Monday, February 27, 2017

Local governments continue to be defunded under "generous" Walker budget

One thing that should be pointed out with all of the handouts and increases in funding in Governor Walker's budget is an area that's not getting handouts- shared revenues to local governments. This is where tax dollars from throughout the state are redistributed throughout the state, and parceled out to various local governments. This has been a system that has been in place in Wisconsin for decades, and shared revenues is a key part of any local government's budget, with higher shared revenues taking pressure off of the property tax when it comes funding local services like roads, police, fire fighters, parks, and public health departments.

In looking at the proposed budget bill I notice that County and Municipal shared revenues actually decrease in each of the 2 years of the budget, before we even account for inflation.

County/municipal shared revenues 2016-2019
2016-17 $696,275.200
2017-18 (budgeted) $692,175,800
2018-19 (budgeted) $690,225,800

It is worth noting that $4 million of that shared revenue reduction is part of the Milwaukee Bucks arena bill that was signed into law in August 2015. As the Legislative Fiscal Bureau described, the state’s paying in $8 million a year to the Bucks arena for the next 20 years, but are offsetting half of that expense by lowering Milwaukee County’s shared revenue by $4 million a year over that time.

But this also means that the $4 million being cut in shared revenues for the Bucks arena aren’t being made up and redistributed to other communities in Wisconsin, so all communities will have less available to them than before (since Milwaukee County will still get SOME of those shared revenues). And the proposed two-year drop in shared revenues in this budget continues a trend of reduced aid to local communities throughout the Age of Fitzwalkerstan. Overall, County and municipal revenues in 2019 are slated to be nearly $118 million less than the dollar amount in 2011. I don't care how much money you think has been saved due to the "tools" of Act 10, you can't tell me that these communities are in a better spot after these cuts at the state level, especially when you realize that drop in shared revenues goes over $234 million when you account for inflation.

But it's not just general county and local aids that have been getting reduced in value since 2011. The state has also done nothing to increase the incentive payments given to communities for keeping their expenses in line with the rate of inflation. Known as the Expenditure Restraint Program, this figure hasn't been increased since 2011, and Walker's budget keeps it at that same level, meaning that the 2018-19 ERP budget of $58.1 million is $8.4 million below where it would be if this incentive payment had been raised for inflation.

There's another shared revenue program that earmarks money for police and fire fighting services. This has been paid for by charges that are part of your phone bill (it used to be general tax dollars that paid for this, but it was changed to the surcharge in 2009), and this amount has also decreased in recent years, down over $9 million in actual dollars since 2011, and nearly $18 million lower when you adjust for inflation.

So much for police and fire fighters being a protected class in the post-Act 10 World.

If you look at these three types of shared revenue payments and add up the differenes between the red and blue lines, it means that Walker and WisGOP have decided to cut $1.44 BILLION from local governments in these 3 areas alone. That's before we even account for the numerous cuts to K-12 public education or the UW System, and what have we gotten in return for this? Continual budget shortfalls still remain due to these "savings" being blown on tax cuts, which have led to the worst economy in the Midwest.

Sure, Walker's 2017-19 budget does add in a 9.55% increase in general transportation aids that hits in 2018. But that’s only earmarked for one specific item, and it can’t be used for any other services that has to be needed. In addition, that increase in 2018 comes after those transportation aids had been frozen for 3 years, so that one-year bump barely surpasses the rate of inflation over the course of 2015-19 (the Walker Administration not adjusting for inflation in roads? Where have we heard that before?).

In fact, Northern Wisconsin local officials say this increase in local road aids is "too little, far too late," and they are still calling for the ability for raise their own sales tax in order to pay for their roads.
The state should allow the county to at least ask voters if they would approve the tax to fix roads, said Douglas County Board Chairman Mark Liebaert.

“We need this ability on this half a percent sales tax because we’re not going to be able to bond our way out of this,” Liebaert said Tuesday during Superior Days at the state Capitol. “But, we bonded $5 million, and we plan on bonding for $26 million regardless of what happens with this half a percent sales tax.”

Douglas County is proposing to the Legislature insert language into the 2017-2019 budget for a pilot project that would allow only Douglas County to utilize the half-percent sales tax for road funding.

