Saturday, November 16, 2019

Wis Policy Forum shows how tax cuts, spending choices stopped making Wis special

I wanted to give few items from this week's Wis Policy Forum report on 2017 tax-spending stats from the Census Bureau. This looked at how Wisconsin compares with other states on various types of tax burdens and in how much it spends.

To begin with, the Policy Forum points out that Wisconsinites pay a lower percentage of their incomes in state and local taxes than they did 20 years ago.
A look further back shows 2017 taxes (10.3% of income) fell from the 11.5% they took up in 2007 and 12.4% in 1997. The state’s tax ranking also fell from seventh highest in 1997 and 16th highest in 2007. The 16.7% decrease since 1997 in the share of income going to state and local taxes in Wisconsin was the eighth-largest among all states and the second-largest in the Midwest, behind only Indiana. (For neighboring states, see Figure 1.)
As you can see, Wisconsin's taxes have been reduced more than Minnesota, Illinois and Iowa over those 20 years measured, but still is slightly above the levels that the country as a whole pays.

But that tax ranking is made up of several different types of revenue sources. Wisconsin has a higher income tax than most states, but a lower sales tax at the state and local levels. Similarly, Wisconsin's system of loading most local government services onto the property tax raises that burden compared to most other states.
Property tax levies by municipalities, schools, counties, and other local governments represent the single largest tax in the state at 3.5% of personal income in 2017. Though that figure was unchanged from the previous year, the state’s property tax ranking in 2017 fell by one slot to 16th highest....

Wisconsin’s individual income tax takes up the next highest share of income at 2.8%, which was 11th highest in the country in 2017. The tax’s share of personal income and its national rank were both unchanged from 2016. Again, the ranking would change if we looked at some subsets of income taxpayers.

The sales tax—the last of the state’s three big taxes—took up 2% of personal income in Wisconsin, ranking the state 33rd nationally. Those figures have been essentially unchanged since 2009.
On the spending side, Wisconsin is middle of the pack at 24th in the nation. But what we spend money on has changed significantly over time. The Policy Forum says this is especially true in education spending, where Wisconsin used to be among the leaders in investing, but now is merely average.
Spending on K-12 schools in Wisconsin accounted for 4.1% of personal income in 2017, which ranked 24th highest and equaled the national average. That was significantly less than the 5.3% of income spent on K-12 education in 1997, which ranked sixth. Complicating comparisons, however, is the fact that 2011 Act 10 ended most collective bargaining for teachers and most other public employees and lowered school and local government spending on workers’ benefits. In 2017, higher education spending on universities, colleges, and technical colleges ranked 19th highest at 2.3% of income, which was above average among states.
Oh, lowering taxes and lowering K-12 spending happened at the same time in Wisconsin? It's almost like there's a direct connection between that, as well as our current shortages of teachers both in the classrooms, and with fewer people graduating from college programs.

I also note that Minnesota and Iowa keep pumping up their schools while we don't. Instead, we are closer to Michigan and Illinois these days. Seems like an issue.

Meanwhile, the Policy Forum notes that Wisconsin spends more on Medicaid, Corrections and highways than most places.
Spending on Medicaid and other public assistance programs in the state took up 4.6% of income, ranking 22nd highest. Corrections spending ranked 15th highest in the nation while police spending was 21st highest and fire spending 33rd.

Spending on highways and streets represented 2% of income in 2017, or sixth highest among states. That was a large increase from the 1.3% of income spent in 2016, which ranked 20th.
These 3 items go directly to policy choices in recent years. For example, a reason Medicaid spending is higher in Wisconsin because we refuse to take the expanded Medicaid in the Affordable Care Act, which would push those expenses onto the Feds instead of us (on a related note, a Pew report earlier this year placed Wisconsin 45th in the country for federal aid).

On the Corrections side, this is an obvious effect of the "lock em up" mentality of WisGOPs that has ended up with the state spending more on Corrections than the UW System. The "6th in the US" highway spending number can be connected back to a huge increase in local wheel taxes to fix roads that Scott Walker and the WisGOP Legislature refused to pay for.

