As required by s. 292.25, Wis. Stats., the Department of Natural Resources is pleased to submit the attached report regarding the status of the Voluntary Party Liability Exemption (VPLE) environmental cleanup process. As required by law, this report is being submitted to the Governor, the Department of Administration and the Legislature. If you have any questions regarding this report, please contact Darsi Foss from my staff at 608-267-6713.

Attached is the Department of Health Services' 2009-11 Biennial Report.

Please let me know if you have questions.

This report is transmitted as required by s, 20.002 (11)(f), Wisconsin Statutes, (for distribution to the appropriate standing committees under s. 13.172(3), Wisconsin Statutes) and confirms that the Department of Administration has found it necessary to exercise the "temporary reallocation of balances" authority provided by this section in order to meet payment responsibilities and cover resulting negative cash balances during the month of September 2012.

On September 1, 2012, the Medical Assistance Trust Fund cash balance closed at a negative $9.5 million (its intra-month low). The cash balance was negative through September 30, 2012, when it closed at a negative $4.5 million.

A1051 On September 1, 2012, the Environmental Fund cash balance closed at a negative $3.8 million. The cash balance was negative through September 30, 2012, when it closed at a negative $6.6 million (its intra-month low).

The Medical Assistance Trust Fund and Environmental Fund shortfalls were due to the difference in the timing of revenues and expenditures, were not in excess of the statutory interfund borrowing limitations and did not exceed the balances of the funds available for interfund borrowing.

The distribution of interest earnings to investment pool participants is based on the average daily balance in the pool and each fund's share. Therefore, the monthly calculation by the State Controller's Office will automatically reflect the use of these temporary reallocations of balance authority, and as a result, the funds requiring the use of the authority will effectively bear the interest cost.

This report presents statements of fund condition and operations (budgetary basis) of the State of Wisconsin for the fiscal year ended June 30, 2012. This satisfies the requirements of sec. 16.40 (3), Wisconsin Statutes. Displayed are major sources of revenues and major categories of expenditures for the General Fund and other funds compared to the prior year.

The General Fund has an undesignated balance of $342.1 million as of the end of the fiscal year. This is $50.5 million higher than the balance of $291.6 million projected in appropriation summaries under Chapter 20 of the Wisconsin Statutes, approved in the August 10, 2012 meeting of the Legislative Joint Finance Committee.

General-purpose revenue taxes were $13.515 billion compared to $12.912 billion in the prior year, an increase of $603 million or 4.7 percent. Collections increased in fiscal year 2011-12 with individual income and sales tax collections 5.1% and 4.4% more, respectively, than the prior year.

General-purpose revenue expenditures, excluding fund transfers, were $13.381 billion compared to $13.565 billion in the prior year, a decrease of $184 million or 1.4 percent. In fiscal year 2012, the State of Wisconsin continued to devote the major share of state tax collections to assistance to local school districts, municipalities and counties. Local assistance accounted for 53.7 percent of total general purpose revenue spending. Aid payments to individuals and organizations represented 22.4 percent of total general purpose revenue expenditures. The University of Wisconsin accounted for 6.8 percent of total general purpose revenue spending and state operations spending for all other state agencies accounted for 17.1 percent of the total.

The State of Wisconsin expects to publish its comprehensive annual financial report in December of 2012. The report will be prepared under generally accepted accounting principles.

Wisconsin Statute 238.07 (2) directs the board of the Wisconsin Economic Development Corporation to submit by October 1 an annual report on economic development programs of the corporation to the Joint Legislative Audit Committee and chief clerk of each house of the Legislature.

The report was approved by the WEDC Board of Directors on October 19, 2012. To ensure ease of accessibility, WEDC is hosting the report on its website at http://inwisconsin.com/act125report/

The 2011-13 Biennial Budget (2011 Wisconsin Act 32) was balanced in part on achieving the following required lapses and transfers of funds to the general fund:

• DOA-allocated lapse of $174.3 million from GPR and PR appropriations with cash balances, of which $51,005,664 remains to occur in fiscal year 2012-13;

• PR lapses related to employee compensation changes, elimination of long-term vacant positions and across-the-board reductions;

• GPR and PR lapses related to the 2 percent pay increase received by represented employees in June 2009.

A1052 This memo focuses on the allocation of the $51 million remaining from the $174.3 million DOA-allocated lapse requirement under s. 9255 (1)(b) and the review and approval process for all of the required lapses. Attached are the lapse allocation amounts for each of the lapses listed above. As in the past, specific exemptions were granted for high-priority programs, and lapses may not be taken from sum sufficient or federal appropriations. Unlike past biennia, the lapses may not be taken from segregated appropriations or any program revenue appropriations within the University of Wisconsin System. Finally, these lapse allocations may only be taken from sum certain GPR or PR appropriations that have a positive cash balance.

Agencies should submit lapse plans for those required under Act 32 to Brian Hayes, State Budget Director, by Monday, November 19th, outlining how the fiscal year 2012-13 lapses will be taken. These plans should minimize layoffs of state employees and should take advantage of high vacancy rates that exist in most state agencies. Any proposals that require changes in statutory language should be noted. After the plans have been reviewed and approved, a consolidated plan that outlines the DOA-allocated lapse under s. 9255 (1)(b) will be submitted to the Joint Committee on Finance under its 14-day passive review authority.

These lapses will present operational challenges and opportunities to state agencies. The Governor remains committed to putting Wisconsin's state government on a stable fiscal footing while ensuring that it functions as efficiently and effectively as possible.

We appreciate the efforts of you and your staff in identifying creative ways to manage these reductions.