The county has more than 300 miles of road to maintain and has budgeted around $2 million each year to repair roads. At that rate, county officials claim it would take more than 50 years to repair its transportation infrastructure.
And the reason Douglas County and so many other places in Wisconsin are asking for this law to be changed is because Scott Walker and the Wisconsin GOP have broken their part of the bargain when it comes to adequately funding local government. So if the state is going to continue to defund these communities, why shouldn't they be given the freedom to raise taxes on tourists and consumers, if a community votes to do so? That seems a better option than making local services suffer and/or make the local property taxpayer have to pick up the slack for WisGOP's arrogance and failed tax policy.

Sunday, February 26, 2017

That Trump Boom seems less likely, making Walker budget less likely to work

In what is starting to become a consistently vital column for me, Stan Collender in Forbes notes that any "Trump Boom" that might happen won't be felt for a few years, if ever. Collender spells out the timing of the budgetary changes and economic impacts in this manner.
For example, while Trump said he wants to increase the military budget by up to $40 billion this year, the truth is that very little of that will be spent quickly. Even if Congress includes the additional funding in the continuing resolution that will be needed by April 29th to prevent a government shutdown, which is hardly a sure thing, most of these additional funds will be devoted to procurement and that spends out very slowly. If the historical pattern holds, no more than about $4 billion of the $40 billion will be spent in calendar year 2017, an insignificant amount in a total U.S. economy that is approaching $19 trillion.

Infrastructure is another example. The Trump plan supposedly is for $1 trillion in new spending over the next 10 years. But in spite of all the talk about “shovel-ready,” the truth is that infrastructure projects are notorious for how long they take to begin. Here too, unless the new projects are a sharp departure from all previous experience with infrastructure, very little – as in almost none – will be started in 2017 and only a handful of projects will begin in 2018. The biggest economic impact will start to be felt in 2019-2020. Then there’s tax reform.

The Trump administration said last week that it wanted to have a tax plan in place by the start of Congress’ August recess. That’s only five months from now. Congress would find this schedule difficult to follow if it was dealing with a noncontroversial issue like the naming of a post office for a just-deceased member of Congress.

But given the multiple enormous controversies surrounding tax reform and the extraordinary procedural impediments to getting it passed in the House and Senate, getting tax reform enacted by the end of this July will be a legislative miracle. Even a more likely December 31, 2017, is starting to look like a reach.
And this delay is setting up to be a real problem for Scott Walker's budget, because that budget relied on higher revenues resulting from a Trump Boom. Remember what the Legislative Fiscal Bureau assumed when it gave its upwardly-revised revenue picture last month.
Under the January, 2017, forecast, IHS Marki! predicts real GDP growth of 2.3% in 2017, 2.6% in 2018, and 2.3% in 2019. The main drivers of growth are expected to be consumer spending, business fixed investment, and residential investment. However, the trade deficit is forecast to increase due to an appreciating U.S. dollar and growing domestic demand for imports, thereby dampening real GDP growth.

The 2017 forecast is based on the following key assumptions. First, the forecast assumes that the new Trump administration and Congress will lower the average effective personal income tax rate from 21.0% to 19.5% and lower the statutory corporate tax rate from 35% to 20% (partially offset by reducing tax deductions and credits). Second, the forecast also assumes a $250 billion increase in federal infrastructure spending over the next ten years. Third, the 2017 forecast assumes that the Federal Reserve will increase the federal funds rate by 75 basis points in each of the next three years to 1.50% by the end of 2017, 2.25% by the end of 2018, and 3.00% by the end of 2019. Fourth, the Brent spot crude oil price is projected to average $54 per barrel in 2017 and $57 per barrel in 2018. Fifth, the inflation-adjusted, trade-weighted value of the dollar for the broad index of U.S. trading partners is expected to increase 3.3% between fourth-quarter 2016 and fourth-quarter 2017, where it will reach its peak value at 5.5% above the 2016 average, followed by a steady decline. Finally, real GDP growth of major and other important U.S. trading partners is assumed to average 1.7% annually and 3.5% annually, respectively.
After looking at Collender's report, I wouldn't count on much of that coming true, at least to affect in calendar year 2017 (well except for oil prices to be even higher than the IHS Marki! projected).