And of course, the real story is whether Wisconsin's trend of lower taxes and reducing our previously-strong investments in education and other areas translated into an improved economy in the 2010s. The answer is "Not so much."

So go ahead WisGOP, try to talk up the fact that we continue to fall down in the taxing and spending rankings compared to our Midwestern neighbors. Especially given the stagnant economic growth and recent trend of job loss and rising unemployment in the state, I don't think many non-ahole Wisconsinites are happy with that trade.

Friday, November 15, 2019

As the real economy shows GDP is near 0%, we get....DOW 28,000?

Remember how I’ve mentioned that the economy has stayed out of recession and job loss mostly because US consumers keep spending? Well, we got a report today that indicate that last pillar is starting to crack.
Retail sales increased 0.3% last month, the government said Friday, matching the forecast of economists polled by MarketWatch.

The increase in sales was concentrated in just a few segments, however. If autos and gasoline are excluded, sales rose a scant 0.1%, with almost all of that gain coming from internet retailers….

Internet retailers also reported a nearly 1% increase in sales while receipts at auto dealers and grocers both climbed 0.5%.

Yet sales fell at restaurants, home centers and retailers that sell clothing, electronics, home furnishings, books and sporting goods.

Sales were basically flat at department stores and pharmacies.
With “core” retail sales were only up 0.1%, in a month when the Consumer Price Index rose by a seasonally-adjusted 0.4%. Put it together, and you have a second straight LOSS in real retail sales.

So the consumer is flagging, and on top of that, we got more proof from the Fed that the country’s manufacturing recession is continuing.
U.S. manufacturing output slumped in October by the most in six months as an auto workers’ strike at General Motors Co. curtailed vehicle production and the trade war continued to weigh on other factories.

The 0.6% decline in output followed a 0.5% decrease the previous month, Federal Reserve data showed Friday. Excluding the 7.1% drop in motor vehicle output, which was the largest since January, factory production decreased a more modest 0.1% for a second month.

Total industrial production, which also includes output at mines and utilities, slumped 0.8% in October, the largest setback since May 2018…

The median forecast of economists in the Bloomberg survey for manufacturing output called for a 0.7% decline. Of the three main industrial production groups, mining dropped for a second month on weakness in the oil patch, while utilities registered the sharpest drop since June. Capacity utilization, measuring the amount of a plant that is in use, fell to 76.7% from 77.5%. Capacity utilization at manufacturers decreased to 74.7%, the weakest since September 2017.
And even with the GM strike ending, do you really think that alone will stop the slide, especially when the rest of the manufacturing sector also had no increase in production for October? (check the report if you don’t believe me)

The Federal Reserve Bank of Atlanta looked at this and other disappointing economic data of the week and now predicts that there will be hardly any real economic growth at all in Q4 2019.

Now let’s see what Wall Street thinks about what is clearly a stalling economy.
Stocks rallied to record highs, with the Dow Jones Industrial Average topping 28,000 for the first time, Friday after White House officials said the U.S. and China are getting closer to a phase one trade deal.

"The important thing is to make sure that the deal is what we think it is," Commerce Secretary Wilbur Ross told FOX Business' Maria Bartiromo. He says there is a "very high probability" of a deal, but cautioned "the devil is always in the details."

Trump’s economic adviser, Larry Kudlow, likewise on Friday indicated the two sides were close to a deal and talks were so far "constructive."

Friday's buying ran the Dow Jones Industrial Average up more than 221 points, or 0.8 percent. It took 90 trading sessions for the index to rally from 27,000 to above 28,000
So Wall Street keeps blowing this stock market bubble higher because of BS statements from the Trump Administration? On a deal that hasn't been struck and would change...what???

I caught an exchange on Bloomberg this morning from two investment strategists, and both admitted that at this point, any trade deal with China won’t change the underlying fundamentals of the US economy. And both seemed perplexed as to why the market was Bubbling higher without any legitimate growth for either companies or the real economy.

And besides, is any trade deal going to pump revenues back up for exporting companies that have lost so much of their pricing power over the last 12 months?

When is the reality going to seep into the financial markets that Main Street is hitting the wall? And how much of a pullback of this inflated stock market are we going to see when that happens?

