Tag Archives: Budget

Massive State Surplus

How about y’all give it back instead of spending it?

MADISON, Wis. (WSAW) — $753 million more than anticipated: that’s what Wisconsin’s legislative fiscal bureau announced Wednesday as extra funding for the next biannual budget.

But Wisconsin’s Department of Revenue (DOR) Secretary Peter Barca tells NewsChannel 7 that extra money may not be quite what it seems.

On Tuesday, the Department of Revenue released a statement showing a sharp increase of revenue coming in from corporate tax collections compared to 2018, which Barca says largely contributed to that extra $753 million.

Wisconsin’s Legislature begins serious budget work

Here is my full column that ran in the Washington County Daily News yesterday.

When Gov. Tony Evers released his executive budget proposal at the beginning of March, Republican leaders in the Legislature immediately dismissed it as an unserious liberal manifesto — which is precisely what it is. Last week, the Legislature’s Joint Finance Committee began the serious work of crafting a budget for Wisconsin. Their first step was to toss most of Evers’ silly budget in the trash and start from scratch. Despite Evers’ bravado, the Republicans have a strong hand to play and are on the right side of public opinion.

In a time of divided government, it is worth remembering the relevant powers of each branch of government. The legislative branch has the power to create legislation and the power over where to spend tax dollars. The executive branch has the power over administrative rules (filling in the gaps to execute laws) and the power to veto legislation which the governor disapproves.

Governor Evers has already shown that he is not shy about using his veto power. In fact, he vetoed the middle-class tax cut, which was the very first bill to reach his desk. But while Evers can veto things he does not like, he does not have the power to create laws that he wants. To get a law that he wants to his desk, Evers must be willing to negotiate and compromise with Republicans, but Evers has shown that he has little aptitude or appetite to deal.

This delineation of powers is relevant to the actions taken by the JFC last week. The committee scrapped almost all of Evers’ non-budgetary policy initiatives including expanding Medicaid, legalizing medical marijuana, capping school choice, increasing the minimum wage, granting driver’s licenses to illegal aliens, repealing right-to-work, closing the dark store loophole, ending the property tax levy freeze for counties and municipalities, and dozens of additional initiatives that never belonged in the budget.

What is left are mostly just the nuts and bolts of funding Wisconsin’s state government, which what the budget is supposed to do. As the legislative Republicans go about assembling those nuts and bolts, recent polls show that a majority of Wisconsinites support conservative legislative goals.

For example, in a recent poll of likely voters conducted for Wisconsin Manufacturers & Commerce, a state business group, found that 60% of likely voters oppose raising property taxes on businesses and 53% oppose raising the gas tax. Some 77% oppose raising taxes on manufacturing, And 69% oppose eliminating the property tax levy freeze, and 77% oppose raising energy taxes. Up to 83% oppose indexing gas taxes and 63% oppose eliminating drug testing for welfare recipients.

All of those things that Wisconsinites oppose were things that Governor Evers included in his budget proposal and the Republican threw out — except for the gas tax increase. Republicans should take note of that. They are on the right side of these issues except for some of the Republican leadership’s maddening affection for raising the gas tax.

Over the next few weeks, the Republican-led Legislature is going to hash out a budget and send it to Governor Evers for his signature. Governor Evers has arguably the most sweeping veto power in the nation with the ability to strike out words and sentences to make the budget more to his liking, or he could veto the whole thing. What he cannot do is write new language into the law. That is the exclusive prerogative of the Legislature.

What Governor Evers decides to do with the budget will determine how likely he is going to be able to get any of his agenda done for the rest of his term. If he uses his veto pen to strike out every Republican initiative he can, then those same Republicans are unlikely to every put a bill that Evers wants on his desk. If he accepts some compromise, then some of the ideas stricken from his budget proposal may see life again in a separate bill.

In the end, the Legislature holds an ace. Wisconsin will not shut down if Evers vetoes the entire budget and the state enters the new fiscal year without a new budget. By law, the old budget that was passed by many of the same legislative Republicans and signed by Gov. Scott Walker will continue in force. From a conservative perspective, a new fiscal year with no spending increases and no tax increases sounds pretty great.

Wisconsin’s Legislature begins serious budget work

My column for the Washington County Daily News is online and in print. Here’s a sample:

Over the next few weeks, the Republican-led Legislature is going to hash out a budget and send it to Governor Evers for his signature. Governor Evers has arguably the most sweeping veto power in the nation with the ability to strike out words and sentences to make the budget more to his liking, or he could veto the whole thing. What he cannot do is write new language into the law. That is the exclusive prerogative of the Legislature.

What Governor Evers decides to do with the budget will determine how likely he is going to be able to get any of his agenda done for the rest of his term. If he uses his veto pen to strike out every Republican initiative he can, then those same Republicans are unlikely to every put a bill that Evers wants on his desk. If he accepts some compromise, then some of the ideas stricken from his budget proposal may see life again in a separate bill.

In the end, the Legislature holds an ace. Wisconsin will not shut down if Evers vetoes the entire budget and the state enters the new fiscal year without a new budget. By law, the old budget that was passed by many of the same legislative Republicans and signed by Gov. Scott Walker will continue in force. From a conservative perspective, a new fiscal year with no spending increases and no tax increases sounds pretty great.

