Friday, April 28, 2017

GDP disappoints, but don't panic...yet

Not a good Gross Domestic Product report for the first 3 months of the Trump presidency. And more concerning to me is the reason why.
rowth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to a 0.3 percent rate in the first quarter. That was the slowest pace since the fourth quarter of 2009 and followed the fourth quarter's robust 3.5 percent growth rate.

The near stall in consumer spending is blamed on a mild winter, which undermined demand for heating and utilities production. Higher inflation, with the reading on the personal consumption expenditures index averaging 2.4 percent - the highest since the second quarter of 2011 - also weighed on consumer spending.
That jibes with the soft retail sales figures I’d been noticing in the early part of this year, and a major part of that low consumer spending number comes from a decline in auto sales, which had been rising strongly at the end of 2016.



That drop in auto sales reduced GDP by nearly $20 billion, and 0.45% for the quarter. Oddly, on the same day that the decline in car sales was shown to hurt US GDP, General Motors came out and announced an increase in earnings nearing 35% compared to 1 year ago. Also noteworthy is that the decline in auto sales has yet to translate to auto layoffs, as auto vehicle and parts manufacturing employment went up by 3,000 in March, and rose by 2,000 for the first 3 months of 2017.

But the decline in consumer spending is concerning as GOPs at both the state and federal level continue to pass and propose wage-suppression measures that aren’t going to help people spend more of the money they have. Combine that with a real disposable income growth being cut it half (1% vs 2% in Q4 2016), the uncertainty in health care coming from Capitol Hill, and Drumpf’s general instability, and is it any wonder that people increased their savings rate from 5.5% to 5.7% in early 2017?

The positive part in the GDP report was on the “investment” side, where a massive increase in mining expenses and home construction kept allowed GDP growth to stay above zero.
Spending on mining exploration, wells and shafts surged at a record 449 percent rate after rising at a 23.7 percent pace in the fourth quarter, accounting for the rise in nonresidential structures investment.

Spending on nonresidential structures accelerated at a 22.1 percent pace in the first quarter after falling at a 1.9 percent rate in the prior period.

Investment in home building rose at a 13.7 percent rate. Exports rose at a 5.8 percent rate, outpacing the 4.1 percent rate of increase in imports. That left a smaller trade deficit, which had a neutral impact on GDP growth.
Of course, some of those stats also could scream “BUBBLE!”, particularly in housing with interest rates going up and wages not matching the sizable home price increases. And with oil prices having a sudden retreat of 8% over the last 2 weeks, you have to wonder if there’s any incentive for those companies to keep drilling and buying equipment in the near future.

These concerns aside, a few other underlying figures from the full report makes me think our economy hasn’t stalled out (yet). For example, inventories were reduced throughout Q1, taking away 0.93% from the GDP figures for that time period. Add that back, and quarterly GDP growth ends up at 1.63%, compared to a non-inventory growth level of less than 1.1% in Q4 2016.

Perhaps growth will pick up in the coming quarters, particularly if shelves need to be restocked, job losses in retail don’t spread into other parts of the economy, and gas prices stay low in the next few weeks. But as a guy who follows the Wisconsin budget closely, it’s noteworthy that in January the Legislative Fiscal Bureau was counting on 2.3% real GDP growth for 2017, and this 0.7% number for Q1 means we now need to grow at a 2.8% rate for the rest of this year to keep up. The US hasn’t averaged 2.8% growth over a year since 2005!

With an economy allegedly near full employment and consumers not willing to shell out for anything other than houses, I can’t see where that 2.8% growth might come from. Makes you wonder if those revenue estimates might not be rosy when they come out in the next week or so, especially once we get a look at the April revenues for the state. Stay tuned.

