Thursday, July 20, 2017

$712 million in DOT borrowing down to $0 in 2 days? Not sure it adds up

There have been a few developments regarding highway funding in recent days. So let’s pick up on this week’s proceedings regarding the DOT budget, and see where we stand.

First, let’s go into the Senate Republicans’ plans, courtesy of the Legislative Fiscal Bureau (the DOT plan is on pages 567 to 593 of this PDF). The biggest headline has been the Senate GOP’s plans to throw $350 million onto the state’s credit card to continue roadwork on Southeastern Wisconsin freeways.
Provide $350,000,000 BR in general fund-supported bonding for transportation purposes for the southeast Wisconsin freeway megaprojects program. The estimated debt service on these bonds would be equal to $633,800 GPR in 2017-18 and $7,809,600 GPR in 2018-19. Enumerate the I-94 East-West freeway project as a southeast Wisconsin freeway megaproject. Define this project as the reconstruction of the I-94 freeway in Milwaukee County, from 70th Street to 16th Street, including all interchanges, and including work on local roads as necessary for the completion of this project.
Guess they want to redo and expand I-94, even if Milwaukee social groups and elected representatives in the area don’t want it. But when the greedy oligarchs at the Metro Milwaukee Association of Commerce speak (and gives $362,500 to the Republican Governors’ Association), the GOP follows those requests.

As for the funding part, the Senate GOP would borrow $350 million of General Fund money, meaning that future payments will inevitably take from the available funding for schools, medical care, and other social services. And the extra funding is not offset by much reduction in borrowing from the Transportation Fund side, meaning that there is a total of $712 million in borrowing in the Senate GOP bill, more than Governor Walker’s proposed level of $500 million (which was all Transportation Fund-based).

That’s well above the $200 million that the Assembly GOP wanted for the 2017-19 budget, and leaders of that house said the Senate GOP “didn’t come up with something that we could live with” on transportation.

But with today came news of Governor Walker being OK with getting rid of his stupid $1-a-week income tax cut, and instead using the $200 million in General Fund money that’ll be restored to fund the roads. Assembly GOP leadership quickly leapt to agree with the Governor, saying that the cuts in borrowing that would result from that transfer comes closer to their goals.
We believe this compromise utilizes our current resources wisely by taking all or a significant portion of the proposed income tax cuts from this budget and using the savings to provide funding for our transportation system. In addition, you have offered the possibility of no new transportation bonds, which we appreciate. However, we understand there is a possibility of new bonding based on future federal appropriations and revenue-supported bonding.
That second part of the paragraph requires some more clarification, because I don’t see how $500 million borrowing - $200 million with no tax cut = $0 borrowing. Is the Assembly GOP assuming that all other portions of their prior DOT proposal from Dale (Koo-Koo) Kooyenga are going to go through as well? That plan raised $300 million for the Transportation Fund by making the state's gas tax be susceptible to the 5% sales tax (an increase of about 7 cents a gallon), while reducing the current "base" gas tax by a nickel.

The other option to reduce borrowing to $0 is to cut highway spending by $300 million, which means delays in major projects of 1-2 years. I'd like to see what the formal budget amendment looks like, because Walker is either signing off on a slight gas tax increase (which would put him on the wrong side of DC lobbyist Grover Norquist), or he's causing more delays by striking a "no borrowing" pose.

In addition, while transferring General Fund money is probably better than borrowing it (especially borrowing it from the General Fund, like the Senate GOP wanted to), that doesn’t help anything for the future. It doesn't change our $1 billion structural deficit in the 2019-21 General Fund at all, if you assume $200 million will also be sent over to the Transportation Fund in the next 2-year budget. Combine that with all of the General Fund money that is being proposed to pay for property tax relief in this budget, and it makes me wonder what future programs are going to be cut and which taxes are going to be raised if we get any type of economic or political stagnation over the next 2 years that negates the LFB's January projection of a "Trump Boom" (with a bust getting more likely by the week).

