Saturday, January 31, 2015

GDP still pretty darn good

Today’s big economic story is that GDP figures came out for the 4th Quarter of 2014, and a lot of the financial media is portraying the 2.6% growth shown in the release as disappointing. Apparently the “experts” were thinking growth should have topped 3% after the blowout growth in the 2nd and 3rd quarters (4.6% and 5.0% growth, respectively), but a look inside these figures indicate the economy was still on good footing as 2014 ended.

If you take a look at the Bureau of Economic Analysis’ release, you can break out the four large GDP components. What this shows is that U.S. consumers spent strongly in the last 3 months of the year, and the only things that held 4th Quarter growth under the 3.0% figure were cutbacks in government spending (particularly military spending) an increasing trade deficit. Table 2 of the BEA release has these figures if you want to follow along.

Contributions to GDP growth, 4th Quarter 2014
Consumption +2.87% to GDP, (+4.3% vs Q3)
Investment +1.20% to GDP (+7.4% vs Q3)
Federal Gov’t -0.54% to GDP (-7.5% vs Q3)
State/Local Gov’t +0.14% to GDP (+1.3% vs Q3)
Exports +0.37% to GDP (+2.8% vs Q3)
Imports -1.39% to GDP (8.9% more imports than Q3)

The increase in imports makes sense, given the increase in consumption along with the increasing strength of the dollar (which makes imported items cheaper for Americans to buy). Even with that, private sector GDP expanded by more than a 3% annual rate for this quarter, and remained headed in the right direction.



Overall growth for the year from the end of 2013 to the end of 2014 is now estimated at just under 2.5%, which isn’t that bad, and keeps overall GDP on the modest but relatively steady growth line that we’ve seen for the 4 ½ years of the Obama Recovery.



Looking ahead, it’ll be interesting to see what effect the dropping price of gas will have on overall consumption numbers (both of gas itself and on other goods with the extra money left over), and also if the lower inflation numbers start helping to make real GDP growth go higher. On the flip side, the improving dollar and bad overseas economies may raise the trade deficit, and make that Net Exports number be even more of a drag on GDP than the -1.02% it was in this quarter.

But despite the naysaying from the Wall Street and DC media, I think today’s report shows that U.S. GDP growth was in a good place at the end of 2014, with a strong final 3 quarters of increases of both jobs and output. But now we start looking ahead to what the beginning of 2015 holds, and with high volatility in both jobless claims and the stock market, it feels like things could go either way for growth over the next few months.

For more analysis on the GDP report, I'll forward you to Econbrowser with thoughts from James Hamilton, who notes that GDP expanded at an annual rate of growth over 4% for the last 9 months of 2014, and also UW-Madison's Menzie Chinn.

Friday, January 30, 2015

More hints that Wisconsin finances are slipping away

As we await the release of Governor Scott Walker’s budget, we continue to get clues as to the direction of the state’s finances. I’ll direct you to the quarterly General Fund Cash Forecast report that came out this afternoon. While not a direct match for the status of the state’s General Fund, it usually goes in the same direction, and what’s worth comparing here are the numbers that came out with what was predicted three months ago.

Cash balance, forecast vs actual Oct –Dec 2014
Oct 2014
Actual beginning balance $1,729.1 million
Predicted ending balance $2,154.3 million
Actual ending balance $2,072.5 million
Difference -$81.8 million

Nov 2014
Predicted ending balance $1,874.4 million
Actual ending balance $1,847.9 million
0Difference -$25.5 million

Dec 2014
Predicted ending balance $1,318.9 million
Actual ending balance $1,202.0 million
Difference -$116.9 million

That’s not a good sign, and even worse is the predicted direction for the coming months. The same documents cash forecast predicts the gap between the October report and the January one to widen in the next three months, as taxes get filed.

Jan 2015
Actual beginning balance $1,202.0 million
Predicted ending balance Oct ’14 $2,197.5
Predicted ending balance Jan ’15 $2,043.0 million
Difference -$154.5 million

Feb 2015
Predicted ending balance Oct ’14 $1,915.9 million
Predicted ending balance Jan ’15 $1,738.8 million
Difference -$177.1 million

Mar 2015
Predicted ending balance Oct ’14 $1,234.4 million
Predicted ending balance Jan ’15 $1,011.0 million
Difference -$233.4 million

And the reason for why the state’s treasury keeps falling short? Lower revenues, as the three months for October through December 2013 missed on cash receipts by $105.5 million, and all of the additional $116.5 million change in predicted cash balance in the first three months of 2015 are due to a lowering of expectations for receipts.