Wednesday, April 26, 2017

ESPN layoffs sad, structural change in the biz

Today was a sad day for those of us Gen X types that were huge sports fans in our younger days, and it’s a sign of how different things are today. Approximately 100 staffers at ESPN lost their jobs today, and most of them were on-air personnel and reporters. Richard Deitsch at Sports Illustrated has been updating the list of casualties throughout the day, and it is filled with familiar names.
Over the course of the day on Wednesday, a number of staffers announced via social media that they had been let go. Those included the noted NFL information broker Ed Werder; longtime columnist Johnette Howard; espnW staffer Jane McManus; college football and ESPN Radio analyst Danny Kannel; NHL reporters Scott Burnside, Pierre LeBrun and Joe McDonald and a mass of college sports reporters including C.L. Brown, Eamonn Brennan‏, Jeremy Crabtree, Brett McMurphy, Max Olson, Dana O’Neil, Jesse Temple, Derek Tyson, Austin Ward, Ted Miller, David Ching and Brian Bennett. MLB reporter Doug Padilla, ESPN Dallas Columnist Jean-Jacques Taylor, soccer reporter Mike Goodman, ESPNU anchor Brendan Fitzgerald, NFL analyst Trent Dilfer, SportsCenter anchor Jay Crawford, NBA writer Ethan Strauss, Justin Verrier​ and Calvin Watkins, NFL reporter Ashley Fox and longtime MLB reporter Jayson Stark also tweeted they were being let go.

ESPN issued two statements early on Wednesday, including one from President John Skipper and a second from his deputies.

“A necessary component of managing change involves constantly evaluating how we best utilize all of our resources, and that sometimes involves difficult decisions,” Skipper said, in a statement. “Our content strategy—primarily illustrated in recent months by melding distinct, personality-driven SportsCenter TV editions and digital-only efforts with our biggest sub-brand—still needs to go further, faster…and as always, must be efficient and nimble. Dynamic change demands an increased focus on versatility and value, and as a result, we have been engaged in the challenging process of determining the talent—anchors, analysts, reporters, writers and those who handle play-by-play—necessary to meet those demands. We will implement changes in our talent lineup this week. A limited number of other positions will also be affected and a handful of new jobs will be posted to fill various needs.”
As Skipper alludes to, a lot of the moves go along with an updated ESPN strategy to emphasize more of its digital platforms over having a large number of on-the-ground reporters that gather content for its website and shows like SportsCenter. In addition, online services like Hulu or Sling TV has allowed more people to “cut the cord” on cable while still getting ESPN content, and even if you have cable, you can DVR anything and watch a show at your leisure.

Unfortunately, these ESPN layoffs are a natural result to this structural change in the sports journalism industry, especially on television. It’s noteworthy that SportsCenter has basically turned away from being a highlight show in recent years, and instead has become a host-centered show with various long-form segments and not as much on the day’s games and player moves. Cork Gaines at Business Insider hearkened back to words from last year, when two former cornerstones at ESPN- writer/NBA guy Bill Simmons and former SportsCenter anchor Keith Olbermann – had a conversation on Simmons’ podcast about how the media world had changed.

Olbermann noted that ESPN’s non-game programming strategy had become obsolete by the mid-2010s, because people get their sports news and highlights in a different way than when me and my college buddies were gathered around the Witte Hall dorm den to watch Keith every night in college.
"[Former ESPN Executive Editor] John Walsh said — I think this was 1993 — 'You know, we have done all sorts of marketing and research, and no matter what happens to ESPN, as long as we have 'SportsCenter' and it is a success, we will be dominant in this field no matter what competition arises. Our research indicates that our fans will stick with us if we lose the NFL contract, and they will stay with us if we lose this personality. As long as we have 'SportsCenter' and it is accurate and well done, we will be dominant in this field.' And it's not true anymore because it can't be the centerpiece of the operations for the reasons we already alluded to.

"But they clearly — and I think you would agree with me — they don't know that. And all attempts to change it are predicated on the idea that it can be what it was two years ago, five years ago, 20 years ago when Dan [Patrick] and I did it. And it can't."
That rings true. Name the last time you said “I gotta set aside time at 10pm to watch SportsCenter to find out what happened in this game!” You don’t need to. You can just click on your favorite website or go through your Twitter feed, and you will see the results and see the highlights that show how it happened. You don’t need SportsCenter for the postgame interviews, because that’s online as well, and you can read analysis from across the country on any number of websites and social media sites.