That flashing yellow light seems to be brighter after this week. And if Americans don’t open up their wallets for their Holiday shopping, the light is likely to turn red very soon.

Thursday, November 14, 2019

Another month with job loss and higher unemployment in Wisconsin

Thursday featured another Wisconsin jobs report, and it continued the same, stagnant theme that we have seen for the better part of the last 2 years.

Wisconsin jobs change

Oct 2019
-1,200 total jobs, -1,100 private sector
-1,300 manufacturing

Sept 2019 revision
-1,200 total jobs, -700 private sector
-700 manufacturing

Revised Sept total +600 all jobs, +100 private sector, -2,900 manufacturing

Oct 2018 – Oct 2019
+16,500 total jobs, +17,200 private sector
-7,700 manufacturing

Sadly, that year-over-year total jobs number is actually better than the prior 2 months. Because while the state had a small jobs decline in September and October of 2019, Wisconsin lost 13,400 jobs in Sept and Oct of 2018. Yikes!

I’ll also point out that with two straight months of notable losses in manufacturing, we now have only 100 more manufacturing jobs in Wisconsin than we had 2 years ago. That’s in a time period when the rest of the country has added nearly 300,000 jobs in manufacturing. Again, why is WisGOP still insisting on a tax cut of $300 million a year to “manufacturers” in Wisconsin without ANY requirement of job growth?

The household figures that go into determining the unemployment rate was also more of the same. It rose by 0.1% for the fifth straight month, and while it’s at a still-low 3.3%, that’s the highest in more than 2 years. While the Wisconsin labor force grew by 300 in October, the number of people in the state identifying as “employed” continued to fall.

Going further back, the number of “employed” Wisconsinites has declined by more than 30,000 since peaking in early 2018, and is now at its lowest level in since Trump took office in January 2017. So Trump thinks he can win Wisconsin this time next year by selling his “great economy”? That ain’t happening Donnie.

People on the ground can see that things are already in decline today. And given that the economy is likely to be slower in Nov 2020 than now, with a WisGOP Legislature not doing anything to change the losing policies they put in place, how is this slide going to stop over the next 12 months?

As FY 2020 starts, deficit jumps more

As most of our political media focuses in on the impeachment hearings, the Trump Administration not only released its regular October Treasury Statement, but also gave estimates on the federal budget for each of the next 2 years. And the Trump folks are probably happy that media didn't have the energy to talk about the fiscal issues.

Because the budgetary numbers are not good. The Trump Administration now projects the FY 2020 budget deficit to be even higher than the $1 trillion+ that the Congressional Budget Office estimated in August.

And the reason the Trump Administration says the deficit will decline in FY 2021 is because of a $200 billion+ increase in revenues, a jump of more than 6%. I'm not buying that when it seems very possible that we will be in recession by that point, and at the very least in a low-growth maximum growth scenario like we are in at the end of FY 2019.

Also, the October 2019 numbers were bad on both the revenue and spending sides. Despite the GOP Tax Scam already being in place with its lower withholding tables in Oct 2018, we had less money taken out of people's paychecks last month.

Income tax withholding
Oct 2018 $111.3 billion
Oct 2019 $108.6 billion

In addition, there was a large jump in corporate income tax refunds in the major filing month of October.

Corporate tax refunds
Oct 2018 $0.96 billion
Oct 2019 $4.23 billion

Those two factors led to a decline in revenues of $7.2 billion last month vs the same month a year ago. Before inflation. On the spending side, outlays were up $26.8 billion, leading to a total increase in the deficit of $34 billion.

Maybe this gets fixed with the calendar for the next month, but as FY 2020 begins, the country's fiscal situation is flashing major warning signs for now

Tuesday, November 12, 2019

More cold, more salting and plowing, and a need to pay for it

The record cold and early-season snows have led to a lot of already-squeezed local communities facing difficulties in having enough money to keep the roads clear as 2019 nears a close. And because people and businesses need to travel, that unexpected cost means other priorities take a back seat.
In Dunn County, highway commissioner John Sworski said $1.2 million was budgeted for snowplowing and road salt in 2019. He said that total was based on a five-year average of winter maintenance costs. But February was anything but average, he said…

"We already exceeded 100 percent of our winter maintenance budget in March, April," Sworski said. "By that time we had basically gone through our whole yearly budget with anticipating that there’s two and a half to three months of winter yet to come here before we get to our new fiscal year January 1."