With the month ending on Saturday and tax season beginning, we will start to see very soon if these numbers have any chance of making up these deficiencies in receipts over the last five months of Fiscal Year 2015. But given the last year of lower-than-predicted tax revenues leading to increasing budget deficits not just for this year, but for the 2-year budget after that, I sure wouldn’t bet on it. Somehow I’m guessing this information about these lower revenues and higher deficits isn’t being told to the suckers GOP supporters that might be attending our Governor’s latest out-of-state speaking engagement.

P.S. It's also interesting that these numbers are not included in the disclosure for the state's attempt to refinance $260 million in debt in the coming weeks. They cut it off in November. By the way, this refinancing is in addition to the $279 million in borrowing that's going to happen next Tuesday- the same day that Walker reveals his budget.

Thursday, January 29, 2015

Koo-Koo and Dingbat want to treat MKE like a third-world country

State Sen. Alberta (Dingbat) Darling and State Rep. Dale (Koo-Koo) Kooyenga are two suburban Republicans who have Milwaukee County constituencies, but due to gerrymandering, rely on votes from outside of Milwaukee County to stay in office. But that's not stopping them from believing they have the solution to inner-city Milwaukee unemployment and poverty. These two have teamed up to produce a paper titled the New Opportunities for Milwaukee Agenda, a piece that I am sure had no input whatsoever from the Bradley Foundation or Wisconsin Manufacturers and Commerce (no, not at all...).

Naturally, much of this agenda features calls for school privatization and related giveaways to corporations. But perhaps the most heinous part is where Koo-Koo and the Dingbat decide that the solution to unemployment and low opportunity in the inner city is to lower wages beyond the legal limits.
Similar to a state’s tax burden, a state’s status as right-to-work influences a company’s decisions. The businesses considering investment, or additional investment, are increased with regularity if the state is right-to-work. Approximately twenty-four of the states in this country are right-to-work and the other twenty-six still require all employees in a union shop to be part of the union.21 It is important that Wisconsin is competitive in luring businesses by providing a right-to-work zone.

It is not our intent to make the proposal a battle over right-to-work. However, when targeting new investments, Wisconsin will be competitive with the most economically dynamic states if policymakers are able to offer no taxes and a right-to-work zone. When coupled with the DWD and the WTCSs ability to offer on-site job training, Milwaukee and Wisconsin will be in an advantageous position to bring significant investment to Wisconsin.

Reform: Create a 5-person governor appointed board that could grant a company’s employees the right not to be mandated to join a union. The board would have to certify the business does not directly compete with an existing Wisconsin business.
That's right, Koo-Koo and the Dingbat want to eliminate labor laws that apply to the rest of the state, and allow businesses to exploit the inner-city Milwaukee work force by paying them subpar wages and removing their rights. Oh, and there's another great part in the document where they say they would "streamline" licensing requirements for certain services, specifically mentioning "African hair braiding" as a skill the underprivileged in Milwaukee should be especially apt to do. Niiiiiice.

Reading that plan led me to look up this term in Wikipedia.
Colonialism is the establishment, exploitation, maintenance, acquisition, and expansion of colony in one territory by a political power from another territory. It is a set of unequal relationships between the colonial power and the colony and often between the colonists and the indigenous population....

Collins English Dictionary defines colonialism as "the policy and practice of a power in extending control over weaker people or areas."[1] The Merriam-Webster Dictionary offers four definitions, including "something characteristic of a colony" and "control by one power over a dependent area or people."
Yeah, that seems to fit.

Naturally, this document doesn't call for added investment and stabilization from government services for those areas, but instead is entirely based on a private sector that has neglected this area of the state for decades. Even better is that the document is "authored" by people whose own suburban lifestyle is based on utilizing the resources and amenities of the large city while not paying any of the taxes and investment that come with maintaining such an urban core. The mentality would be laughable if these people weren't in power in this state, but because they are, and because they have media access that the residents of inner-city Milwaukee don't have, this type of crap gets a hearing in the public square, and has a chance to become law. In fact this arrogant, borderline racist "improvement" plan for inner-city Milwaukee is given huge amounts of air time and exposure on Milwaukee media, and today's editorial in the pro-suburb Journal-Sentinel says that it "holds promise."