Of course, that doesn’t mean ESPN hasn’t made some self-inflicted damage along the way to cause some of the bloat they feel a need to get a rid of. This Tweet summed up my sideways glance at today’s news, especially as I realized several of the layoffs were veterans done for cost reasons.



Seems like something they really don’t need to spend the money on that, regardless of whether or not they’re doing more feature pieces vs game reporting as part of the change in ESPN's emphasis (and I like Marty Smith a lot, by the way- I think he’s hilarious and good at what he does). Somehow Steven A. Smith and Max Kellerman still have their jobs and shows through all of this, which also seems head-shakingly symptomatic of what Skipper and the suits think is what grabs ratings for "sports programming" in 2017.

The other thing that strikes me as odd with ESPN’s mass firings is the timing of it- the day before the NFL Draft. ESPN has had the Draft for almost all of the 38 years ESPN has been on TV, and it’s one of those events where it makes a lot of sense to have reporters at the various team offices to get inside info on possible trades, draft strategy, and interviews with the coaches/GM.

I don’t get why you get rid of a lot of college football and NFL people one day before you’re going to have a weekend full of draft coverage. Have mass firings on May 1, after the draft is over? I get that. But I guess that means I have yet another reason to watch NFL Network starting on Thursday (they’re better at the Draft anyway).

The suddenness of ESPN’s move tells me that there might be something else afoot. Wall Street media has been consistently discussing ESPN owner Disney, and the Worldwide Leader’s struggles and loss of subscribers, and Disney announces its next quarterly earnings in 2 weeks. You think maybe this is a pre-emptive move to deal with bad earnings news and keep investors happy?

Regardless of the reason, the bloodletting at ESPN is somewhat of a sign of the times, where we have more ability than ever to get information, but it hurts the ability of any one place to give you information (look at print media’s massive struggles over the last 25 years). And it’s sad to see a lot of familiar faces leave a network that I still watch, and it makes me wonder what platforms and networks I will see them pop up on in the coming months. Yes, ESPN's influence is much smaller than it was 20 years ago, but it's still generally the network I turn to for "general sports" programming, and like most TV shows, you grow a small level of attachment to those people. Interestingly, as I finish this Michael Smith and Jemele Hill have spent the first 15 minutes of their 5pm SportsCenter show to talk openly about the layoffs. In addition to telling viewers that it's difficult to deal with, because these are co-workers and colleagues (Smith just said "This has not made our team better").

I will disagree with one take Smith is having, because he's comparing the job reductions and public reaction to speculation/reaction to coaches getting fired. ESPN did not FIRE people today, which is something done for unacceptable performance or actions. ESPN did LAYOFFS today, which have to do with cold-hearted business decisions and often are affected by structural changes in consumer tastes.

Tuesday, April 25, 2017

And here we go with the Wisconsin budget!

If you're an avid budget watcher (and if you are.....what kind of twisted freak are you?), I got a link to get you geared up. The first round of budget papers from the Legislative Fiscal Bureau are now out ahead of next week's first votes.

There are a few things on Monday that are intriguing, although nothing too earth-shaking. You may be interested to read on the plans by Governor Walker to get rid of the Judicial Commission and move in under the State Supreme Court (one of many consolidations of power in the Governor's budget). There's also scheduled to be discussion about plans to end the state's Local Government Property Insurance Fund (I described the millions that may eventually be needed to bail this fund out back in December).

And if you ever wanted to read about how the state's Indian casinos interact with the state, and the revenue that the tribes send back to the state, I'll direct you to this paper. Because I have a thing for gambling laws and how casinos are doing, I noted that Wisconsin's Indian casinos in 2015 had its highest amount of net gaming revenue in 7 years at nearly $1.2 billion, and up 5.35% compared to 2014.