Legislature Starts Digging Into Evers Sham Budget

They should still repeal minimum markup, but not as a budget item. They should do it for the sake of consumers and economic freedom.

MADISON – State Transportation Secretary Craig Thompson conceded Wednesday that Democratic Gov. Tony Evers’ plan to eliminate a required markup on gasoline may not save as much money as his boss has claimed.

Thompson made the acknowledgment as Republicans who control the Legislature’s budget committee ripped apart Evers’ budget and made clear they would not go along with plans he campaigned on.

“Today is a reset for the budget as proposed,” Rep. John Nygren, co-chairman of the Joint Finance Committee, said at the committee’s first budget meeting.

The Marinette Republican called the plan “irresponsible” because of its $1.3 billion in tax increases before the panel heard testimony from Evers’ allies who oversee the departments of public instruction, transportation and health services.

Public input on the next state budget

My column for the Washington County Daily News is in print and online. Go get a copy! Here’s a taste:

Gov.-elect Tony Evers and Lt. Gov.-elect Mandela Barnes have announced they will hold four public listening sessions before Christmas to get the public’s input on the upcoming state budget. The four sessions will be today in Green Bay, Wednesday in Wausau, Dec. 18 in La Crosse and Dec. 19 in Milwaukee.

Since all four sessions begin during working hours and, like most tax-paying Wisconsinites, I work for a living, I will not be able to attend and give the incoming administration my thoughts in person. This column will have to suffice.

As the Legislature and governor begin the process of crafting the next state budget, they must do so with the understanding that Wisconsin is not immune from the economic winds blowing across the nation. While the underlying economic metrics remain strong, several leading indicators, including the wild movements in the stock market, foretell a looming recession within the next year or two.

Since Wisconsin uses a biennial budget, it is likely the next recession will come during the budget our elected officials are about to write. They must write that budget understanding recessions always lead to a decrease in state tax revenue while making higher demands on state services like welfare and Badger-Care. To that end, the overriding objective of the next state budget should be to reduce spending, reduce taxes and continue to pump money into the state’s rainy day fund, because rainy days are in the forecast.

From a revenue standpoint, the state of Wisconsin is in great shape. Thanks to the series of tax cuts that Gov. Scott Walker and the Republican legislators have delivered over the past few years, tax revenue is flowing into state coffers at historic levels. There is no shortage of money for politicians to spend.

While the Republicans have done a tremendous job in the previous few budgets, they have failed to reduce spending. Despite claims to the contrary, every single state budget for the last generation or more has spent more than the previous budget. Granted, the Republicans did not increase spending as much as the Democrats wanted to, but they increased spending nonetheless.

The vast majority of state spending is spent on a handful of budget priorities. One cannot seriously reduce spending without looking to the big budget items. The first area Evers and the Legislature should look is at education spending.

West Bend Annual Meeting, Budget, and Tax Levy

This post is going to be a little long, so strap yourself in. If you live in the West Bend School District, you’ll want to read it. The rest of y’all should find a good college football game to watch.

On Monday, the voters of the West Bend School District are invited to attend the Annual Meeting of Electors. This is an annual meeting where, theoretically, the voters approve some of the big ticket items like the tax levy and budget. In reality, all of the votes are non-binding, so the School Board can still do whatever they want. Still, it is an opportunity for voters to show up and have their voices heard.

On the agenda this year is:

7. Consideration of Proposed Resolutions

a. Resolution No. 1 – Tax Levy

b. Resolution No. 2 – Disposal of District Property

c. Resolution No. 3 – Board Member Compensation

d. Resolution No. 4 – 2019-20 Annual Meeting Date

The only thing we have any information on is the proposed budget and tax levy, so the voters will be walking in blind to whatever the resolutions are about board member compensation and the disposal of district property. We’re going to take a deeper look at the budget and tax levy, but first, let’s discuss the process a little.

In years past, the West Bend School Board began its budget process in the spring. If I remember correctly (I’m sure someone will correct me if I’m wrong), we usually got a preliminary budget in the April/May time frame. That high-level preliminary budget was posted on the district web site and the people had some time with it.

This year, the first appearance of a preliminary budget from the school district that I saw was last Tuesday morning – after the Monday night board meeting.  Perhaps it was posted Monday night. But now the Electors are being asked to vote on it a week later. One. Week. That’s all the voters get to read it and understand it. There hasn’t been any time for the media or interested parties to ask questions. There hasn’t even been another board meeting where citizens could voice their opinions on it. There is really no excuse for this kind of opaqueness from the West Bend School Board. They have had this information for months, but failed to be transparent about it. Their lack of transparency is not incompetence. It is willful.


That being said, let’s look at the budget. As we get into it, we must remember the context of this budget. The West Bend School Board just postponed action on a $85 million referendum. Budgets are where we define our priorities. There is always an unlimited list of needs/wants (the distinction between the two often being in the eye of the beholder) and a limited amount of money to pay for it. The budget is where you have to prioritize that list.