Because the winter maintenance budget had already been spent, Sworski said he had to pull around $1 million from funds slated for summer road construction to ensure there was enough money to pay for plowing through the end of 2019.
It’s especially interesting coming on the heels of a report that WisDOT sent to the state’s Joint Finance Committee on October 22 – before the snows of the last 2 weeks started to fall. This report detailed their plans for using highway maintenance and operations funds, and went over their plans for paying for local communities to plow and care for state and federal highways, under a set-aside known as Routine Maintenance Agreements.
…Activities include winter and non-winter routine maintenance such as snow plowing and de-icing; small crack filling and the application of sealcoats; interim repair of highway surfaces and roadside structures; bridge, drainage and culvert maintenance; mowing and vegetation control; sign maintenance and replacement, and other measures deemed necessary to provide adequate traffic service.
If you dig into the April 2019 report filed with the Joint Finance Committee, you’ll see that $5 million in additional funding was given to the counties for the last half of CY 2018 to take care of these costs, but $5 million was reduced from the first half of CY 2019 to make up the difference.

In addition, you’ll notice in that April request that WisDOT had to tap federal funds to take care of the severe winter from the first 3 months of 2019.
As winter costs rose, it became apparent the reserve would not be sufficient. The Department identified federal funding to supplement budgeted segregated state funding for certain federally eligible activities. This allowed the segregated winter reserve to be increased to $15 million [from $11 million]. Unless late winter weather or spring flooding significantly exceeds expectations, the Department does not anticipate an FY19 request for supplemental funding….
WisDOT didn't make an extra request for funds for FY 2019. However, if you look ahead to the July 1, 2019 – June 30, 2020 fiscal year, the winter reserve is back down to $13.8 million from that $15 million, and the projected amount being sent to counties through the RMAs also goes down.

RMAs to counties
Jan – June 2019 original $86.0 million
Jan – June 2019 revised $81.0 million
July – Dec 2019 $66.2 million

And now we have the severe winter weather of late October and November driving up costs at the local level, as Wisconsin Public Radio chronicled this week.
Wisconsin County Highway Association Executive Director Dan Fedderly said the heavy snows of February have hit snowplowing budgets hard across the state but parts of southern Wisconsin including Madison, Milwaukee and La Crosse, may have gotten the worst of it. He said highway commissioners around Wisconsin will be watching their budgets closely as winter takes hold once again in Wisconsin.

"You know, whatever happens right now will be on top of what was the majority of last winter’s cost," Fedderly said.
This higher usage of salt and plowing is going to have to be made up for in some way over the last 6 weeks in this year, or in the form of less money for the locals to carry over into 2020, and possible deferments in maintenance for next year.

Fortunately, the first Evers budget added more money in state aids for maintenance, as part of a $320 million increase in highway rehab over the next 2 years. But it might not matter that much if the weather continues to be as brutal as it has been. You might want to file this away as the winter drags on, because we an already-stretched DOT might have to come up with more money to take care of plowing and salting in the next few months.

Monday, November 11, 2019

Assembly's rural broadband tax cut showcases another WisGOP two-step of BS

Tomorrow the State Assembly is going to have another floor session. And one of the bills being discussed would have generally positive effects on computer speeds in rural Wisconsin, but might indirectly raise property taxes for the customers of that upgraded computer service.

The state’s Legislative Council describes how telecommunications companies would get a write-off on their property taxes for new activities dealing with providing rural broadband.
Under current law, the real and tangible personal property of a telephone company that the Department of Revenue (DOR) determines is used more than 50 percent in the operation of the telephone company is not subject to general property tax. Rather, such property is subject to a specific tax collected by the DOR (“telephone company tax”) unless an exception applies.

2019 Assembly Bill 344 adds “qualified broadband service property” to the current list of telephone company property that is exempt from the telephone company tax. For purposes of the exemption, qualified broadband service property is defined to mean either:

Tangible personal property installed before 2020 that is used to provide internet access to rural areas at speeds of at least 25 megabits per second download and three megabits per second upload.