The LFB says that strong year means that the state should be getting $655,000 above what Governor Walker's bill had built into it, as part of $107 million that the state treasury and state agencies are slated get from the tribes over the 2017-19 biennium. However, there is one small hangup that might get rid of that mini-surplus.
On March 6, 2017, the Stockbridge Munsee tribe indicated "that it has notified the State of Wisconsin of its intent to withhold its revenue sharing payment of $923,000" for 2016-17 in a dispute over the expansion of the Ho-Chunk's Wittenburg facility (scheduled for completion in December, 2017). On April 19, 2017, the Stockbridge Munsee tribe filed suit against the state and the Ho-Chunk Nation alleging that: (a) the state is in violation of the Stockbridge Munsee compact revenue sharing provisions; (b) Ho-Chunk is in violation of its own compact for operating a gaming facility on lands not eligible for Indian gaming under federal law; and (c) the Wittenburg expansion does not meet the meaning of an "ancillary" facility. Given that DOA will not bill the tribe for payment until June, 2017, and that legal matters are pending, no assumption regarding a fiscal impact is made at this time. To the extent that a payment has not been received or is not made, revenue would be reduced pending the outcome of the lawsuit. Subsequent to settlement, payment may be received.
So far the Ho-Chunk haven't backed down, and are threatening a countersuit for damages if the Stockbridge-Munsee tribe doesn't back down. $923,000 isn't a big deal in a General Fund budget that is well over $15 billion a year, but it's an interesting story to follow if you like to play a few casino games around Highway 29.

But that tribal casino question is a mere trifle compared to the bigger issues that'll follow over the rest of May and June. Feel free to get your head ready for all of the fun and games, especially since we get new revenue numbers that could make or (more likely) break a lot of things when they come out some time over the next 2 weeks.

Monday, April 24, 2017

Walker claims there's money to fix the roads? Not today there isn't!

Lots of things in GOPland these days make me double-take and say “What the WHAT?” And so I guess I can add this one from our Fair Governor.
Reports last week indicated the governor might be willing to consider raising registration fees, but Walker told reporters at the Capitol he doesn't have "any interest" in doing that. He said he has explicitly stated his opposition to a gas tax hike because lawmakers have raised the possibility.

"I don’t know of anyone in the Legislature who’s talking about vehicle registration fees," Walker said. "For us, I think there is more than enough revenue out there. I’m willing to work with them."
First of all, if no legislators are “talking about vehicle registration fees”, then explain this comment from 3 days ago, Governor.
"Transportation’s going to be the biggest challenge. I think everything is on the table right now," Joint Finance Committee co-chair Sen. Alberta Darling, R-River Hills, told reporters Friday.
When “everything” is up for discussion, particularly involving DOT funding, that includes the registration fees that go into that funding, Governor.

Second of all “more than enough revenue out there”? For what? Not for any type of adequate funding of transportation projects, unless you want to include major cuts or delays. As mentioned previously, Walker’s DOT budget basically assumed that somehow an extra $107 million in highway spending would end any chance of delays on major projects in the Fox Cities and on the Verona Road/Beltline project in Madison (as was noted in the DOT’s budget request from September). The Walker Administration insists these projects will continue on schedule and on-budget despite the brutal audit that showed $3.1 billion in cost overruns from past highway projects, with much of that amount resulting from an inability to adjust projected costs to inflation. Call me skeptical on that assumption.

And despite what the Walker Administration propped up a couple of weeks ago, the $38 million in “added revenue” that the DOT is projecting into its Transportation Fund is merely a drop in the bucket when looking at the $6 billion DOT budget. Combine that with the fact that Walker’s budget would have spent $100 million more than it took in to the Transportation Fund, and there’s nowhere near enough revenue to cover the needs there.

Oh wait, Scotty wasn’t talking about generating more money from the Transportation Fund. He instead wants to raid the General Fund to pay for the roads.
“I’ve said repeatedly in my meetings with the (Assembly) speaker and the Senate majority leader that I think we can free up some more money, looking at general purpose revenue in the state budget and some other areas we think we can save on,” Walker told reporters.
Sounds good in theory, except for one major problem. THERE IS NO MONEY IN THE GENERAL FUND TO RAID. We just saw on Friday that General Fund revenues were down nearly 5% for March, and are currently on pace to fall short of the projected totals for this year as well as the 2 years in the 2017-19 budget.

