens: This is just another example of how we are encouraging and rewarding illegal behavior at the expense of legal residents. It is both wrong and unfair to the students from our neighboring states that choose to pursue their higher education in Wisconsin to continue paying out-of-state tuition while others who are not even here legally get the benefit of in-state tuition. I am also concerned that this will ultimately affect a legal student’s chances of being accepted by their first-choice school because of the competition they will face from illegal aliens and the demand for greater diversity on college campuses. Lastly, U.S. businesses are prohibited by federal law from hiring illegal aliens whether they have a college degree or not, so I do not see how our state will benefit from this in the long run.

• Reduction in the long-term capital gains exclusion from 60% to 30%: This measure could severely affect our business community, the engine of job growth in Wisconsin. With his budget, I believe the Governor is hindering the ability of business owners to reinvest in their companies and provide more jobs for our ever-growing unemployment pool by raising the tax on their capital gains. Here, the “Soak the Rich” mantra quickly becomes “Drench the Poor,” as the trickle down effect from higher taxes on business owners will ultimately affect the workers through wage and benefit cuts as well as layoffs. In addition to that, many retirees who depend on the capital gains earned through their mutual funds and other investments as a primary source of income could see their household budgets shrink.

• Property tax increase on homes valued at a minimum of $165,000: Under this provision, homeowners will see their property tax bill increase by $90 during the first year of the budget cycle, followed by a $130 increase in the second year. This makes no sense to me considering the sharp decline in home values and the ongoing struggle homeowners are facing as they fight to keep their homes.

These are just a few of the many provisions in the budget that I do not believe will benefit our great state in the near future. I find myself asking, how will these measures protect the middle class in the long run as Governor Doyle indicated? How do higher taxes, fewer jobs and wasteful spending benefit the average folks, especially during a recession? How is the 2009-2011 State Budget good for Wisconsin? Within time, we will see if the heavily partisan budget is enough to get Wisconsin’s economy back on track or if it completely derails.