Also, if you go further into that revenue estimate, note what LFB's forecaster admitted was a possible scenario. This one feels quite a bit closer to what's actually going to happen in the coming years.
IHS Markit's 2017 forecast also includes an optimistic scenario and a pessimistic scenario. Under the pessimistic scenario, the January, 2017, forecast assigns a 20% probability of a two-quarter economic contraction in the first half of 2018 due to strained trade relations with China and Mexico. U.S. exports decline more than imports, and economic conditions worsen across the world. The U.S. dollar increases in value, further undermining export competitiveness. U.S. businesses react by postponing capital investments. The stock market declines markedly, along with consumer confidence. Meanwhile, productivity continues to decline, and thus modest demand-side growth causes inflationary pressure. OPEC oil production cuts (which are not offset by increased domestic production) and inflation prompts the Federal Reserve to raise interest rates, further constricting growth. Under this scenario, disagreements between the new Trump administration and Congress, as well as a federal government hiring freeze, prevent stimulus spending. A~ a result, consumer and business confidence deteriorates, leading to declines in business investment, meager growth in consumer spending, and a fall in housing starts. Real GDP growth is estimated at 1.3% in 2017, -1.1% in 2018, and 1.9% in 2019. These growth rates are lower than the baseline forecast by 1.0% in 2017, 3.7% in 2018, and 0.4% in 2019.
A drop in real GDP growth for 2017 and a 2018 recession would also likely mean that 3.7 million jobs wouldn't be added in the next 2 years, nor would it increase personal income by a cumulative 10% in those 2 years (both are part of the LFB's projections). This would reduce the state revenue growth that is baked into Walker's budget, and when you add in the strong possibility that revenues will fall short in this current fiscal year and it seems likely that reductions in Walker's pre-election handouts will have to be done by the State Legislature, since the amount of funds available will be reduced.

By the way, this is BEFORE we account for the issue that's helping to delay these Trump stimulus measures and tax reforms- the repeal and/or changes to Obamacare. ACA "modifications" will likely restrict the U.S. economy even further, especially in the short term as people have to figure out what the GOP's changes mean for their situation, making them less likely to spend as much as they otherwise would (aka Scott Walker's favored excuse of "uncertainty"?).

So no, the mess in DC isn't helping an already dicey Wisconsin budget situation. Few want to admit this reality at either the US or Wisconsin Capitol yet, but much like other bad things going on in TrumpWorld and the GOP Congress, it's going to blow up in public sooner than later.

Greedy Wisconsin CEOs and WisGOP politicians work together-and hold our economy back

Dave Zwiefel had an excellent column out today in the Capital Times where he noted that Wisconsin Manufacturers and Commerce is part of a new group that is trying to update Wisconsin's image for the 2010s, with the idea of encouraging talent to locate in the state. This is something Zwiefel finds odd, since WMC and the GOP politicians they support have backed policies that have had the exact opposite effect.
Our state government long embraced the "Wisconsin Idea," where the best and brightest at UW shared their expertise with the state to help build the middle class and promote economic and social justice. Coupled with its concern for education and the environment, the state became a magnet for young idealists who wanted to be a part of it.

As we know, that image of Wisconsin has been turned upside down. Where once the state exported ideas aimed at building a more equitable economy and an infrastructure of strong schools and a world-class university, the biggest idea the Scott Walker administration is touting is a textbook plan on how to destroy unions. Instead of inviting university faculty to partner in solving problems, this Legislature demonizes them as pampered left-wingers intent on brainwashing young-adult students.

Environmental regulations have been eviscerated, the state parks have been unfunded and many of our school districts are struggling. This isn't the image that attracts young people hoping to start a career and raise their families.

If Wisconsin Manufacturers & Commerce really wants to send a message that our state is a welcoming place to locate, perhaps it ought to stop spending hundreds of thousands of dollars on politicians who do their best to prove that it isn't.
The greedy, "profit and power over anything else" mentality of the state's business lobby is equally perplexing to me. It's not like that mentality is leading to good results, as Wisconsin has had the worst economy in the Midwest over the 6 years that the WMC-bought GOP politicians in the Governor's Office and Legislature have been in power.