 

There are two versions of the West Bend School District’s Preliminary Budget. Here is the summary document that is being provided for the meeting on Monday. Here is a slightly more detailed version that was presented at the School Board meeting last week. Neither version is nearly as detailed as what other districts, like Slinger, provides. Again… transparency…

Let’s start with the revenue side of the budget. There are two primary sources of revenue for a Wisconsin school district – the local property tax levy and state aid. The West Bend School District is facing a demographic and societal shift that is causing a decline in enrollment for the foreseeable future. The estimates range between a 10% and 20% decline in enrollment in the next 10 years. This is a significant impact on the state aid that the district receives because it is based on enrollment. Also, enrollment affects the property tax levy limit for the district. In short, the West Bend School District is facing a sustained period of declining revenue. In the preliminary budget (focusing on the operating budget and not the special parts), we see this manifest in a projected $233,405 decrease in revenue.

That decrease in overall revenue is despite a property tax hike. The School District wants to increase the property tax levy by $928,249 – the maximum amount allowed by law. Most of this is offset by a decrease in the levy due to some debt service coming off the books, so the impact will be minimal. But taxpayers could be enjoying a rare tax decrease if not for the School Board’s desire to tax to the max.

In light of that fact, let’s take a closer look at the spending side of the budget. Overall, the preliminary budget proposes a $1.3 million spending increase. You’re reading that right. The preliminary budget has a structural $1.4 million deficit.

The School District must have a balanced budget, so they are raiding their reserve fund to fill the gap. Superintendent Don Kirkegard acknowledges that this is not sustainable and he will be working to bend the district’s cost into the revenue number next year. I cut him some slack because he has only been on the job since July and was handed this budget. Also, he comes from another state and it takes a little time to learn the Wisconsin Way of school budgeting. This budget is the product of the interim Superintendent, staff, and most of all, the School Board.

What is driving the spending increase? Almost all of it is due to a planned compensation increase for the teaching staff. Although salary negotiations are still underway, this budget includes a 2.1% base salary increase. That is the maximum that the School Board would have to give under Act 10. That amounts to a $929,853 compensation increase. That umber is a little misleading because the budget number includes benefits, salary, and headcount fluctuations. But based on the commentary at the school board meeting last week, that number is about right. They are planning roughly a $900k salary increase.

The other increases are scattered around the budget. It is a little hard to tease them out because the district is also reallocating a lot of expenses. According to the Superintendent, they are working on reallocating expenses to the building level so that they can have better visibility to where the expenses are actually being spent. That’s a good thing, but it makes year-to-year trending data difficult.


The story of this budget is not really what it does, but what it doesn’t do. The West Bend School Board is facing declining enrollment and, consequently, declining revenue. Next year they are planning to ask the taxpayers to dig deeper into their family budgets and pay more for bigger, newer facilities. This budget is the School Board’s statement of priorities before asking the taxpayers for more money and they chose to kick the can down the road another year. They are choosing to not make any hard decisions nor demonstrate that they will be good stewards if the taxpayers give them almost the equivalent of an entire year’s budget to spend all at once.

Here are just a couple things this budget does not do:

Maintenance. Many of the facilities needs that are driving the perceived need for a referendum are due to years of poor maintenance. Jackson Elementary is old and falling apart, they tell us. The High School building needs serious renovations and repairs, we’re told. I defy anyone to look at the preliminary budget and determine what the school district spends to maintain their facilities. There isn’t a line item for it. According to the Superintendent, the large, capital projects like roof replacements and such are covered by the Capital Projects Fund and is about $2.3 million. More routing maintenance like carpet replacements, door repairs, fixture replacements, light bulbs, etc. are kind of tucked into the “other support services” or “central services” budget items. But those line items blend a lot of “catch all” expenses.

It is safe to say, however, that despite these pressing needs that are fueling a referendum discussion, the budget makes no serious effort to spend more on maintenance.

I tried to find some good benchmarks for what schools should spend on maintenance, but they are hard to come by. This data from the Building Owners and Managers Association says that for office space (roughly equivalent), people spend about $8.07 per square foot for annual operating expenses. That number includes some things like security, administration, etc. that are not really pertinent in a school setting. If we just include repairs, maintenance, cleaning, etc., it’s about $4 per square foot per year. The West Bend School District has 1,141,656 sq. feet of building space – not including grounds, sports fields, parking lots, etc. It is reasonable to expect that the district needs to spend $4 to $4.5 million per year just to keep their facilities reasonable cleaned and maintained. I don’t see anything near that much in the budget even as I add up the line items.

This points to a trend of School Districts intentionally under-funding maintenance, allowing facilities to decline into disrepair, and then pushing for a referendum to make up for their neglect. This budget looks like it will continue that trend.

Labor Costs. Without a doubt, labor costs are the largest expense in any school district budget. If the School Board is ever going to control costs and bring them in line with revenue projections, they have to control the cost of labor. There are only a few ways to do that. They can cut overall compensation – salaries and benefits. They can reduce the number of employees. Or they can force employee churn to create a younger, cheaper workforce.

At some point, the district needs to reduce the number of employees. There are fewer and fewer kids to teach. Therefore, there will need to be fewer and fewer teachers, administrators, and support staff to serve those kids. This needs to be done intelligently and carefully, but it needs to be done.