In addition, Walker’s budget spends $366 million more than it takes in, and only has $12 million in breathing room. That’s before we even get to the prospect of a revenue shortfall, or the fact that the budget bakes in $60 million in health care savings from a self-insurance scheme that may not pass and is far from guaranteeing when it comes to delivering those lower costs.

So given the tightness of the budget, there are only 2 ways that a huge transfer from the General Fund can happen

1. A bailout from DC in the form of huge increases in Federal spending, which can then be used to replace state money. Given that this GOP Congress and Drumpfian White House are going to have enough problems trying to keep the government from shutting down this week, I wouldn’t count on any help coming from those guys.

2. Getting rid of a number of Walker pre-election budget gimmicks. One possible move would be to reduce Scotty’s proposed $618 million increase in per-pupil aids for K-12 education, but WisGOP legislators don’t seem willing to risk the political damage that would result from that.

So the next option would be to take out some of Walker’s proposed tax cuts and shifts. The most likely one to go would seem to be an attempt to get rid of the state’s Forestry Mill tax, which is currently part of your property tax and goes to fund the DNR’s conservation fund. Instead, Walker wanted to spend over $180 million of General Fund money to make up the difference that resulted from dropping Forestry off the property tax. This plan got panned by many speakers during the Joint Finance Committee’s public hearings throughout the state, as many citizens rightfully were concerned that this would make the conservation fund an easy target for cuts in the future once the dedicated funding was taken away and General Fund money became scarce.

Another idea was to give a 0.1% income tax cut, which would give barely more than $1-a-week to the typical Wisconsin taxpayer, but would cost the state $203 million during the 2017-19 budget.

$22 million more could be restored from getting rid of Walker’s silly idea of a sales tax holiday in August for school supplies, which won’t do much to help overall sales and might prove more trouble than it’s worth for businesses to adjust staffing and registers for.

Now if Scotty’s signaling those 3 tax proposals can be taken out, then that’s over $400 million that could go to roads for this biennium without raising gas taxes or registration fees. But that would contain its own set of difficulties, because transferring that $400 million would increase the state’s $1 billion structural deficit in the next budget, since the structural budget doesn’t count on that money being taken out of the General Fund (although the effect is only $225 million, since the Forestry tax shift is assumed to happen).

So let’s see what Scotty is talking about when he claims “there will be enough revenue” for roads to be funded well in this budget. There sure isn’t enough revenue right now to make it happen, so that must mean there’s a deal in the works to make major changes to Walker’s budget, and we’ll see soon enough what it is.

Either that, or Walker is living firmly in Fantasyland. If so, those illusions will crash to Earth soon enough.

Dems don't need a Guv candidate yet. But stop the moping!

A lot of concern has been bandied about over what the Wisconsin Democrats will do to try to deny Scott Walker a third term in November 2018 (and make no mistake, Gov Dropout is running- what else is that political lifer going to do?). The lack of a declared “name” candidate for the Dems is something that is causing plenty of media discussion, including a segment on Mike Gousha’s show over the weekend.

Milwaukee’s Dom Noth jumped into this “Dem 2018” debate recently with another excellent column at his Dom’s Domain site. Noth mentions that Walker is particularly vulnerable given his failed record on job creation and policies and promises that don’t add up in the real world.
You can hardly quote [Walker] to create ridicule, as you can with Trump. Inelegant? Boastful? Sure, but hardly a memorable style. He’s much like Trump in promises exuded with confidence, but Walker already has a long track record of deception, of policies unfulfilled or exaggerated or misapplied. Current GOP legislators don’t admit this aloud, but he has put many in bind after bind.

This should be a campaign where the Democrats succeed by borrowing from Reagan – the “are you better off” question reaching back to 2010. Not just poor families but a typical middle class family of two parents and two kids, or single parents, or farmhands, or storekeepers or seniors – the bulk of the voters. It’s tax time. Have them write finances down and then look at the realities.