Tangible personal property installed in 2020 or later that is used to provide internet access to rural or underserved areas at speeds of at least 25 megabits per second download and three megabits per second upload or certain download and upload speed benchmarks designated by the Federal Communications Commission, whichever are higher.
Interestingly, under the amended bill that the Assembly will discuss, new services and infrastructure will get their taxes written off before providers that already are providing this type of broadband service.
In general, the amendment incentivizes new installation in rural and underserved areas by providing a tax exemption on such property four years before the exemption for existing property in rural areas may be claimed. Specifically, the exemption for eligible property installed in 2020 or later in rural and underserved areas first applies to property tax assessments beginning on January 1, 2021. The exemption for eligible property installed before 2020 in rural areas first applies to property tax assessments beginning January 1, 2025.
To back up, the Legislative Fiscal Bureau looked into this bill when it went through the Joint Finance Committee a couple of weeks ago, and noted that under current law, phone companies and other telecommunications businesses don't pay property taxes, but instead pay a tax to the state's Department of Revenue.
Due to their unique nature, most public utility property in Wisconsin is exempt from local property taxation, and instead, public utilities are subject to state taxation. The Department of Revenue (DOR) administers the state public utility taxes. The tax on telephone companies is a state property tax, where the value of telephone company property is determined based on the municipality where it is located and multiplied by the net property tax rate of the corresponding municipality. For tax year 2018, state taxes on telephone companies totaled $67.2 million, based on an assessed value of $3,321.4 million, which included $2,993.1 million in personal property.
As the bill is written today, the LFB said it would lead to a lot more property that not only won't be assessed and taxed by local authorities, but will lead to a few million dollars for the broadband companies.
As noted above, the taxable value of telephone company personal property equaled $2,993.1 million in 2018, and just over half of that value is estimated to be in rural areas. Further, of that property, 67.25% is estimated to be broadband service property, and 33.50% is estimated to be qualifying broadband. Therefore, 11.35% of all telephone company personal property is estimated to qualify for the exemption (50.37% x 67.25% x 33.50% = 11.35%). Between 2018 and 2020, the value of telephone company personal property is estimated to increase by 4.61%, as investments in new equipment exceed depreciation and retirements. Based on these assumptions, the value of property exempted by the proposal is estimated at $416.8 million in 2020 and $454.8 million in 2021, and the corresponding tax reductions are estimated at $8.0 million and $8.7 million. On a state fiscal year basis, general fund tax collections are estimated to decrease by $11.8 million in 2020-21 and $9.1 million in 2021-22. A one-time effect in 2020-21 results from the difference between the tax year and fiscal year.

Fiscal Effect of Substitute Amendments. Based on the preceding analysis, the substitute amendments would reduce telephone company taxes by an estimated $1.5 million in tax year 2021. As more qualifying property is placed in service over the ensuing years, the tax reduction would increase each year and equal an estimated $5.5 million in tax year 2024. After the second exemption takes effect in the ensuing year, the tax reduction is estimated at $10.6 million in tax year 2025 and $11.3 million in tax year 2026. On a fiscal year basis, the decrease in GPR tax collections is estimated at $2.3 million in 2021-22, $3.5 million in 2022-23, $4.9 million in 2023-24, $6.0 million in 2024-25, and $13.0 million in 2025-26.
On a related note, if state plans for broadband expansion are followed, a whole lot of new infrastructure would get this exemption starting next year. As noted by the LFB, Wisconsin is slated to greatly increase the amount of broadband grants for underserved areas over the next 2 years.