The School Board and this budget fail to take advantage of Act 10 to control the overall compensation costs for the employees. Employees still have a sweetheart deal on benefits. The School Board is assuming a maximum base salary increase. The School Board has not implemented merit pay or other performance-driven compensation models. They haven’t done much of anything. The compensation package for West Bend School District employees looks much like it could have in 1999 or 2005.

Once again, this budget just kicks the can down the road and fails to do anything about rising labor costs in the face of declining revenue.


The preliminary budget for the West Bend School District sends a very clear message to the citizens of the district. Despite virulent protestations about needing tens of millions of dollars in a referendum to pay for critical facilities, the School Board intends to just keep doing the same thing as if there isn’t any need at all. They are not making any hard choices or shifting any additional spending to address those needs. They are also not addressing the structural funding issues that are already impacting the district’s revenue. The School Board is planning to ask the taxpayers to dig deeper into their family budgets and give up their own priorities, but the School Board is refusing to dig deeper into their own budget. Instead, they are doing what far too many school boards do: tax to the max; give employees as much of an increase as possible; starve facilities; refuse to innovate; keep doing everything the same way and wondering why you keep getting the same results.

I will believe that there is a crisis in the West Bend School District when they begin acting like it. This budget sends the message that the School Board thinks everything is fine the way it is.

State Projects Larger Surplus

Remember, this is just a forecast, but it’s positive nonetheless.

[Madison, Wisc…]  The Legislative Fiscal Bureau had good news for the State of Wisconsin on Wednesday morning when it announced the state is on track to end the biennium with $137.5 million more in the general fund than originally estimated just four months ago.

In September, when the 2017-19 budget was passed, LFB estimated the state would end the 2019 fiscal year with $247.7 million. Now LFB predicts it will be $385.2 million.

The increase is expected to come from $76.3 million more in tax collections, $1.7 million more in departmental revenues, $97.7 million in lower spending, and a $38.2 million transfer to the budget stabilization fund.

The lower spending mostly comes from debt service adjustments. The state did some refinancing and is not issuing as many new bonds as expected.

Wisconsin’s surplus

My column for the Washington County Daily News is online. Here you go:

Huzzah, huzzah! The State of Wisconsin finished its last budget with a $579 million surplus. That is great news both in real and in political terms, but it also gives some perspective to some unpleasant truths.

There is no reason to understate the fact that $579 million is a lot of money. A lot. If Wisconsin had ended the budget with a $579 million deficit, it would have been considered a crisis and woeful example of incompetent fiscal management. But the fact that it is a surplus confirms the converse. Namely that the state of Wisconsin is in terrific fiscal health and its finances are being competently managed.

What is perhaps more important is that this budget surplus is merely one in a string of recent budget surpluses. Gov. Scott Walker and the legislature have been managing the state budget successfully for almost a decade and it is not going without notice around the nation. Just last week, Both Fitch Ratings and Kroll Bond Rating Agency upgraded the state’s bond rating to AA+. Fitch noted that, “the fiscal 2011-2013 budget marked a turning point, with extensive structural budget actions and the resolution of several lingering fiscal challenges.”

Fitch’s commentary is a heady tonic as Walker gets ready to officially announce his run for a third term in office. Whichever Democrat wins the nod to challenge Walker in the general election will have to make the case that budget surpluses are bad and the state’s bond rating is too high.

Walker and the legislature must now decide what to do with the surplus. There is a very easy answer to that: give it back to the taxpayers — $579 million is almost exactly $100 for every man, woman, and child in the state. Taxpayers would no doubt appreciate a $100 credit for each member of the household on their state income taxes next year. In any case, given the fact that the legislature just completed the new budget, which is balanced and not reliant on a surplus from the previous budget, they should reject the urge to spend it on things whose priority failed to garner funding in the current budget.

While $579 million is a fortune in real terms, it is only a small fraction of the state budget. The previous state biennial budget was $72,635,547,000. The $579 million surplus was, then, is about 0.8 percent of the entire amount. The 2017-2019 budget that just passed the legislature projects to spend $75,590,563,100. The surplus is only 0.77 percent of that budget.

It is worth remembering some of the heated debates that raged over the budget and delayed its passage by months. One of those debates was over the fictional budget shortfall for transportation that was estimated at anywhere between $400 million and $1 billion depending on who one asked. In order to fill that budget gap, the legislative Republicans separated into three camps.

The first camp was headed by Speaker Robin Vos and some Assembly Republicans who wanted to raise taxes to spend more on transportation. The second camp was represented by the Senate leadership and wanted to borrow more to cover the shortfall. The third, and smallest, camp of Republicans wanted to delay or reprioritize transportation projects to spend within the money already available.

In the end, the Republicans struck a compromise that did a bit of everything. They increased taxes on people who drive electric and hybrid vehicles, reprioritized some projects and borrowed a lot of money. In hindsight, that entire debate could have been rendered moot had they just prudently managed the resources available as they did demonstrated in the previous budget.