In addition, the WMC crowd is constantly whining about a "skills gap" at the same time that they have vociferously backed wage-suppression measures like right-to-work (for less) and the recent legislation against Project Labor Agreements, and have backed a governor and Legislature who won't even consider raising the minimum wage above $7.25. In addition, Wisconsin firms continue to pay among the lowest manufacturing wages in the Midwest, between $3.50 and $5 an hour lower than the neighboring states of Illinois, Minnesota and Michigan, on the average. It's like these business "leaders" have never taken an introductory Economics course where they mention that shortages in labor require THAT WAGES BE RAISED to encourage more people to want to enter the market.

And the business community's choices in the state school superintendent's race illustrate this foolishness. Instead of backing strong public schools to generate talent and strong, stable communities that businesses can utilize to grow, the state's business community wants to lower the level of public education in exchange for grabbing more money and influence for themselves. Look at how the Metropolitan Milwaukee Association of Commerce shelled out $10,000 of its members' funds to pro-voucher candidate John "I'll say anything" Humphries, who promptly got 7% of the vote in last week's primary and was laughed out of the race. You know, the same MMAC that has backed Scott Walker for 15 years, have demanded school privatization for longer than that, and whose home area won this "honor" in 2016.
Over the year, nonfarm employment rose in 49 of the 51 metropolitan areas with a 2010 Census population of 1 million or more, and fell in Milwaukee-Waukesha-West Allis, Wis. (-0.5 percent), and Virginia Beach-Norfolk-Newport News, Va.-N.C. (-0.4 percent).
Sticking with the business community and the School Superintendent race, One Wisconsin Now discovered an email from the other voucher whore (and general election candidate), Lowell Holtz. Not only was Holtz using his work email to ask for campaign help last year (a big no-no), but the Milwaukee Journal-Sentinel noted that Holtz used that personal account to draft a letter to a "business leader" about advice on how to run his campaign.
The email was dated May 25, 2016, and time stamped at 1:43 p.m., in the middle of the school day. It was sent by Holtz to his wife, Susan, and was a draft of note he wanted to send to a woman named Diane asking "if you would share some of your expertise and advice with our committee."

Holtz added that he wanted to discuss "some of the issues we want to emphasize that align with the Governor's thoughts on career and technical education, business partnerships, common core, state-wide testing, and the expansion of vouchers."

Diane's full name was not used.
Oh, given that Holtz runs in WisGOP circles and previously worked in Beloit, I think we have a good idea who Diane is.

Speaking of Scott Walker and Cruella de Ville Diane Hendricks, I noted this story from recent days.
As the Hendricks CareerTek youth workforce training facility opened its doors to the public for the first time Wednesday, officials welcomed Gov. Scott Walker on an early morning tour of the center, set to bring Beloit businesses closer with middle school and high school students.

The center will serve as a bridge between students and future career fields, from construction and manufacturing to information and technology development. The center broke ground last year thanks to a grant from the Hendricks Family Foundation to the Stateline Boys and Girls Club. The facility is strategically located in the Ironworks campus on Third Street, next to IronTek, Beloit’s business incubator space, home to expanding technology firms including Comply365 and AccuLynx.

“This center will have a positive impact on the community in terms of helping students get a head start on what their career paths might be,” Walker said. “A place like this really will help students then apply what they learned from those academic career plans and plug it into whatever path they might be on.”
Gotta say this about our Guv. Once he's bought, he stays bought. And Diane Hendricks gets a bunch of tuition money and free labor to make more money off of, with some of that extra money kicked back to Scotty. Win-win, baby!

Of course, the other 99% of us don't win, as our state's economy flounders and talent continues to leave. But the regressive Wisconsin business community and the WisGOP politicians they own don't care, as long as THEY'RE getting paid and doing fine. Had enough of this crap yet?

Saturday, February 25, 2017

Public defenders may face big deficits, and Walker's not dealing with it

In addition to lower revenues, one other item that seems likely to throw a wrench into Scott Walker's budget giveaways is the fact that other needs aren't being taken care of. One of these items comes from the area of Public Defenders, which already face a sizable deficit over the last 4 months of this fiscal year, and will likely face more problems in the 2017-19 biennium.