And while media may portray the developments of this week as a method of “shoring up the state’s Transportation Fund,” it looks like it’s merely trading part of the Transportation Fund’s shortfall by the possibility of increasing the one in the General Fund. Yes, it’s better than where we were, and miles better than the Senate GOP’s pile of crap. But it’s nowhere near where we should be or need to be if we’re serious about filling the many (pot)holes in the state budget. And given the mess that is TrumpWorld these days, I'm not thinking Scotty is going to get the help he needs from DC he needs to allow him to stay in GOP BubbleLand while getting the state's road needs take care of.

Wednesday, July 19, 2017

Plenty of bad in Senate GOP budget...before we get to DOT

Now that I've dug into the WISGOP Senate budget some more (and it is basically a rewriting of Gov Walker's budget), here are a few reactions. I'm going to talk about the non-DOT parts here, and will take up the DOT mess in another post.

1. The good - It finds money by dumping two of Walker's dumbest talking point gimmicks in the budget. The first is a $200 million income tax cut that the Legislative Fiscal Bureau estimated would give the average Wisconsinite around $1 a week.

The other gimmick that goes away under the Senate GOP plan was Walker's proposed sales tax holiday, which would have done next to nothing for helping the state's economy, and would have been an extra burden for retailers.

2. The not so good- Another way the Senate GOP finds more money is by getting rid of $50 million that had been set aside in a contingency fund for health care spending. This was a sensible hedge by the Joint Finance Committee since who knows how much the Feds would cover under Trump/Ryancare, but the Senate GOPs decided to use the money and roll the dice.

The Senate GOP also includes several gimmicks to cut property taxes. In addition to sticking with the $180 million in tax dollars that Walker wanted to spend to buy down the state's property tax for Forestry operations, the Senate GOPs pay back WMC by paying off $239 million to get rid of the state's personal property tax, which generally hits equipment and other business possessions.

The Senate GOP also tried to take care of the possibility of higher property taxes resulting from fewer Lottery sales by using $45 million of General tax dollars to pay back retailers who sell Lottery tickets. This enables $45 million more in Lottery sales to go to property tax reductions. If that's all you care about, I suppose that's a good thing, but $465 million is a lot of tax dollars to shell out to reduce someone's bill, and with a $1 billion General Fund deficit looming for 2019, that is not likely to be sustainable.

3. The really bad- The Senate GOP plan gets rid of Walker's proposals to expand the state's Earned Income Tax Credit (EITC) and the state's Working Families Tax Credit. Both moves will raise taxes on lower-income workers. At the same time, this proposal gets rid of Wisconsin's Alternative Minimum Tax (AMT), which overwhelmingly benefits richer Wisconsinite's. This continues the 6-year trend of Walker/WISGOP tax cuts favoring the rich, and shows yet again who this group REALLY works for.

The same applies for provisions in the Senate GOP bill that expand K-12 school vouchers yet again. Not only does the Senate GOP raise voucher eligibility to families of 4 that make nearly $54,000, but they also have other giveaways like not allowing for incomes of current voucher families to be verified, and approving the setup of "virtual private schools", where a teacher instructs from a remote location.

Combine those giveaways to the voucher lobby with prior revelations that the voucher program is taking more money and students from K-12 districts than previously thought, and now vouchers are projected to take $36 million more in taxpayer dollars than what was in Walker's original budget. And almost all of that is "paid for" by funneling away money from public K-12 districts in Wisconsin.

Now, all of that money-funneling to vouchers may make GOP donors and puppetmasters like Betsy DeVos and Scott Jensen happy, but I'm betting most of the rest of the state would hate it. Especially when school property taxes rise to make up the difference.

So this Senate GOP bill goes well beyond the binge of borrowing for roads, and while it at least admits it needs some revenue to work out, it is still badly lacking and has plenty of partisan giveaways of taxpayer dollars. It should get tossed to the curb in favor of real solutions with real fubding, but I bet some of the bad plans in Section 2 and 3 end up in the final budget...whenever that document might get passed.

Tuesday, July 18, 2017

New Senate GOP budget plan = same old failing BS

Since it's raining up North, I got a few minutes to react to the Senate GOP's "new and improved" budget plan.

First of all, it looks like Fitzgerald and the GOP Senators want to borrow $712 million for,roads, with $350 million from the General Fund.

This is a horrible idea. Apparently it's not just the DOT Fund that the Senate GOPs want to screw up, but the General Fund too. I mean, we already have $1 billion deficits in both these funds, so what's another few hundred to pay off in the future?