That fact raises the question, why were any Republicans ever even proposing a tax increase? Why any of them proposing more borrowing? Why were some of them so unwilling, in the context of a $76 billion budget, to reprioritize spending to fill what amounts to less than 1 percent of the state budget? Republicans should rightly be commended for their fiscal management these recent years, but some of them have drifted very far from their conservative moorings if they are reaching for tax increases and debt as a measure of first resort.

A $579 million surplus may be a lot or little depending on the perspective, but there is no argument about it being a good thing for Wisconsin. The taxpayers are continuing to reap the rewards of the conservative revolution begun at the dawn of this decade.

Wisconsin Finishes With $579 Million Surplus

Fantastic. Let’s return it to the taxpayers. That would be about $100 for every man, woman, and child in the state. I’m sure a family of 4 would appreciate a $400 check before Christmas.

The state finished 2016-17 with a surplus of $579 million, a better ending balance than what the Legislative Fiscal Bureau had previously projected.

The last LFB estimate of a $467 million ending balance, though, did not include a final look at expenditures over the fiscal year. The Department of Administration wrote in its annual fiscal report expenses came in about $41 million less than had been expected, while revenues were up.

Gov. Scott Walker’s office touted it as the second largest closing balance for a fiscal year since 2000. The guv did not call for any new spending, though a spokesman noted Walker has previously urged lawmakers to use money saved through his budget vetoes to cover a $9.7 million boost in aid for small, rural districts in 2018-19.

Walker Issues Budget Vetoes

You can read the full list of vetoes here.

I’m still reading through them, but they look good! It looks like he stuck to his promise to the conservative senators who held out and he took a few further steps to make this budget a little better.

Wisconsin Senate Passes Budget After Veto Promises

It’s still not a good enough budget, but it will be better is/when Walker makes his promised vetoes. Now that the budget and Foxconn bills are done, let’s get to work on the rest of the agenda.

The state Senate put the final touches Friday on a nearly $76 billion state budget that would pump an additional $649 million into K-12 education over the next two years after a handful of holdout GOP senators received assurances from the guv’s office on a package of vetoes.

The budget, delayed by more than two months, came down to the wire Friday as Majority Leader Scott Fitzgerald, R-Juneau, tried to persuade three of his Senate colleagues to support the two-year spending plan.

GOP Sens. Chris Kapenga, of Delafield; Steve Nass, of Whitewater; and Duey Stroebel, of Saukville, ended up joining most of their Republican colleagues as the budget cleared the Senate 19-14 without any amendments to the plan the Assembly approved earlier this week. Sen. Dave Craig, R-Big Bend, was the only Republican to join all Dems in voting against the bill.

That clears the way for the budget to head to Gov. Scott Walker, who the three Republicans said promised to a series of vetoes to win their support.

Assembly Passes Budget. Senate Conservatives Hold Out.

Heh.

The Assembly tonight passed the state budget 57-39, with five Republicans joining all Dems in opposing it.

It now heads to the Senate, where it faces an uncertain future as Senate Majority Leader Scott Fitzgerald says he doesn’t have the 17 votes he needs to pass it and three Senate Republicans circulate a list of demanded changes.

The Assembly vote came after nearly 11 hours of debate, the rejection of 19 Dem amendments and the adoption of a GOP amendment that makes what the authors call “technical” changes, including deleting a provision requiring DOT to install a railroad gate crossing in Winnebago County.

But in the end, Reps. Scott Allen, R-Waukesha; Janel Brandtjen, R-Menomonee Falls; Bob Gannon, R-West Bend; Adam Jarchow, R-Balsam Lake; and Joe Sanfelippo, R-New Berlin, all voted against the budget.

Good for my rep, Bob Gannon, for voting against this. This is not the kind of budget we expect from a Republican government. We don’t just want “well, it’s better than the Democrats would do.” We want a budget that actually moves the needle toward a better Wisconsin.

And good for my Senator, Duey Stroebel, for being one of the senators holding out for a more conservative budget. It’s almost frustrating because I can’t call and yell at my elected officials. They are already doing the right thing!

Three Senate Republicans are demanding a series of changes to the budget to win over their votes, including raising the income limit for the statewide school choice program and banning UW from spending money on diversity, sensitivity and cultural fluency training.

The three — Sens. Chris Kapenga, of Delafield; Steve Nass, of Whitewater; and Duey Stroebel, of Saukville — also want to move up the planned repeal of the prevailing wage on state projects to Jan. 1 rather than Sept. 1, 2018, and to delete language the Joint Finance Committee added to the budget that would pre-empt local regulations of quarries that produce material for road and construction work.

Vos Makes Empty Threat

Heh.

“We’re not going to be held hostage to individuals who have some kind of a wish list,” Vos said.

The state Assembly began debating the budget shortly after noon Wednesday. A vote is expected by the late-night hours.

Senate Republicans, who have yet to take up the budget, are expected to meet Wednesday to discuss it. Fitzgerald said Tuesday that he hopes the meeting will produce agreement among his members on changes to the budget that can be sent to the Assembly, in the form of an amendment, before it votes on it. That would prevent the Assembly from having to approve the budget a second time after a Senate vote, which has not yet been scheduled.

Vos laid down the gauntlet at Wednesday’s press conference, saying he won’t revisit the budget after Wednesday.

“Once we vote for the budget today, we are done with the budget process,” Vos said.