This was reiterated in an update given to the state's Joint Finance Committee this week. This report not only shows the workload and payments that state is making for its own public defenders, but also the costs it has to shell out for private lawyers to take on some of these cases (also known as "private bar attorneys."
Between October 1, 2016 and December 31, 2016, the SPD (Office of the State Public Defender) appointed counsel in 32,652 cases. Of the total cases assigned, 13,030 were assigned to private bar attorneys either on a rotational or contract basis. The total expended this quarter from the private bar appropriation under 20.550(1)(d) was approximately $5.99 million.
And that $2 million a month given out to private attorneys is a problem, because high expenses in that account last year means that there isn't enough to last through the end of this Fiscal Year on June 30.

Private bar appropriation
2015-17 2-year budget $44,097,800
2015-16 Fiscal Year $27,020,146
2016-17 1st Half $9,647,938
2016-17 Remaining 2nd half $7,429,716

If we continued to spend $2 million a month to private attorneys to provide counsel, this would mean we would have a deficit of over $4.5 million by June 30. And if you think we could just have our current staff of State Public Defenders take on more work, that seems unlikely to be a solution. The state's Public Defenders are already adding to their caseload, although somehow they're saving a bit of money by doing so.

State Public Defenders cases, expenses
Caseload, Trial
2015-16 Fiscal Year 79,987
2016-17 First Half 40,567
2016-17 Full-year Pace 81,134

Caseload, Appellate
2015-16 Fiscal Year 1,313
2016-17 First Half 659
2016-17 Full-year Pace 1,318

Combined costs, SPD staff
2015-16 Fiscal Year actual cost $58,083,389
2016-17 First Half $24,814,443
2016-17 Full-Year Pace $49,628,886
2016-17 Full Year budget $58,239,000

So if that $49.6 million figure holds up, that would allow enough savings in the 2016-17 budget for the SPD's office to cover the private bar deficit of $4.5 million. But I also have doubts that the State Public Defenders are handling more cases for much lower cost, so it seems more likely that the "lower" costs reflect delayed billings that are being paid at a future year and then not being credited back to the proper quarter. Bottom line- do not be surprised if some measures have to be taken in the next months to give extra funding to the private attorneys, and possibly the SPD as well.

These shortfalls led the SPD to ask for an added $16 million in funding for the 2017-19 budget, with the overwhelming amount of that money being related to increases to cover private bar payments and related SPD counsel needs. But Governor Walker's budget only has $1.15 million of that increase included. At the same time, Walker's budget allows the SPD board to ask for more staff to handle the bigger workload, but it doesn't set aside money that would pay those people, which seems like absurdly duplicity (but not surprising with this crew). Lastly, Walker's budget consolidates the entire Public Defender appropriations into a block grant, with the private bar and SPD counsel costs no longer being separated. Seems like something you'd want to track and pay for separately, and it makes you wonder the point behind such a move.

In other words, on the issue of Public Defenders, our governor is again ignoring the real additional costs of governmental duties that have to be paid for one way or the other, and passes off the responsibility of dealing with this real issue to the State Legislature. The JFC and Legislature now either have to find a source for extra money (good luck doing so in a budget that is facing dwindling revenues and no cushion to begin with), or our neediest defendants are going to have to wait longer for the counsel they are entitled to while the SPD defenders get even more overworked (and underpaid).

Somehow, I'm guessing that screwing over poorer defendants and the lawyers who defend them isn't something that alleged Christian Scott Walker cares much about, but decent people who actually believe in our Constitution probably do. And while the dollar amounts are a relatively small sidelight in this budget, the lack of caring and resources given about the necessities for a democratic society is a symptom of the larger problem that afflicts Scott Walker and today's GOP.

GOP Obamcare bills likely to be a budgetary disaster

The Washington Post had a good rundown of the potential ACA replacement plan being discussed among Congressional Republicans, and it doesn't seem likely to keep the uninusred rate at the decades-low figures that we have today.
Meanwhile, the new plan would eliminate the income-based tax credits given to people who can’t afford insurance on the individual market, to be replaced with tax credits by age. But the Post also reports that the emerging GOP subsidy scheme is getting pushback from budget analysts, who are telling Republicans on the Ways and Means Committee (which is working on the subsidy plan) that it will stint on subsidies to those who need them most, i.e., lower income people:
According to the several people familiar with House leadership’s approach, a central idea under consideration there — new health-care tax credits — hit a snag this week when congressional budget analysts reported privately to the committee that they would cost the government a lot of money and would enable relatively few additional Americans to get insurance.