Oh, and it looks like the only plan they have for saving money is the same plan they've had for the last 6 years- SCREWING WORKERS, this time by eliminating prevailing wage requirements on construction programs. Hey Wisconsin blue-collars! How is that GOP vote to stick it to the book-learners working out for you tough guys?

Lastly, these guys want to give away another half-billion dollars in this budget by doing WMC's bidding and repealing the personal property tax. This will result in a significant property tax increase on homeowners, or will result in spending ANOTHER $522 million to avoid that unpleasant result.

Right now, I see no extra money being added in revenue that pay for this WISGOP Fantasyland plan, which makes me wonder what is getting cut to pay for it. School aids? Shared revenues? Medicaid?

Here's one thing I do know. SCOTT FITZGERALD AND THE SENATE GOP HAVE NOTHING. They've merely doubled down on the same poser BS that has already delayed this house-of-cards budget by 3 weeks. And I'm betting it'll be held up for a few weeks more, if this empty, no-solutions proposal is an indication.

Sunday, July 16, 2017

Little mid-Summer break

I could talk a lot about issues of the day. But this is the view from Vilas County

Current air temp- 72. Low tonight, 45. Between that and no work, I will take it. It just amazes me that people who live here vote for so many legislators who don't care about how special these scenes are (cough-Tom Tiffany- cough- Sean Duffy)

Saturday, July 15, 2017

Social Security is secure- if we choose it to be

A couple of days ago, the Board of Trustees for the US's Social Security program released its report for 2017. As always, it had some interesting numbers and projections, starting with the typical long-term outlook that is often quoted as politicians debate the future of the program.
Annual OASDI cost exceeded non-interest income in 2010 for the first time since 1983. The Trustees project that cost will continue to exceed non-interest income throughout the 75-year valuation period. Nevertheless, total trust fund income, including interest income, is more than sufficient to cover costs through 2021, so trust fund asset reserves continue to grow. Beginning in 2022, cost exceeds total income, and combined OASI and DI Trust Fund reserves diminish until they become depleted in 2034. After trust fund reserve depletion, continuing income is sufficient to support expenditures at a level of 77 percent of program cost for the rest of 2034, declining to 73 percent for 2091. Figure II.D2 depicts OASDI operations as a combined whole. However, under current law, the differences between scheduled and payable benefits would begin at different times for the program’s two trust funds: in 2028 for DI (disability) and in 2035 for OASI. (Social Security for older people).
Not much different than what we have seen in the past, and this graph from last year largely holds, except that the cut in benefits for 2034 would be 23% instead of 21%.

Combining this graph with the updated numbers in this week's Social Security report, it means is that there is a "cliff" that would hit in 17 years that would require either a 23% cut in benefits, or Uncle Sam would have to do what he does with every other program that spends more than it takes in- by borrowing money to make up the difference.

What that chart doesn't show is that the $2.8 trillion in the Social Security trust fund isn't just laying around, it's earning income in low-risk investments. As a result, there was more money in that trust fund at the end of 2016 than there was in 2015.
The trust fund investments provide a reserve to pay benefits whenever total program cost exceeds income. Combined trust fund reserves increased by $35.2 billion for 2016 because income to each fund, including interest earned on trust fund reserves, exceeded total expenditures. At the end of 2016, the combined reserves of the OASI and the DI Trust Funds were $2,848 billion, or 298 percent of estimated expenditures for 2017. In comparison, the combined reserves at the end of 2015 were 305 percent of expenditures for 2016.
So Social Security's trust fund ran a $35 billion surplus in 2016, and has enough money in its bank account to pay for nearly THREE YEARS of benefits even if the taxes that fund it were to go away.