You may remember that the broadband grant program came up a couple of weeks ago in Joint Finance because the Evers Administration wanted to add another individual to evaluate and administer the increasing amount of grants.
PSC staff argue an additional 1.0 position remains necessary to adequately complete all tasks associated with grant management, including: (a) monitoring activities under open grants; and (b) drafting grant amendments to address changes in projects. PSC staff contend additional grant oversight is needed to maintain sufficient fiscal controls of grant expenditures. PSC staff also note the number of grants awarded each cycle has generally increased, particularly as additional funds have been appropriated to the program. Although grant awards have not yet been made for the 2019- 21 biennium, Commission staff expect that the total amount of awards will be larger, and the complexity of projects will be higher, as remaining unserved or underserved areas likely require relatively larger allocations of funding to establish broadband infrastructure.
That request was rejected by Joint Finance co-chairs John Nygren and Alberta Darling, who said Evers needed to find positions to eliminate that would offset the new job dealing with broadband grants. This is despite the fact that the position would have been paid for from money that the Public Service Commission already has, with Wisconsin taxpayers or companies not paying an extra DIME.

Remarkably, both Darling and Nygren voted to expand this property tax write-off for companies that provide rural broadband in the same meeting where they rejected Evers’ request for more people to oversee the rural broadband program. So now rural residents might have to wait longer to get rural broadband, because the grants can’t get processed as fast. At the same time, they pay higher property taxes because the property that the telecom company uses to supply rural broadband is taken off the tax rolls, and now this bill gives those broadband companies an extra tax break!

But small-time insurance salesman John Nygren keeps telling us that Republicans are the party that looks out for small-town Wisconsin.

Surrrre Johnny. Someone needs to call this Mediocrity from Marinette out on the Assembly floor tomorrow for not seeming to make the connection between his poses and the policies he votes for. And this broadband expansion issue along with the tax break he wants to give out to companies is a great example of this disconnect that Nygren and company hope their rural constituents don;t notice.

Sunday, November 10, 2019

More warning signs about UW System as it looks for a new president

Now that the UW System is choosing a new president, they've decided to change the way that they make that selection. And it doesn't sound good.
The nine people who will identify System President Ray Cross’ successor are the smallest in number and least diverse presidential search committee going back at least to the early 1990s. The committee’s pick will oversee the state’s public university system, its 167,000 students and an annual budget of $6.3 billion.

The next leader will also inherit lingering tension with faculty and staff who believe the Regents have not advocated strongly enough against controversial, Republican-promoted laws and policies in recent years, such as the weakening of shared governance principles, the removal of tenure protections from state law and large budget cuts....

Board of Regents President Drew Petersen appointed the search committee last week, and the group is expected to convene in December. It includes four Regents, one student Regent, one former Regent, two chancellors and a provost.
And 4 of the 5 current and former Regents were appointed by Scott Walker, not current Governor Tony Evers.

You'll notice that the search committee does not include one current faculty member, staff member, or student, which kind of seems to be important constituencies to consider when it comes to the future leader of a university system. Especially when retiring President Ray Cross was given votes of no confidence from faculty and students at multiple campuses for allowing an anti-UW GOP to run roughshod over the System through budget cuts, speech codes and the eradication of tenure.

Another story from this week illustrated to me how a small group with personal agendas is getting to set the agenda for the UW over the people who actually work and attend classes there. And it's from what seems to be a positive story.
The University of Wisconsin-Milwaukee has received a $10 million donation toward construction of a new research vessel intended to help advance the scientific understanding of water and the Great Lakes.

The money from anonymous donors, and given through the Greater Milwaukee Foundation, equals the largest gifts ever received by the school, officials said.

The research vessel, to be called the Maggi Sue at the request of the donors, will cost an estimated $15 million. A capital campaign for the ship includes an additional $5 million for operational costs.

The donation is a major step toward construction of a ship that will expand UWM’s research capabilities on the Great Lakes and provide students more opportunities for onboard study.
So great, the opportunities for the School of Freshwater Sciences will be helped through this new $10 million ship. But that investment by donors also means that the school needs to follow by making that school an emphasis with their dwindling resources from other areas. Which is a problem when it comes to the university's overall mission, much like what was mentioned in this movie that was shot at UW-Madison over 30 years ago.

"It was a really big check..."

And that's what concerns me about both of these stories. It's another indicator that the ALEC desire to have the UW System be one that serves the needs of corporations and big-money donors over the needs of society, or even the wants of the individuals that attend the school.

This has to stop. Plenty of damage has already been done, but more can follow if we don't get stop these oligarchs from calling the shots of a UW System that's supposed to be for all Wisconsinites.