Those tax credits would replace subsidies the ACA provides people with incomes of up to 400 percent of the poverty level to help them afford health plans through marketplaces created under the law. The credits would be available to everyone who buys coverage on their own, wealthy or poor. But the Congressional Budget Office has concluded that the credits, as conceived at the moment, would be too small to help low-income people afford health plans. They also wouldn’t make much difference to affluent people, according to the CBO, since most of them already are insured.
In other words, fewer poor people would be covered under the GOP’s plan and taxpayers would pay more. What a deal!

That reality doesn't really jibe with this statement from an alleged Wisconsinite.

So what’s one way that Republicans could prevent Obamacare repeal from exploding the country’s budget deficit, especially in light of the huge tax cuts on the rich that the ACA bill has in it? Shoving a huge tax increase onto people that are already getting insurance through their job!
As Utah Sen. Orrin Hatch has made clear, the party’s real bottom line is that ACA taxes have to go — and the rub isn’t the tax penalty working people pay if they don’t get insurance, either through Obamacare or at work. A possible source of funds being floated for this investor-class tax cut? The $268 billion it costs to make benefits you get at work tax-exempt.

Let’s take the average corporate-sponsored family health plan, which the Kaiser Family Foundation estimates costs $18,142, of which companies pay $12,865. Though this is part of your pay package, you don’t pay taxes on it. Under at least some Obamacare-repeal plans, you would.

For families making between about $55,000 and $86,000, the middle fifth of all incomes, fully-taxed insurance would hike taxes by $1,900 to $3,200, using tax rates of 15% and 25% and assuming no offsetting deductions. The higher figure would also apply to the fourth income quintile, which runs up to about $133,000 in family income.
So instead of just screwing people in the lower classes, the GOP’s plan also screws middle and upper-middle class people who don’t even get their insurance the Obamacare exchanges. What a brilliant strategy!

And then let’s remember another aspect of Obamacare- Medicaid funding. DC publication (and RW troll hangout) The Hill broke down an earlier draft of the GOP’s plans to replace/change the ACA, and that draft indicated that sizable amounts of money would be sent to states to establish certain programs to serve certain high-cost/risk individuals. In addition, the expanded Medicaid funding that a majority of states have taken advantage of (Wisconsin not being one of them) would go away, and instead be replaced by block grants.
The plan also includes $10 billion per year in “state innovation grants,” which are a version of high-risk pools but appear to allow for a broader array of uses for the money by states. The money could be used by states to help sick people get coverage and stabilize premiums.

As an alternative to ObamaCare’s individual mandate, the plan would allow insurers to charge people 30 percent more on their premiums if they had a gap in coverage and then signed up again.

The plan also includes a “per capita cap” for Medicaid, which imposes a per-person cap on federal spending on Medicaid. A lobbyist who reviewed the language said the Medicaid provisions were more generous than expected, based on the growth that is set out for the cap on federal payments.
Ahh, there’s your savings! Reduce the amount of funding many states get for Mediciad, and either leave them holding the bag to have to pay more money themselves, or cut off a large amount of the working poor who have had their situation stabilized due to Medicaid being made available to them.

Obviously there's a caveat in that we there isn't a final bill out there, and the blowback that we're already seeing at GOP Reps holding town hall over any possible changes to the ACA might well lead to more changes. But from the fiscal side, there is little doubt that any move to get rid of Obamacare under Republicans will be expensive, and likely handcuff the rest of the federal budget, which would lead to further cuts in other areas.

That outcome is probably just fine with this group.

These insured, well-connected folks in the Beltway don't need to worry about the backwards steps that will be imposed on tens of millions of Americans. So maybe it's up to us to do things that make them worry.

Thursday, February 23, 2017

Janury revenues disappoint, meaning Walker budget may already be impossible

While our Governor was telling the Bubble-Worlders at CPAC to ignore the voters who pay their salary, we got another indication that things aren't as nice in Wisconsin as Walker claims to the clueless outsiders. That came with the release of January’s revenue figures from the Wisconsin DOR. The numbers are a bit wonky because of New Year’s and other start/end-month days falling on weekends in both 2016 and 2017, but when you include the DOR's adjustment for that variable, the numbers were mostly disappointing.