Also worth noting is this passage later in the trustees' report, where they note how much money is NOT taxed for Social Security, due to the cap on taxable earnings for the program (which the report says is $127,200 for 2017, meaning all payroll income above that is taxed at ZERO).
The ratio of taxable payroll to covered earnings (the taxable ratio) fell from 88.6 percent for 1984 to 82.6 percent for 2000, mostly due to much higher increases in wage levels for very high earners than for all other earners. From 2000 to 2010, the taxable ratio varied with the business cycle, rising during economic downturns and falling during recoveries. Specifically, the taxable ratio rose to 85.7 percent for 2002, declined to 82.4 percent for 2007, rose to 85.2 percent for 2009, and was 82.6 percent for 2015.
The flip side of that is pointing out that over 1/6 of Amercians' payroll earnings are not taxed for Social Security which leads me to bring up a simple reform that would likely solve any future funding issues with Social Security. Simply make the tax even for everyone.

Quick math indicates that the Social Security rate could be cut from the current 6.2% (employee) + 6.2% (employer) to 5.2%- + 5.2%, and if we made the rich pay the same percentage as the rest of us, and extended that 5.2% rate to all payroll earnings, it seems like it would raise the amount of revenue going into Social Security. It would be a $67.5 billion tax cut for everyone making income below $127,200 (using 2016's Social Security report), another $67.5 billion tax cut for employers, and that money would be made up and then some (by around $12-$13 billion a year) by imposing that tax on all payroll earnings, including those over $127,200.

Perhaps this evening of Social Security taxes would also have some positive macroeconomic effects, as giving massive amounts of money to high-end earners becomes less worth it for employers...and for CEOs to give themselves. At the same time, smaller employers who don't pay big-time salaries get a minor tax break, and the 90%+ of us that work for a living also get a tax cut. I strongly believe that there is more bang for the buck for the economy for those two groups to benefit, as they are more likely to spend it on activities that actually grow the economy, as opposed to rich people and corporations who tend to save/hoard their money, or spend it on less productive activities like gambling on Wall Street and buying politicians.

But that reality of a slanted-but-fixable tax system and a still-strong Social Security program didn't stop GOPs on Congress from trying to claim the program was in trouble. Buried in a national story mentioning that Social Security was going to give old people their largest raise in 6 years (at 2.2%), is this bit on finger-wagging from a Trump Administration official.
"Congress must act to ensure the long-term fiscal viability and sustainability and survival of Medicare and Social Security," said Health and Human Services Secretary Tom Price. "There are a great many ways that the situation can be addressed. The bottom line is that it must be addressed."
Hey Tommy, I'd worry more about the fiscal viability and sustainability of Americans facing medical emergencies due to inadequate health care, but that's just me.

Bottom line, Social Security is as stable as ever, and merely needs a small tweak on the revenue side or more political will to spend on it to continue as the successful program it has been for the last 80+ years. The only thing we might really have to worry about is if debt costs and our federal budget deficit goes up to maintain the program. While the debt part has its own concerns, there is no way Social Security ever goes "bankrupt"...unless members of Congress choose not to pay it.

These 3 1/2 minutes of facts from America's Favorite Politician are as true now as it was when he did it for the "Koch Brothers Exposed" movie a few years ago (with a few cameos from our own Lyin' Ryan!). The only difference is that the Social Security Trust Fund has about $300 billion more in it than when this video was taken.

Friday, July 14, 2017

Now it's the US budget that's messed up!

Interesting Friday afternoon news dump out of DC, and for once it didn't involve Russia.
The White House said Friday that worsening tax revenues will cause the budget deficit to jump to $702 billion this year. That's a $99 billion spike from what was predicted less than two months ago.

The report from the Office of Management and Budget comes on the heels of a rival Congressional Budget Office analysis that scuttled White House claims that its May budget, if implemented to the letter, would balance the federal ledger within 10 years. The OMB report doesn't repeat that claim and instead provides just two years of updated projections.

The White House budget office also says the deficit for the 2018 budget year that starts on Oct. 1 will increase by $149 billion to $589 billion. But lawmakers are already working on spending bills that promise to boost that number even higher by adding to Trump's Pentagon proposal and ignoring many of Trump's cuts to domestic programs.
These figures are independent of what might happen with the GOP's attempts to repeal and replace Obamacare, but the lower revenue projections should not be a surprise, as yesterday's Treasury statement shows that revenues continue to slump in the 2017 Fiscal Year.