Ummm… if the Senate votes for a different version of the budget, it goes to conference and then both houses have to vote on it again. It’s not really up to Vos unless he is saying that the Assembly is willing to not ever pass a budget.

 

State Senate Works on Budget

Thank goodness that it looks like there is a valiant cohort of senators, including my own, who are trying to make this budget more conservative.

Spokespersons for Sens. Stephen Nass, R-Whitewater, and Duey Stroebel, R-Saukville, also confirmed they are not yet “yes” votes.

Nass spokesman Mike Mikalsen said the senator wants to see a full repeal of the state’s prevailing wage requirement take effect Jan. 1. Under the Joint Finance Committee budget, that repeal would take effect in September 2018.

Fitzgerald said he hopes to marshal the Senate votes to pass the budget this Friday.

Wisconsin’s conservative reformation draws to a close

My column for the Washington County Daily News is online. Here you go:

After weeks of delay and intra-party wrangling, the Wisconsin legislature’s Joint Finance Committee has passed the state’s biennial budget. It now heads to the Assembly, and then to the Senate, for final debate and passage. Assuming that it passes largely as currently written, which is expected, this budget is the muffled whimper that marks the end of Wisconsin’s conservative reformation.

When Wisconsinites elected Scott Walker as governor in 2010, they ushered in a new era in Wisconsin governance. Walker brought to Madison a governing philosophy steeped in the modern conservative movement. 2011 marked the beginning of a Wisconsin conservative reformation that was unprecedented in the state’s history.

In 2011, Walker and the legislative Republicans were aggressive and ambitious in advancing a conservative agenda. They touched the third rails of state politics and slew dragons. In a short span, Walker and the Republicans enacted transformational changes in Wisconsin including welfare reform, massive regulatory reform — especially in the DNR, expanding Second Amendment rights, expanding educational choice, freezing tuition at the University of Wisconsin and, of course, enacting Act 10. The hundreds of reforms made since 2011 have truly made Wisconsin better for citizens and businesses.

Voters have rewarded Republicans with electoral success. The voters defended Walker’s conservative agenda by reelecting him during the recall election and again in 2014. Republicans have maintained their majorities in both houses of the legislature for most of this decade as the conservative wing of both caucuses has grown. Even the Wisconsin Supreme Court has moved to be more conservative. Wisconsinites have shown their support for the conservative reformation time and time again at the ballot box.

But along the way, Wisconsin could not escape from its tradition of big, expensive government. While Republicans have been making tremendous progress in many areas, they have continued to spend more every budget. The current 2017-2019 proposed budget that the JFC just passed spends $76.02 billion. That is a 4.8 percent increase in spending over the previous budged.

The proposed 2017-2019 budget spends a full 23 percent more than the last budget signed by Gov. Jim Doyle. On a per capita basis, Doyle’s last budget spent about $10,868 per Wisconsinite while the new budget spends $13,131 per person — a 21 percent increase in per capita spending by state government in seven years. All of the Democrats’rhetoric about “austerity” and “cuts” are pure myth. The truth is that Wisconsin’s Republicans have increasedspending every single budget. To be fair, Doyle increased state spending 28 percent during his tenure. The Republicans did not increase spending as much as Democrats, but they were certainly not shy about increasing spending.

There are a few items in the new budget that conservatives will like. For example, UW tuition will continue to be frozen, but the budget spends more on UW to offset that. The state property tax will be eliminated. This saves taxpayers about $90 million per year. Able-bodies childless adults will be required to work or train and be subject to drug tests in order to receive Badgercare benefits. The prevailing wage law will be rescinded for state projects. The alternative minimum tax will be rescinded.

Those are very small potatoes in a stew full of massive hunks of new spending meat and bitter debt increases. The Republicans have seemingly lost the nerve to make the big, necessary reforms that Wisconsin still needs. The Republicans still control the entire law-making apparatus of government, but are about to pass a budget that is reminiscent of something from 2005. It spends more and tinkers around the edges, but is primarily designed to not offend anyone before the next election.

Where are the big ideas? Where is the cut or elimination of the state income tax? Where is the reformation of how Wisconsin builds and maintains its transportation infrastructure? Where is the fundamental reform of education? Where is an actual reduction in the size and scope of state government? Even the marginally more aggressive items that Walker suggested in his budget, like a “backto- school” sales tax holiday or a broad cut in income taxes, were rejected by legislative Republicans. Many of them went to Madison with a passion for Conservative reform, but now only have passion for getting reelected.

Rep. Bob Gannon (R-West Bend), who has said that he will not vote for this budget, was correct when he commented, “this budget is much better than a democrat governor or legislature would have proposed, but it is also not a conservative piece of work. Your government is in a growth mode.”

Indeed. And that growth is smothering the conservative reformation in its sleep.

JFC Passes State Budget

On to the Assembly.

The Legislature’s budget committee on Wednesday approved the package of tax provisions on Wednesday during its last day of work writing the $76 billion 2017-19 state budget, which was due on Walker’s desk more than two months ago.

The Joint Finance Committee rejected Walker’s proposal to reduce the lowest income tax rate that would save 70 percent of tax filers an average of $44 this year and rejected Walker’s proposal to include a $20 million boost to the earned income tax credit for the working poor, which would apply to 130,000 families.