Year-over-year change, Jan 2017 vs Jan 2016, Wisconsin
Income taxes DOWN 0.9%
Sales taxes UP 6.1%
Corporate taxes DOWN 41.7%
Excise taxes DOWN 5.1%
Other taxes UP 17.6%

That 0.2% increase in total revenues is well short of what we need to stay in line with the 2.7% increase in total revenues that was projected by the Legislative Fiscal Bureau for Fiscal Year 2017. For the entire fiscal year, we are only up 2.1% with 7 months completed, but more concerning is the 20.9% drop in corporate taxes for the year. The LFB only projected a decrease of 6.5% for Fiscal Year 2017, so if we continue to have the 20.9% decrease that we currently have in corporate taxes, that’s a shortfall of $138 million.

Fortunately, sales and income taxes are in line for the Fiscal Year estimates so far. However, it is concerning that the Fiscal Bureau indicated in its relatively rosy report that income tax revenues were likely to end up on the low side for the coming months of tax season, because of tax maneuvering.
A lower growth rate in the second half of 2016-17 reflects some taxpayers accelerating estimated payments in December, 2016, as opposed to January, 2017, and an increase in refunds in the Spring months due to law changes. The law changes include increasing the standard deduction for married filers, federalizing exemption amounts under the alternative minimum tax, the final year phase-in of the manufacturing and agriculture credit, and the capital gains exclusion for Wisconsin assets. The capital gains provision was enacted as part of [the 2011-13 state budget], but its initial impact will occur in tax year 2016 due to a five-year holding period requirement.
And January’s decline in income taxes happened before those higher refunds (and lower revenues) were filed and released. Ruh roh.

One other potential shortfall in coming months may come as a result of the record warmth we just had throughout the state. The LFB wasn’t counting on that when it projected this part of the revenue report last month.
Public utility taxes are estimated at $359.7 million in 2016-17, $373.5 million in 2017-18, and $378.2 million in 2018-19. On a year-to-year basis, these estimates represent a decrease of 0.2% in 2016-17, and increases of 3.8% in 2017-18 and 1.3% in 2018-19. The gross revenues tax group comprises almost 70% of estimated collections, and gross revenues taxes are estimated to increase 0.3% in 2016-17, 5.9% in 2017-18, and 1.7% in 2018-19. Private light, heat, and power companies are the largest taxpayer group among gross revenues taxpayers, and collections from these companies are estimated to increase 0.7% in 2016-17, 6.2% in 2017-18, and 1.6% in 2018-19. This pattern is influenced by a mild winter and low natural gas prices in 2016 and a return to more normal weather patterns and some "bounce-back" in natural gas prices beginning in 2017.
Well that just went out the window in the last week, didn’t it? Sure, these are relatively small things in a budget that relies on $15.5 billion in General Fund taxes for this year. But the problem is that any shortfall for Fiscal Year 2016-17 pretty much ends any chances for the state to be able to afford Governor Walker’s cynical handouts and unfunded tax cuts.

Remember, Walker’s budget relies on $453 million being in the bank on June 30, and then it promptly takes more than $371 million out of the bank over the next 2 years. Add in reserve requirements of $75 million, and there is less than $7 million of breathing room in this budget.

It illustrates just how tenuous Walker's budget is, and combine the disappointing revenues with a whole lot of uncertainty regarding how much money will be flowing down from DC (and in what parts), and anyone who thinks Walker’s budget is going to largely remain intact is a complete SUCKER. The only question is how much patchwork is the Legislature going to have to do in the coming months.

Tuesday, February 21, 2017

Roads and state buildings keep crumbling in Fitwalkerstan

Today's big story at the Capitol was a hearing that followed up on the brutal audit released last month by the Legislative Audit Bureau. Scott Bauer of the Associated Press will remind you of what that audit showed, as well as what might be done to try to fix the problems.
The audit found that 19 major highway projects completed in the past decade cost a total of $1.5 billion — twice as much as the $772 million original price tag. It also said the cost of 16 ongoing major highway projects more than doubled to a total of $5.8 billion — increasing by a staggering $3.1 billion — from the time they were approved through August 2016.