Despite Walker’s tax pledges, are you truly better off? Because of him? Can you claim real savings on property tax, faster transit to jobs, more assured life on the farm, better schooling at reasonable cost, health care improvements the state is responsible for, better treatment and balance in the environment – or is it mainly promises about not spending like the Democrats of GOP legend? And how has that welfare to educate the rich [in the form of tax breaks for private school tuition] worked out for you?
Noth goes on to mention that it’s not like the Dems lack for potential candidates, it’s just that none have formally entered the race. In addition, Noth says name recognition is something that can easily be built during the 15 months leading up to a contested Dem primary in August 2018, and the general election 3 months after that. He adds that “the interest should be [generated] from the angry bottom up.”

Among those Guv-interested candidates that Noth finds to be strongest are State Sen. Kathleen Vinehout and State Rep. Dana Wachs. Both come from outside of the Madison and Milwaukee areas, which Noth thinks is an advantage for Dems (he admits this anti-urban mentality among voters is ”not right. But it’s there.”)

Let me add a side note on Wachs and Vinehout- they should work out who wants the Guv job and who wants the Eau Claire-area Senate seat, and not run against each other. Maybe the ongoing redistricting litigation is part of this problem, since that wouldn’t be decided till Fall, but let’s not cannibalize our good candidates and blow a needed legislative seat in the process (personally, I want Vinehout for the Guv spot).

To conclude, Noth says the DPW needs to ignore the money factor when evaluating candidates and stick to issues and competence.
Basically I am annoyed if the Democratic search puts self-funding ahead of actual doing. The elements I have outlined -- what’s best for Wisconsin and who is proven -- count more than private income or potential celebrity. These are people we’re electing, not interchangeable brands….

But I know what I want after Walker: Restoration in the broadest sense of the Wisconsin Idea. Even if they are new ideas. Our state has lingered too long in the middle and near the bottom while once it flooded the nation with hopeful concepts and successful programs.
Dane County Exec Joe Parisi said a similar thing at the 2nd District Dem convention over the weekend, saying that if the Dems get the right candidate and the right message “the money will follow.”

I think both Noth and Parisi are correct in this- given the enormous amount of money candidates like Bernie Sanders and Jonathan Ossoff have been able to raise through the Internet and through progressive word-of-mouth, THE MONEY WILL BE THERE TO COMPETE AGAINST WALKER. But thinking this way makes the average consultant/party hack less meaningful, so naturally those insiders want to emphasize the “money-raising” part and ignore the “voter inspiration” one.

What’s depressing to see is so many potential Dem candidates pull the plug on a potential Guv candidacy so early. Ron Kind continues to be a comfortable coward and settles for his backbench House seat in DC (it’s especially disappointing because he allows Walker to clown him on the issue of Medicaid expansion instead of “coming down” to kick him out of the Governor’s chair). On the other side, I think Parisi was right not to run- he's a low-key Dane County liberal that is absolutely NOT the kind of candidate who will beat Scott Walker, no matter how successful things are here in the Madison area.

Senate Dem leader Jen Shilling bailed on a statewide run after she had to go to a surprising recount in her State Senate race, likely because she evaluated it as a reflection of her shortcomings as a candidate. But I think that decision was misguided because a lot of what hurt Wisconsin Dems in rural Wisconsin was having Hillary Clinton being at the top of the Dem ticket in 2016. The dimwits at Team Hillary/DNC were convinced that they “had the math” and failed to listen or seem to care about the needs and issues that rural voters cared about (it’s no coincidence that all people that I have seen running for DPW Chair and other party positions have openly criticized Team Hillary/DNC’s campaign, and its lack of resources/attention to rural Wisconsin. This includes the current DPW leadership).

What’s frustrating about all of these people refusing to run in the Governor’s race and the general confusion over what direction the Dems will take in 2018 is that it gives a false impression of Walker being stronger than he is. The state is floundering economically, the roads are falling apart, and Walker is a known crook who can’t be expected to keep his word on pretty much anything other than staying bought. Sure, he’ll have a lot of money from oligarchs backing him, but so what? In the late 2010s, having “big corporate” behind you may be a negative more than a positive, especially when it’s scum like the supporters of lead paint and lead in your drinking water.