The committee also approved a $74 million cut to the tax businesses pay for machinery and tools but won’t include Gov. Scott Walker’s proposals to cut income taxes or to increase a tax credit for the working poor.

The state’s alternative minimum tax, which applies to individuals making between $200,000 and $500,000 annually, also would be eliminated starting in 2019 under the committee’s action — amounting to a $7 million tax cut for those individuals. The tax is meant to ensure filers with large amounts of tax deductions or exclusions pay a minimum amount of income tax.

The package also eliminates the state’s Working Families Credit, which has given a modest tax credit to about 725 individuals making about $9,000 a year. And the committee rejected Walker’s proposal to exempt school supply shoppers from sales taxes during one weekend before the next school year starts.

I think this budget marks the end of the Conservative Revolution in Wisconsin. It is just another budget that nudges here and pinches there. It spends more than the last budget and gives targeted tax breaks to the politically favored. It lacks any significant reforms and fails to transform the state’s government. It is a caretaker budget that’s only purpose appears to be to not anger anyone before the next election.

The Republicans who run Wisconsin have lost their will to lead.

State Legislators Near Budget Deal

Meh.

Leaders of the state Legislature’s budget-writing committee said Tuesday they have a plan to resolve the most contentious area of the state’s overdue budget: how to fund Wisconsin’s roads and bridges.

The plan slightly trims Gov. Scott Walker’s road-borrowing blueprint, imposes a new fee on electric and hybrid vehicles and moves the state closer to collecting highway tolls, according to the committee’s co-chairpersons, Rep. John Nygren and Sen. Alberta Darling.

The great missed opportunity of this budget was to make dramatic reforms in the size and scope of government. The problem with the transportation budget is that Wisconsin still spends way too much – much more per mile than comparable states – and legislators refuse to make serious reforms in the way the state goes about building and maintaining our transportation infrastructure. Instead of tackling the fundamental problems while Republicans control the entire law-making apparatus of state government, they have chosen to nibble around the edges and kick the can a little further down the road.

As for the framework of a deal itself, the biggest item, symbolically if not fiscally, is the imposition of a new tax on electric and hybrid vehicles. While I abhor the notion of a new tax to just prop up bloated spending, this tax is conceptually palpable.

As I said, the big issue is the spending, but a secondary issue is that the funding mechanisms for transportation isn’t as applicable as it once was. Wisconsin funds transportation by the vehicle registration fees and by the tax on gas. The gas tax was intended as a proxy for usage. In general, the more gas one buys, the more they are driving, the more they are using the roads, the more they are paying for the roads. But electric cars (and hybrids to a lesser extent) subvert that proxy.

If we want to stick to the notion that people who use the roads more should pay more for them, and we don’t want toll roads, then we need to find a way to impose more taxes on those who use the roads but don’t buy gas.

I was struck by a quote in a biography of Robert Morris that I’m finishing up. In countering David Howell’s opposition to the Impost Law in his native Rhode Island, Morris said:

“As all taxes are unpleasant, some state will be found to oppose any which can be devised, on quite as good ground as the present opposition. What then is the Consequence?”

The same is true here. The drivers of electric cars and hybrids will protest a new tax on them, but opposition and clams of unfairness can be found in any tax. At some point, if we have decided that we collectively want to spend this money, we have to tax people to get the money somehow. It seems that spreading the burden out on as many users of the system as possible is the fairest way to do it.

Budget Deal?

Perhaps.

Gov. Scott Walker offered a change to his budget plan this week to Republican leaders feuding over how to pay for road projects in an effort to break a 20-day impasse, but it’s unclear if it’s enough to get both houses back to the negotiating table.

“There’s no deal yet. That’s for sure,” Senate Majority Leader Scott Fitzgerald, R-Juneau, said Thursday after he relayed to his members the governor’s offer to use $200 million slated for tax cuts for road projects instead, drawing down bonding levels.

But Walker’s offer did win support from Assembly Speaker Robin Vos, R-Rochester, and Assembly Republicans, who in letters to Walker and Senate Republicans on Thursday said they accepted the governor’s proposal and want to resume work on the 2017-19 state budget as early as next week.

[…]

Walker’s offer eliminates a $203 million tax cut that would instead be used to reduce or completely wipe out all new transportation bonding in the 2017-19 state budget, the governor told reporters.

Illinois Budget Hits Wisconsin

Heh.

A set of tax hikes recently approved in the Illinois state budget will reduce Wisconsin’s general fund by $51 million in the next state budget, according to a memo released Tuesday by the nonpartisan Legislative Fiscal Bureau.

The Illinois budget, enacted last week after a two-year stalemate by a legislative override of Gov. Bruce Rauner’s veto, includes a 32 percent tax increase that will bring in an additional $5 billion for the state. Because of an income tax reciprocity agreement between the two states, that means Wisconsin’s budget will take a hit.

The agreement has been in place between the two states since 1973. It allows people who live in one state and work in the other to pay income taxes only in the state in which they live. Because Wisconsin has more residents working in Illinois than Illinois does in Wisconsin, Wisconsin makes a payment to Illinois each year. In addition, Wisconsin residents who earn income in Illinois other than personal service income pay taxes on that income in Illinois, then claim a credit in Wisconsin.