No, it does not hold promise. It's the same, top-down privatization BS that has failed Milwaukee for decades, except with lower wages, and much of it is not a plan worth of serious discussion. It's based on the same trope that cultures who think they're superior have tried to impose on other cultures for centuries, and it rarely has made the other culture better off. But that trope sure got a select few of that (usually white) empire/colony-overseer very rich, and the white business community in the Milwaukee area see an opportunity to repeat that history with disaster capitalism plans like this. That's Koo-Koo's and Dingbat's real goal with this policy, even if they're too dense to fully understand that.

Wednesday, January 28, 2015

Walker's Wisconsin borrows just like they do in DC

In Wisconsin, we've become used to “fiscal conservative” Scott Walker constantly crying Tea Party tears about the U.S. debt, an example of which is when Walker said people who believe the feds will continue to fund Medicaid were living in an “alternate universe” last August. You may ask "How does our federal government pay its bills when it spends more than it has coming in?" It borrows it, usually through the selling of Treasury Notes and Treasury Bonds, and we've generally had plenty of interest from bidders, regardless of the amount of deficit that we have to pay off (which, by the way, is much lower than it was 5 years ago).

Knowing this makes Walker's "concerns" about the federal debt all the more, because Walker's own budgets at the state level have also relied on borrowing and increased debt back here in Wisconsin. More evidence of this came out this week, as the Wisconsin DOA announced it would offer up over $279 million in new borrowing to pay for various agency expenses. Doubly interesting is the fact that the bids for this offering close on February 3, the same day that Walker is expected to present his 2015-17 budget.

And despite Walker's brown bag campaign of 2010 that claimed state government shouldn't spend more than it takes in, his four years in office show otherwise. If you look at the recent history of the state’s indebtedness, General Obligation debt has leveled off in the last two years, but is still higher than when Walker took over in early 2011.

Outstanding G.O. debt, Wisconsin
Dec 2009 $6.223 billion
Dec 2010 $6.823 billion
Dec 2011 $7.379 billion
Dec 2012 $8.015 billion
Dec 2013 $8.028 billion
Dec 2014 $7.857 billion (according to last bond disclosure)

Also not mentioned is the fact that Walker has heavily relied on borrowing to pay for projects in the Transportation Fund, as nearly $1 billion of such borrowing was in the 2013-15 budget, (provision 4 in this document) with $416.5 million of that was borrowed just to allow the Transportation Fund to pay for everyday operations, (i.e. not tied in to any specific project). It is a big reason why the Transportation Fund’s debt service is scheduled to increase by $9.5 million in this fiscal year, and the DOT's budget request projects an additional $36.5 million in the next 2-year budget.

Don't construe that take as me being against the concept of borrowing in general. If something has to be done and interest rates are low, it’s not a bad strategy (if you're not keen on raising taxes). Given that the strengthening dollar and plummeting budget deficits have helped to reduce the benchmark 10-year Treasury bond below 1.8%, it sure seems like 2015 would be a time to do that, before interest rates and inflation rise again.

But to do this otherwise sensible strategy is in direct conflict to Walker’s trying to sell nationwide about how he’s "a fiscal conservative more responsible than those people in D.C." (note: this is not an actual Walker quote, but it's probably similar to the line of BS he'll try to spin to the rubes in Iowa). Walker’s track record in Wisconsin shows a very different story from that meme, and it seems likely that borrowing would be one of the ways that he’ll try to close his self-inflicted deficit in the current and future budgets. Let's see if the national media picks up on something that Starfuckers, Inc. won't talk about.

Tuesday, January 27, 2015

Walker's plan for the Bucks needs more blanks filled in

I wanted to say "the plan is far from a slam-dunk" in the headline, but that would be really lame.

I had a good idea that we would be seeing a bill in Wisconsin giving state funding for a new Bucks arena when I saw that Seattle Mayor Ed Murray met with NBA Commissioner Adam Silver last week, and emerged from the meeting saying that he wasn’t planning on the Bucks to head to the Pacific Northwest.
“I actually have to say, that brought clarity to the process for me,” Murray said. “I had the impression that maybe the whole expansion and/or other teams (relocating) might be sooner and more of a possibility.”

Murray had believed the Milwaukee Bucks might be a relocation candidate if the franchise can’t get a new arena deal worked out this year. But he says Silver and others quickly shot that down.

“They were very clear that they see them staying,” he said.
So that likely gets rid of the idea of Seattle stealing the Bucks away (although the people of the Land of Grunge still get to keep the victory they stole over another Wisconsin team from earlier this month. And no, I’m not quite over that one).