Change in US revenues vs FY 2016
FY 2017 budget +5.9%
FY 2017 year-to-date 1.6%

And as alluded to in the article, the news of higher deficits and lower revenues comes one day after the Congressional Budget Office gave its evaluation of the Trump Administration's first budget. Interestingly, the CBO did say that the Trump Administration's budget would reduce the deficit by a total of more than $3.4 trillion over the next 10 years compared to current law, but that would be because of severe cuts in domestic spending, including Medicaid.
A decrease of $2.0 trillion in mandatory spending (which is spending for programs generally governed by provisions of permanent law), including a $1.9 trillion reduction in spending for health care, as well as cuts to income security programs and student loans;

O A decrease of $1.9 trillion in discretionary outlays (which result from funding provided or controlled by annual appropriation acts) stemming from substantial
reductions in nondefense discretionary spending and from sharply lower outlays for military operations and related activities in Afghanistan and elsewhere
(known as overseas contingency operations, or OCO); and

O A decrease of $0.3 trillion in net interest costs because of lower deficits.
The flip side of that is the CBO says that the Trump Administration's promises of 3% GDP growth isn't close to what they think will happen over the next 10 years, and that the Trump Administration's proposed tax cuts will not magically pay for themselves.
CBO projects that revenues under the President’s budget would total $3.6 trillion (or 8 percent) less than the Administration estimates for 2018 through 2027. CBO attributes the bulk of that difference, about $3.4 trillion, to differences between its economic projections under current law and those of the Administration under its proposed policies.
Related to this, the CBO estimates average GDP growth in the US to be 1.9% over the next 10 years under this Trump budget, not really any different than the 1.8% average growth that they predict for current law.

What's kind of been hidden with all of the discussion with Trumpcare bill and the increasingly obvious TrumpRussia collusion is that we only have 2 1/2 months to get a new budget through before the government shuts down. In addition, Congress likely has to raise the debt ceiling this Fall, and with revenues falling short and the current-year deficit rising, that will likely need to happen sooner than later. And a lot of those GOP nutbags in Congress won't want to go along with that.

So it's not like things are going well in DC anyway, but this disappointing budget news indicates that things may be getting soft economically and fiscally, which is likely the one thing that has kept Trump from hitting "Bush/Nixon nadir" in approval. And it also makes me wonder if those bad numbers are going to be trickling down to the state level, either in the form of Federal budget cuts, or in the form of lower state tax revenues. We're not heading toward recession at this time, but the federal budget news may be a flashing yellow light to pay attention to.

Thursday, July 13, 2017

Disasters keep striking, but Walker budget has less $ to recover

Now that the rains have finally gone away in Southeastern Wisconsin, the cleanup and damage assessments can begin. Heaviest hit seems to be western Racine and Kenosha Counties, including what the police chief in Burlington calls “unprecedented” flooding, with all 4 bridges over the Fox River closed, and thousands still without power.

Governor Walker and Assembly Speaker/hometown boy Robbin’ Vos parachuted into Burlington today to survey the damage, and Walker issued a state of emergency to activate the National Guard and allow for other forms of immediate state assistance. But long-term, there will likely be need for road and bridge repairs associated with these floods, and barring federal help from FEMA, the state may have to be burdened with picking up a decent amount of that bill.

Unfortunately, the floods happened less than 2 weeks after the end of the 2017 Fiscal Year, which means it falls into the next budget. And Scott Walker’s 2017-19 budget plans to cut the amount of tax dollars that is set aside for disaster assistance (as noted in PDF Page 323 of the Legislative Fiscal Bureau’s rundown of the Governor’s budget. These funds are regular tax dollars that are sent over to the Transportation Fund, and are in addition to the $1 million that is regularly set aside in the Transportation Fund for disasters.
Make the following changes to the disaster damage aids transfer appropriation: (a) a decrease of $2,450,000 in 2017-18 to reflect the removal of first year funding from the base; and (b) an increase of $788,200 in 2018-19 to reflect an increase in the estimated amount needed to fund disaster claims in the 2017-19 biennium. 2013 Wisconsin Act 20 established a sum sufficient appropriation from the general fund to fund a transfer to the transportation fund in the second year of each biennium equal to the amount of disaster aid payments made in that biennium in excess of $1,000,000 for any single disaster event. The transfer was estimated at $6,500,000 in 2016-17 under 2015 Act 55. However, this amount was subsequently reestimated to the current base level of $2,450,000 to reflect slower than expected reimbursement claims for damage related to a 2011 storm in northwest Wisconsin (will that have to be paid in this next budget?). The Governor's recommendation would remove the 2017-18 base funding amount and fund the estimated transfer at $3,238,200 ($2,450,000 base funding plus the $788,200 increase) in 2018-19.
This now means that more money needs to be put back into the budget to keep funding for disasters at the same levels that we had for the last budget. And we don’t have that extra money lying around to add back in.