Those two factors together will result in a $51 million reduction to Wisconsin’s general fund in 2017-19, according to the memo.

While unpleasant, some perspective is necessary. This $51 million represents about 0.07% of the state budget. It’s a rounding error, sadly. That’s how much our state government spends.

It’s About the Spending

My column for the Daily News is online. Here you go:

Gov. Scott Walker has taken the first step in Wisconsin’s biennial budget process by introducing his executive budget. Walker calls it a “reform dividend” budget that is able to boost spending thanks to the reforms enacted in earlier budgets. There is a lot to like about Walker’s budget, but it suffers from a fundamental flaw: it spends way too much.

The governor’s executive budget is the first step in what will be a lengthy legislative process before Wisconsin gets to a final budget. The Legislature’s Joint Finance Committee will begin working through the governor’s budget to add and remove their own priorities. The budget that comes out of the JFC will then be debated and passed by both houses of the legislature; the versions that pass each legislative house will be reconciled and sent to the governor; the governor will issue vetoes; the legislature will consider overriding vetoes; and then we will have a final budget. There is a long way to go.

Despite the fact that the governor and both houses of the Legislature hail from the same political party, there are some sharp differences of opinion regarding Wisconsin’s budget priorities. There have already been fierce intraparty clashes over transportation funding, debt load, potential tax increases, and other issues. The final budget will look substantially different than the governor’s budget proposal, but Walker has begun the conversation by making his priorities clear.

Signaling that Walker intends to run for reelection next year, his budget includes a lot of tax cuts and spending increases targeted at various interest groups. Most of the nearly $600 million in tax cuts comes from changes to the income tax and eliminating a portion of the state property tax, but the budget also includes several smaller targeted tax cuts.

The governor’s budget increases spending in a number of areas including an additional $649 million for K-12 schools and $105.2 million more for the University of Wisconsin System. There are also spending increases for tech schools, welfare, work force development, prisons, historical society, health services, transportation, the building commission, shared revenue and more.

Walker’s budget also includes some terrific reforms and accountability measures. The budget finally eliminates prevailing wage statewide, which will save taxpayers millions of dollars on needed work. It contains reforms to welfare and work force development designed to help people break the cycle of poverty and become successful in the work force. Under this budget, Wisconsin will self-insure its employees for health coverage. This is something that many large companies already do and will save taxpayers millions of dollars.

In what is garnering the most pushback, Walker’s budget increases spending for K-12 education and the University of Wisconsin, but does so with some added accountability. K-12 schools that have not already taken advantage of the tools given them in Act 10 to make reforms may not be eligible for the increased state funding. Much of the increased spending on UW will only come after UW makes reforms like offering a 3-year degree option.

But for all of the good it contains, one cannot escape the fact that Walker’s budget still spends too much. Indeed, despite the myth of “cuts” and “austerity” perpetuated by both political parties, Wisconsin has increased spending in every budget Walker has signed. This is despite the fact that Wisconsinites’ ability to pay has still not recovered from the Great Recession.

Let us look at the numbers. Gov. Jim Doyle’s last biennial budget for 2009-11 spent $61.9 billion. The first Walker budget spent $64.1 billion. Since then, Wisconsin’s biennial budgets have increased spending every time to $68 billion to $72.6 billion and now $76.1 billion. The budget that Walker just proposed spends a full 23 percent more than Gov. Doyle’s final budget. “Austerity,” my foot.

Meanwhile, over the same time period, Wisconsinites’ income has struggled. In 2008, the year before Gov. Doyle passed his last budget, the real median household income in Wisconsin was $57,348. It took a beating in 2009 after the Great Recession and dropped to $55,227. Since then, real median household income has dropped more before finally inching up last year. It still has not recovered to the 2008 level. The real median household income since 2009 has moved to $53,269, $53,110, $52,709, $52,370, $52,683, and finally in 2015, to $55,638. As you can see, the median Wisconsin household is earning $1,710 less per year since 2008, but being asked to pay for a state budget that spends 23 percent more.

If Wisconsin’s state spending largesse cannot be justified by an increase in Wisconsinites’ ability to pay, then perhaps the increased spending is being offset by an increase in population and new taxpayers? No. Since 2010, Wisconsin’s population has only increased 1.6 percent. And according to IRS migration data, the aggregate adjusted gross income for people leaving Wisconsin is greater than those coming in. Essentially, Wisconsin is losing higher-earners and retirees to low-tax states and replacing them with lower earners.

Gov. Walker and the Republicans deserve tremendous credit for the immensely beneficial and consequential budgetary reforms they have enacted and for managing the state’s finances in a responsible manner. Long gone are the Doyle budgets of massive deficits and illegal fund raids thanks to mature management of the state’s finances.

But Wisconsin remains a tax hell precisely because it remains a spending hell. For all of the good that Walker and the Republicans have done, they have not addressed this fundamental problem and it drags down everything from economic growth to work force availability to the everyday lives of Wisconsinites just trying to keep enough of their money to build a better life for themselves.