Which led to today, when we finally got a look at the Bucks arena deal, including a release from Governor Walker’s office explaining that the provision will be part of his upcoming state budget, with the state putting down money to get the arena built, and the money being paid back through a “jock tax.”
Under the “Pay Their Way” plan, a Sports and Entertainment District would be created to provide bonding authority to pay back a $220 million grant for a new sports arena. The grant will be in the form of an appropriation bond issuance, paid back by projected growth in income taxes from the Bucks, as well as visiting teams, due to salary increases and new TV contracts. No current base revenues would be used to pay for the bonds, and once the bonds are paid off, the tax growth would return to the state.

Without a new arena, the Bucks would likely leave Wisconsin in 2017, costing the state nearly $10 million per year in income tax collections alone. In addition, if no action is taken on the current Bradley Center, the state is still on the hook for as much as $100 million in maintenance and debt service costs, but without an anchor tenant to drive sales and bring business to the arena and local area.

If the Bucks are sold, the revenue from that sale would first go to pay back these appropriation bonds.
The projections of increased NBA revenues and a higher salary cap (with higher “jock taxes” going with it) make sense. ESPN’s Zach Lowe has consistently mentioned the impact of the league’s new TV contract and the likely huge increase in the cap that’ll result from that, and I’ll direct you to an article he wrote in November talking about what those numbers may look like, under the umbrella of a larger article on the Golden State Warriors’ plans.
No one knows what will happen to the cap in 2015-16 and 2016-17, the first year of the league’s mammoth new national TV contract, but the league’s most recent projections for 2015-16 remain in the range of $66 million to $68 million, per several league sources. It appears unlikely the league bakes any of the anticipated TV money into the cap figure a year early, meaning the 2015-16 cap will sit right around where the NBA had projected it.

But the Warriors were smart to structure the [Klay Thompson] deal this way, since the league’s finances are so fluid. The league and players’ union have only just started discussing “smoothing” proposals for the TV money that would have the cap increase in similar year-by-year increments instead of shooting up in a single season — that 2016-17 campaign.

Who knows where those talks will lead? If the TV money flows in without any smoothing scheme, the cap could jump from about $66.5 million in 2015-16 to somewhere in the $90 million ballpark the following season — an unprecedented one-year spike. The league would like to spread that jump over several seasons so teams can plan with some certainty and one class of free agents — those hitting the market in the summer of 2016 — don’t get to cash in on a once-in-a-lifetime bonanza while their peers sit out.
Theoretically this would also raise salaries for the Bucks (especially if they continue to improve), and some of this money would funnel back to the arena authority in the form of the jock tax. If done right, perhaps that $220 million (plus interest) could be paid off sooner than 2045.

Where I disagree with the Governor’s assessment is the assumption that if the Bucks left, that the $10 million in income tax revenues would leave with nothing replacing it. It would hurt, just like the loss of any large employer would hurt, but it is na├»ve to think there wouldn’t be demand to have some other businesses slightly benefit and expand to take the place of those dollars that would go to the Bucks. Plus, the Bradley Center would still likely exist and hold events without the Bucks, including games for Marquette basketball and Milwaukee Admirals, concerts, and other private events. But I do agree that the BC would seem like a white elephant without having the NBA team there, and it would be difficult to sell the facility and/or its land to someone else to get rid of the large amount of state costs that the facility would require.

And there are two other important details to sort out. The first deals with the site and a final projected cost of the project- neither of which we have seen yet. If you put together the personal investment from new Bucks owners Marc Lasry and Wes Edens of around $150 million, along with $100 million from former owner Herb Kohl and money from naming rights, and add it to the $220 million from the state, that might well be enough to take care of the $400 million to $500 million that was originally estimated to pay for the arena. But we don’t know where that arena would be and how it fits together with the overall development plan of downtown Milwaukee. This is a bigger piece to me than the financing, because I want the arena to be a “hit” that fires up even more development around the area that it’ll be built on, and could be a spectacle that has a major impact on the vibe in the blocks around the area where it exists (the bland-looking BC doesn’t really do that right now).