Another disaster that hit this week was in northeastern Wisconsin, where there was yet another incident involving a large animal farm that requires cleanup.
The owners of Neighborhood Dairy reported the spill Monday and have installed a temporary clay dam to contain the runoff.

An agricultural runoff specialist with the Wisconsin Department of Natural Resources said it’s not known how much manure entered Dutchman’s Creek located outside of Freedom, southwest of Green Bay.

Ben Uvaas said Neighborhood Dairy reported at least 20,000 gallons of manure were released from a holding pit.

"The farm estimates 20,000 gallons was lost from the pit," Uvaas said. "So out of that a fraction, a percentage would have gotten to Dutchman’s Creek. That’s probably the best estimate we’re ever going to have for this."
And James Rowen at The Political Environment notes that just adds to the list of manure spills, in an excellent post that also mentions the Walker DNR's inaction and slow-walking of new rules in recent years, despite increasing contamination and spillage from these large farms.

Seeing way too much of this.

For cleanup of these types of spills, the DNR is often called in to help defray some of the damage and put in remediation measures. But that is another provision where the Governor plans to use fewer tax dollars for 2017-19, and instead will deplete the state’s Environmental Fund to deal with runoff pollution (see Page 348).
Reduce by $3,152,500 annually the sum-certain GPR transfer to the nonpoint account of the segregated environmental fund. The bill would reduce the annual GPR transfer from $11,143,600 to $7,991,100. However, the GPR reduction would be offset by a transfer of $3,152,500 each year of the 2017-19 biennium from the environmental management account of the environmental fund.
And even with the transfer from the Environmental Management Account, you will see that the fund condition statements for Wisconsin’s Environmental Management and Nonpoint Accounts (which is at the end of this paper from the Legislative Fiscal Bureau), you will see that what is set aside for operations and cleanup efforts is slightly DOWN form what was allocated in the recently-completed Fiscal Year. And once that money is gone, you’re on your own when it comes to dealing with the mess and contamination that is caused by those mega-farms and their lack of regulation.

In addition, the LFB notes the budget bill is written in such a way that the reduction in tax dollars going to the Nonpoint Fund is permanent, but the transfer from the Environmental Management Account is not.
…the nonpoint account is estimated to begin the 2017-19 biennium with an available balance of approximately $6.6 million. Nonpoint account expenditures are estimated to exceed revenues by $1.6 million in 2017-18 and $1.9 million in 2018-19. Account balances would be sufficient to support such expenditures, and the June 30, 2019, available balance under the bill is estimated to be $3.1 million. It should be noted that transfers from the environmental management account are one-time, while the reduction in GPR transfer would be ongoing under the bill. As a result, adjusted base expenditures in 2019-21 are anticipated to exceed ongoing revenues by approximately $4.4 million annually.
Which means the next budget has to come up with at least another $1.3 million just to maintain operations (before inflation), or has to cut $1.3 million from operations dealing with nonpoint pollution and related issues.

Fortunately, DNR and DOT disaster assistance has yet to be decided on in the delayed 2017-19 budget, so perhaps the recent floods and runoff stories would encourage legislators to at least restore funding to the prior budget’s levels. Heck, maybe to it to handle what seems to increasing needs to deal with these disasters.

But the fact that the extra step would have to be taken because of Governor Walker’s lack of preparation funding speaks volumes. Of course Walker would try every nickel-and-dime trick to squeeze out money of necessities just to clear room for another campaign talking point. And bleeding out programs that protect the environment is just the way the Koch-ALEC crew likes it.

Maybe the WisGOPs should have shot this budget through when they had the chance, because it seems like with every day it gets delayed, some other complication springs up that makes the budget gaps even harder to close.