Failing to account for inflation was a major driver of the cost overruns, but the audit recommended a number of other cost-saving steps.

The Audit Committee's bill would require DOT to account for inflation in its original cost estimates, report on changes annually to the Legislature, explain any changes, give an update on when the project is expected to be completed and offer an opinion on whether the work will be done on time under the original budget....

The audit found that Wisconsin's roads have consistently deteriorated over the past five years and are in "considerably" worse shape than roads in six other Midwestern states. The proportion of state highways in good condition decreased from 53.5 percent in 2010 to 41.0 percent in 2015, the audit said.
New DOT Secretary Dave Ross and the Republicans on the Audit Committee indicated that they hoped to find new ways to make the DOT more "performance-based", and possibly save money through that and other methods (like wage suppression).

But doesn't the fact that these highway projects are running well over budget, as well as the fact that roads are falling apart in the Age of Fitzwalkerstan, indicate that more investment is needed, or at least getting more local projects done as opposed to shelling out big money for a few choice developments? And State Senator Kathleen Vinehout pointed out that maybe it's better to have the Legislature use some of its power to demand information, and use their power of the purse to say "Yea or Nay" to any major changes and additions to these projects.

While the Audit Committee was discussing one type of construction today, Gov Walker released his plans for another type of construction- one that deals with the state's buildings and facilities. That was shown as part of Governor Walker's Capital Budget, which was released today and will be voted on by the State Building Commission next month.

The Capital Budget gives information not only on the projects Governor Walker wants to see funded, but the ones that state agencies requested and didn't have Walker sign off on. Here are the topline figures. The state media makes the $803 million in projected Capital costs for the 2017-19 seem like a lot, but it would be the smallest amount of total building costs of Walker's 4 budgets (although the amount of new borrowing does go up from $101.2 million to $449.9 million). In fact, the last 2 Walker budgets have been significantly lower for spending on buildings and upkeep.

Total Capital Budget expenses
2011-13 $967.0 million
2013-15 $1,454.8 million
2015-17 $848.7 million
2017-19 (proposed) $803.5 million

And one area in particular that is losing Capital funding is the University of Wisconsin System. The UW System asked for nearly $635 million in specific capital improvements across all of its campuses and offices, and Walker's office only signed off on $128 million of those requests, including ZERO going to UW-Madison.

State Rep. Gordon Hintz from Oshkosh (another UW campus shut out by the Governor) noticed the horrid double-whammy of lower spending along with higher debt for both the state's roads, and had an apt picture to go along with his press release- a falling house of cards.
Governor Walker’s inability to effectively govern on transportation infrastructure funding is now causing problems for the state’s crumbling building infrastructure. For the fourth straight budget, Governor Walker has failed to address Wisconsin’s transportation funding crisis, choosing to instead rely on increased borrowing and delaying scheduled highway projects, despite the state’s sorry status of having the third worst roads in the country. Under Governor Walker, debt service as a percent of transportation revenue has nearly doubled, and Wisconsin now spends over 20 cents of every dollar of transportation revenues paying debt.

As a result of the increased debt issued to fund transportation, Governor Walker has decimated the state’s building infrastructure programs for the UW System and other state agencies. In October, 2016, the UW Board of Regents indicated that the backlog of needed repairs in the University of Wisconsin System has grown to an estimated cost of $2 billion. Governor Walker’s 2017-19 Capital Budget proposal funds just more than 50 percent (53.5%) of the level in the 2009-11 budget.

“Nothing says 21st century economy like 1970s university facilities. Governor Walker is intentionally holding up capital projects as a way to cover up his increased borrowing for roads. Our state – whether it be our roads or state buildings or universities – is literally falling apart,” said Rep. Hintz, “Meanwhile, as projects and repairs are ignored, the costs to maintain our infrastructure is steadily increasing. What family or business makes decisions like that?”
I know who makes decisions like that, Gordon.Someone who doesn't care what happens to the state after he's out of power, and someone who wants someone else to clean up the messes he has caused. And everyone in Milwaukee County is nodding their heads- they've seen these borrow-and-defer tricks from Scotty before.

No, this Walker gimmickry and "governance" ain't working.