Frederica Freyberg:
First, this week, the Wisconsin State Supreme Court ruled that what the legislature did in 2007 to balance the budget is unconstitutional.  The $200 million transferred from the Medical Malpractice Patients Compensation Fund to fill the budget gap has to be paid back, with interest.  The Wisconsin Medical Society, which represents doctors, argued that transfer amounted to an illegal raid on a fund that helps Wisconsin health care providers pay malpractice claims.  So the looming question now, where will the state make up this $200 million deficit?  One of the people who has to deal with this fallout in the Doyle administration is newly-appointed secretary of the department of administration, Daniel Schooff.  Secretary, thanks very much for being here. 

Daniel Schooff:
Thanks for having me.  I appreciate it. 

Frederica Freyberg:
Well, now you’ve had a couple days to chew on this decision from the Supreme Court.  What is your reaction? 

Daniel Schooff:
Well, I think it’s important for people to understand what it is.  A lot of the media attention around it quoted from actuarial studies, sort of questioning and getting into the wisdom of the policy choice made by the legislature and the governor.  I think it is important to know.  I checked this morning.  The balance of the fund is $622 million.  And this will restore $200 million, plus there’s a $100 million backstop.  In other words, the state guarantees another $100 million.  So, there’s the equivalent of $922 million in this fund now.  We’re going to have to make tough choices due to this court case and this court decision in the months and years ahead, really.  So that will be the tough choices for all of us.  But this is not in danger of going into the red. 

Frederica Freyberg:
But, secretary, I also checked with the auditors for the State of Wisconsin on this very issue, because you and the administration is saying, well, there are all these hundreds of millions of dollars in this fund.  But it is true that they say that there are liabilities pending, estimated, projected liabilities for cases that have yet to come to full conclusion, which puts the balance at $109 million in the red. 

Daniel Schooff:
The big chunk of that money is what’s called incurred, but not reported.  It’s a theory that there are lots and lots of decisions out there in this category of incurred, but not reported, that someday will come to fruition.  People should know that this fund has been there since 1975.  It’s paid out an average of $22 million a year.  And now it has the equivalent of $922 million in it.  So I just want people to understand the actuarial study.  That study which I read again this week, would suggest no money was put into it.  It ignores that the legislature put a sum sufficient backstop, and again, takes this broad category.  There’s $922 million in the fund today. 

Frederica Freyberg:
I guess people differ.  The audit bureau differs with that.  They say, yes, that money is there, but there are pending liabilities.  I need to move on from there, however.  Okay.  So there’s this $100 million backstop, but we no more have a $100 sum sufficient for that than we do $200 million.  Where are we going to get the $200 million to pay this back as the State Supreme Court requires us to do? 

Daniel Schooff:
Right.  Well, in the next month the Supreme Court will remand this to the Dane County Circuit Court.  At that point, schedules will be set.  $200 will be scheduled to be paid back, along with what the interest owed will have to be figured out.  And that will be the question.  Is this something that needs to get paid back before the end of the fiscal year or after?  But your question is how will we pay it back?  The choice that we’ll have to make will have to be to make cuts in state spending, whether Medical Assistance... 

Frederica Freyberg:
Where? 

Daniel Schooff:
Here’s our plan.  We have been planning for this since the day the Medical Society filed this case, and with the current makeup of the court we have been planning for this.  We have avoided cuts, deeper cuts in Medical Assistance.  This was a transfer into the Medical Assistance fund.  We will have to continue to have our health department look at those cuts.  We will have to continue to hold state vacancies.  We will have to continue to ratchet back state spending.  And it is a key question on the schedule, because if the court says absolutely you have to go and get an appropriation of the legislature, and you have to pay it back before the fiscal year ends next year, that’s different than, no, you have to pay it back and you can pay it back, for example, in the next state budget.  That question will be answered by the Dane County Circuit Court. 

Frederica Freyberg:
Just very quickly, you said that the $200 million transferred was used to leverage $300 million in federal funds.  Will we now have to pay back the federal funds? 

Daniel Schooff:
No, we won’t.  Four years ago when this decision was made, we did leverage $300 million of federal funds, but we do have to pay that back. 

Frederica Freyberg:
Secretary Schoof, thanks very much. 

Daniel Schooff:
Thank you.