Of course, the other problem is the state’s huge budget deficit, currently at $2.3 billion and counting. While the Milwaukee Business Journal’s Rich Kirchen points out that Walker’s proposal would enable the state to keep $6.5 million of player taxes, with the rest being diverted into the new arena fund, that $6.5 million won't cover all of the taxes that players and other Bucks employees would pay. You may remember this memo from the Legislative Fiscal Bureau that came out in November upon request from Assembly Speaker Robin Vos asking about how much a “jock tax” would produce for the state.
This office obtained information regarding NBA players and other employees who were potentially subject to Wisconsin income tax as of December, 2012. After conducting a search of tax returns filed for tax year 2012, the Department of Revenue indicates that these individuals, in the aggregate, paid state income taxes of approximately $10.7 million in that year.
So if that number were to hold for 2015 (for the sake of argument), the state would still be down $4.2 million from what it currently gets from NBA players and related personnel, which would add another $4.2 million to the state’s budget deficit. And obviously that number would grow as player salaries and related income grows, which widens the money that would have to be made up. Now, maybe the potential loss of the team and the high-priced employees make that a worthwhile trade, but let’s not pretend that the state’s treasury won’t have money taken out of it, because it will.

In addition, when you combine the fact that this proposal comes out the same day that we get details about Walker asking for a massive cut to the UW System in the same budget, it leads to this telling screenshot. And this picture should make anyone wonder about what the Gov's real priorities are.



Oh, who am I kidding? I KNOW what this guy's priorities are. And they don't involve anything that bettering conditions for most of us in Wisconsin.

But I still am agnostic on the Bucks arena issue, because I want to see the site plan, and how this’ll all work together. It may yet still be worth the investment, but given the direction of where this deficit-ridden budget is heading, it seems like a very hard sell. If the 99% of us are going to have to sacrifice services, wages, take-home pay and quality of life (even more than we already have in the last four years), it sure looks like bad form to have the government shelling out for 1%er ballplayers and team executives at the same time.

Monday, January 26, 2015

Euros show how to stand up to RW "news"

The Miami Herald’s Leonard Pitts Jr. has been one of our better political writers for years, with a way of bringing things into focus in a way that many of us can’t. One of my favorites was in 2005, when he explained that too many people allowed the George W. Bush Administration to try to create its own reality because “ignorance was easier.” Keep that phrase in mind, as I direct you to his latest excellent column on ignorance and lies from right-wing world, where Pitts went over the fallout of Fox News’s claims about Sharia Law and Muslim-run “no-go” zones in Europe, and how people overseas reacted to Fox’s act.

In response, French broadcasters ridiculed the Faux News “report”, and condemnation from Paris’s mayor and British Prime Minister David Cameron got Faux to back down and apologize for its dishonesty. Pitts points out this episode should be a wake-up call for us in Amercia on how we can and should fight the lies and hate of the GOP-aganda machine.
The most important takeaway here is not the admittedly startling news that Fox, contrary to all indications, is capable of shame. Rather, it is what the European response tells us about ourselves and our waning capacity for moral indignation with this sort of garbage.

It’s amazing, the things you can get used to, that can come to seem normal. In America, it has come to seem normal that a major news organization functions as the propaganda arm of an extremist political ideology, that it spews a constant stream of racism, sexism, homophobia, Islamophobia, paranoia and manufactured outrage, and that it does so with brazen disregard for what is factual, what is right, what is fair, what is balanced — virtues that are supposed to be the sine qua non of anything calling itself a newsroom.

If you live with aberrance long enough, you can forget it’s aberrance. You can forget that facts matter, that logic is important, that science is critical, that he who speaks claptrap loudly still speaks claptrap — and that claptrap has no place in reasoned and informed debate. Sometimes, it takes someone from outside to hold up a mirror and allow you to see more clearly what you have grown accustomed to.
Boy, if that doesn’t sound like the downward slide into “truthiness” for righties and the legitimizing of truthiness by the “legitimate” media over the last 15 years, what does? And Wisconsin has been especially bad at this, with the hate and dishonesty that rule daytime AM radio in this state. Combine that with a star-fucking pro-Walker media that seems determined to make Gov Dropout a legitimate presidential candidate over telling the truth about his damaging policies and the toxic environment he has left behind, and you have the divisive mess we have today.

It is well past time we take the fight to these paid-off hacks and hammer and ridicule them for the lies and filth that they spread on our airwaves and in our newspapers. Being nice and expecting mere reason to win out isn’t enough, not when big-money interests and weak-minded fools don't want to own up to what's really happening to our once-great state.

More evidence that right-to-work is wrong for Wisconsin

I wanted to continue my series on how things work in (right-to) work-for-less states and apply it to where we stand in Wisconsin, to compare how those states are doing versus what we have here, and to get the data out before the propaganda from (right-to) work-for-less advocates tries to overrun the debate if such a bill is ever produced here. And yes, sure I’m biased on this subject, but that bias is based on historical trends and comparisons- three of which I will have in this post.