I understand that the state political media would rather talk about horse races than issues, and so they’ll be consumed by “2018” talk. But Dems need to get rid of the defensive posture, and even if potential Guv candidates aren’t interested, they need to not say anything about it for now, to get the conversation back to where it should be- discussing the wreck that is happening in the State of Wisconsin due to the Republicans.

Stick with that, have a few candidates officially step forward in the next few months, and the interest in taking out Walker will go from there. And for God sakes, STOP OBSESSING ABOUT MONEY!

Saturday, April 22, 2017

Why are we still losing bigly to Minnesota?

On Friday, we got another chance to see how Wisconsin was shaping up against the rest of the country with the state-by-state job report from the Bureau of Labor Statistics. And it had the strange dichotomy of Wisconsin allegedly having the 2nd lowest unemployment rate in the Midwest at 3.4% (only Iowa was lower, at 3.1%), but also one of the lowest rates of job growth in the region (also oddly, Iowa was even worse than us).

Private sector job growth, March 2016-March 2017
Mich +1.86%
Minn +1.73%
U.S. +1.67%
Ind. +1.49%
Ohio +0.94%
Wis. +0.88%
Iowa +0.67%
Ill. +0.57%

Job growth that ranks 5th out of 7 states in your area and lagging well behind the national average isn’t the sign of a thriving state to me, no matter what the unemployment rate might say.

And we especially look bad compared to our neighbors on the other side of the St. Croix. Maybe it's because the 1-year anniversary of the death of one of the greatest Minnesotans is this week and I've been listening to Minnesota Public Radio a lot this weekend, but I do want to focus in on that....after you enjoy 9 minutes of genius from the Purple One.


Minnesota gained another 5,300 jobs last month in the private sector as well as overall while Wisconsin only gained 500 in the private sector and lost 2,700 overall, and UW’s Menzie Chinn notes that after a slight lull in 2015, Minnesota has resumed the ass-kicking they have given us throughout the Walker era.





Minnesota has added 20,000 more private sector jobs than Wisconsin in the last 12 months, and nearly 40,000 more since March 2011, when Act 10 was jammed through the Wisconsin Legislature.

But how has Wisconsin’s unemployment nose-dived in the last few months to become even lower than Minnesota’s for the first time in several years (3.4% in Wisconsin, 3.8% in Minnesota)? The answer points to 2 reasons.

1. The household “employed/unemployed” survey looks at where people live , while the “jobs number” looks at where people work. St. Croix County (located right across the river from the Twin Cities) was estimated to have nearly 19,000 residents who worked in Minnesota when the number was last measured in the 2009-2013 time period, and St. Croix has continued to grow in the meantime, adding another 3,684 people since 2010. And it’s not just St. Croix, as Pierce County had nearly 9,600 people commuting to Minnesota, and Polk County had over 4,300 that survey.

Wisconsin also exports workers in the Superior-Duluth area, with over 7,300 residents of Douglas County working on the Duluth side, vs less than 3,500 coming across from Minnesota into Wisconsin. The only place that came close to reversing those large Wis-to-Minn numbers were the 4,500 people from Minnesota who come into La Crosse vs. 1,000 heading the other way.

Likewise, over 21,000 Kenosha County residents commuted to Illinois for work, and another 4,500 people from Rock County also headed across the border (more than the people from the Rockford area that worked in Wisconsin). There’s no reason to think that trend has changed any, even with the many WEDC handouts that seem to go around the state line to encourage Illinois people to locate in lower-wage Wisconsin. This means Wisconsin has more people “employed”, but the “job” is in a different state.

2. People may be moving out of Wisconsin (or not moving in), and it’s not being reflected in the totals. Take a look at the difference in the two states when it comes to population growth and especially net migration.

Population growth, 2014-2016
2014-15
Minn +29,326
Wis. +9,414

2015-16
Minn +37,517
Wis. +10,817

Net migration per 1,000 residents
2014-15
Minn +0.3
Wis. -1.3

2015-16
Minn +2.2
Wis. -0.8

This would ordinarily reflect in the growth of the labor force being smaller in Wisconsin, which lowers the unemployment rate even when the job growth figures are low. And comparing the states over the last 6 years, this largely holds up.

