Searching for signs of progress in the state budget debate? There are a few

Lost in the chatter about cutting legislative salaries or expenses if they fail to pass a state budget on time is the fact that lawmakers and Gov. Jim Doyle have been slowly - OK, make that glacially - chipping away at major issues that stand between them and agreement.

While there will be no predictions from this corner about when a Vatican-like white puff of smoke will float over the Capitol to signal the anointment of a new budget, there are tax and spending areas where the outline of a deal is emerging.

Taxing hospitals to ease the Medicaid crisis. One of the most expensive categories in the state budget is Medicaid, the federal-state program to provide health care for the poor. Directly and indirectly, everyone pays for Medicaid - and Wisconsin taxpayers pay more than most because the state leaves some federal reimbursement dollars on the table. Doyle proposed laying claim to those dollars by enacting a hospital “gross revenues” tax to qualify Wisconsin for more federal aid.

Leaving aside the screwy formula that compels the state to tax hospitals more so they can get their fair share of federal dollars, the idea remains alive due to some give-and-take on all sides. The latest proposal would enact a $418-million tax to attract $575 million in additional federal aid and help give hospitals a Medicaid increase, something they haven't seen in 12 years.

Most rural hospitals would be exempted from the tax, which would expire in mid-2009. Hospitals that treat a lot of Medicaid patients would be the biggest beneficiaries - as would their other patients, who would presumably stop absorbing some of the Medicaid-related costs that are now being passed on.

Raising the cigarette tax to help pay for health care. Is there anyone left out there who doesn't think smoking costs everyone, including non-smokers, through higher health-care costs? Lawmakers appear to have agreed that increasing the tax on cigarettes by $1.25 per pack (to $2.02 per pack) is one way to discourage smoking, especially among young people, and pay for smoking's insidious costs. Think of it as a user fee backed by 40-plus years of medical evidence.

Tapping into the state's medical malpractice fund. Senate Democrats have dropped their $15-billion “Healthy Wisconsin” plan, which appropriately frightened many small business owners who worried about its costs. In return for Democrats abandoning “Hillary Lite,” Republicans appear to have agreed to a one-time $175-million transfer from the malpractice fund, which is a physician-paid fund for patients injured through medical malpractice. Debate could continue over whether the transfer leaves the fund short in case of a rainy day.

Finding a better way to pay for transportation repairs and construction. In 2005, the Legislature did away with a 20-year-old system of fuel tax “indexing,” which was a formula that automatically raised gasoline taxes based on factors such as price and consumption. That decision - along with Doyle's $427 million transfer of money from the transportation fund to the general fund in the same year - has created problems. How will Wisconsin pay for the expansion and upkeep of its roads, airports and mass transit systems?

Doyle proposed a $275 million tax on oil companies, which Republicans insisted would only be passed through to consumers. Doyle said his proposal is written in a way that would prevent Big Oil from passing it on, but only four states impose a tax on oil revenues, and none of them bar the companies from adding it to the pump price. The impasse has prompted talk about a return to indexing; removing the sales tax exemption on cars that are traded for a new vehicle; imposing fees based on a car's value; or simply adding a penny or two to Wisconsin's 32.9-cents per gallon gasoline tax. If lawmakers and Doyle can't agree soon, they could break out transportation as a separate item without holding up the rest of the budget.

Why is a new state budget important to Joe and Jane Badger? An agreement soon could stave off major school property tax increases, keep the prisons fully staffed and prevent some possible disruptions in other services. It could also relieve a growing perception problem - especially among major businesses outside Wisconsin - that our policymakers can't work together. If we want to persuade others that Wisconsin is a good place to do business, we should start by taking care of important business at home.