Change in labor force Mar 2011- Mar 2017
Minn +76,600
Wis +62,100

Granted, both Wisconsin and Minnesota have gained sizable amount of people to their work force over the first 3 months of 2017 (Wis +22,200, Minn +15,000), but that also underscores just how much further behind Wisconsin was until that time. That huge change in Wisconsin's labor force after 6 years of stagnation makes the figures in that survey all the more suspicious (particularly since it hasn't translated into higher income tax revenues), and I want to see how that Wisconsin labor force and "employed" number adjusts in later years.

And outside of that outlying unemployment figure, Wisconsin still badly trails Minnesota when it comes to both jobs and wages, which leads me to this observation. If the Packers were 5-11 and the Vikings were 10-6, we wouldn't be saying "Well, the Bears were 3-13, so the Packers are doing OK." We'd be saying "FIRE THE COACH" because being way behind Minnesota would be unacceptable. So why do we accept this type of underperformance from our state and our governor?

March revenue drop means Wis budget in serious danger

I was counting on the Wisconsin Department of Revenue to release its March revenue figures yesterday. They usually release them around the 3rd Friday of the month, and as the day went on, and as the Walker Administration kept tweeting out propaganda about low unemployment (while hiding the bad record of job creation), I had a feeling the numbers might not be good.

Sure enough, the revenue numbers were dumped in the late afternoon, and they were not good.

March 2017 Wis revenues vs March 2016
Income taxes DOWN 8.8%
Sales taxes UP 3.3%
Corporate taxes DOWN 10.4%
Excise taxes DOWN 10.6%
Other DOWN 4.2%
TOTAL TAX REVENUES DOWN 4.82%

That’s not good, given that March is the height of tax season, which gives an indication about the refunds and payments that set the tone for the rest of the year. Now, relatively decent numbers in February kept state finances from being a full-fledged crisis at this point, but the drop for March is still a bad sign.

This is particularly true given that there were extra days to file taxes (and get refunds) at this point in 2016, meaning that it is likely that more refunds are to be given out in April this year vs last, and limit any growth that we might see.

Even if we assume that income taxes hold up at its FY 2017 rate of growth for the last 3 months of the year (which would get us to slightly beat January’s estimates from the Legislative Fiscal Bureau), we’d still fall short, mostly due to the continued shortfall in corporate taxes.

2017 Wisconsin revenues vs estimates (current FY17 growth rates)
Income tax +$31.75 million
Sales tax -$2.4 million
Corporate tax -$64.0 million
Excise taxes +$3.0 million
Other taxes -$18.4 million
TOTAL SHORTFALL $50.05 million

$50 million in a General Fund that is projected to have $15.5 billion in taxes seems small, but the problem is that Scott Walker’s 2017-19 budget spends $366 million more than it takes in, and only allows $12 million in breathing room. So even a small miss like $50 million means that not everything Scotty wants can be funded, let alone the extra burdens from having a lower base to start from, which would drop available revenue in the budget by another $100 million or so, even if you stick with the LFB's assumptions that the "Trump Boom" somehow materializes in the next 2 years (it sure hasn't yet).

And that’s before we do anything about any of the Walker budget's gimmicks, like extra money needed to make up for his phantom savings on his health insurance scheme or the desire of legislators to find some extra money to fix our pothole-marked roads. Speaking of the DOT, did you notice Walker shift from his "no-tax, no-fee" stance this week, and now is saying that he might be OK with higher fees? It's like Gov Dropout finally figured out that there really wasn't any money in the General Fund that he could move over to fill in the holes (a move that would have driven our $1 billion structural deficit even higher, by the way).

The LFB will re-figure its revenue estimates in a couple of weeks, after it gets an indication of the April revenue numbers. If those April numbers come in light, the 2017-19 budget debate will change drastically, because the house of cards that Walker's pre-election boost to programs is based on will rapidly collapse.