The first is a report released over the weekend by the Wisconsin Contractor Coalition, who directs you to a paper by Marquette University economist Abdur Chowdhury. Chowdhury compared Wisconsin’s situation with (right-to) work-for-less states, and found that the state would definitely lose out. Here’s the executive summary of Chowdhury’s study.
A national assessment of the effect of RTW [right-to-work] laws on important labor market outcomes, such as, unionization, wages, employment, inequality and job-­‐related injuries reveal some important findings. First, unionization rates in RTW states are less than half of what they are in Collective Bargaining (CB) states. Second, aggregate employment in RTW states has increased modestly while employment in CB states has declined. Third, wages are lower in RTW states than in CB states. Fourth, RTW increases gender and racial wage inequality and also makes for less safe workplace.

The potential net loss in direct income to Wisconsin workers and their families due to a RTW legislation is between $3.89 and $4.82 billion annually. Using a conservative estimate of an impact multiplier of 1.5, the total direct and induced loss of a RTW legislation is estimated between $5.84 and $7.23 billion annually. Based upon the two estimates of lost incomes and an overall effective tax rate of 4.0%, the economic loss in state income taxes is estimated between $234 and $289 million per year.

While considerable efforts are being made by certain legislators to pass the RTW law in Wisconsin, the empirical evidence on the effect of adopting such a law does not support prescribing it as an economic policy tool. Overall, this study shows that RTW legislation would provide no discernible economic advantage to Wisconsin, but would impose significant social and economic costs. Low wages would weaken consumption. Higher rates of labor turnover and adversarial labor-­‐management relations would decrease productivity. It would also burden the state with higher ‘mop-­up’ costs [costs for social programs such as child care and food stamps].
But other than that, no problems, right? :P The lost income tax revenue and increased mop-costs are interesting to note in light of this state having $2.3 billion in budget deficits already- we can’t afford to make that go even higher through acts like (right-to) work-for-less.

Chowdhury goes on to explain the factors that does seem to encourage business development and growth, and it doesn’t seem to have much to do with the lower wages that (right-to) work-for-less would result in.
Studies examining why firms locate where they do have consistently found that there are several key factors that business decision-­‐makers consider and compare when deciding among alternative investment sites. These include proximity to markets for their products; access to the raw materials and supplies that firms need; access to quality transportation networks and infrastructure; quality of life characteristics (e.g., good schools, health services, recreational facilities, low crime rates, quality housing, and weather); regulatory environment; the cost and reliability of utilities, etc. Stevens (2009) report that there is no more business capital formation in right to work states, as measured by the number of businesses and the ratio of firm formations to total firms. In addition, recent studies of high-tech firms indicate that they often seek out areas with highly skilled labor and proximity to universities and research centers.
Hmm, that doesn’t really seem to follow the defunding of education and lowering of public services that has become a central strategy in Wisconsin during the Age of Fitzwalkerstan, now does it?

Another release came out from the Wisconsin AFL-CIO today using information from the Economic Policy Institute, which shows that (right-to) work for less laws makes all workers worse off, not just those that are in unions.
These laws lower wages, for both union and non-union workers, by an average of 3.2 percent, reduce the odds of getting health insurance through one’s job by 2.6 percent, and reduce the odds of getting a pension through an employer by 4.8 percent.
The AFL-CIO then continued by comparing what we have here in Wisconsin with what people in (right-to) work-for-less states have. As the full EPI paper notes, states with (right-to) work-for-less states have higher poverty rates, higher rates of violent crime and lower levels of educational achievement, among other quality-of-life drawbacks.

Bruce Thompson of Urban Milwaukee performed a similar evaluation last week, which also shows that (right-to) work-for-less states generally have lower pay. As part of the article, Thompson supplied this graph, where the green squares are work-for-less states in the former Confederacy, and the blue triangles are work-for-less states in other parts of the country. Compare and contrast those states with where the orange circles are, which represent states that don’t have such union-busting laws. You will notice that Wisconsin is smack dab in the middle of this graph, with per capita income just below $43,000 in 2013.


As a group, these (non-RTW) states have somewhat higher income but lower growth than either group of RTW states. It is perhaps telling that Indiana and Michigan, the two states that recently adopted RTW, are at the low end of the non-RTW states in average income and the growth of income.

Other statistical measures support these generalizations. Southern states have the lowest mean income and the lowest standard deviation suggesting that there is a commonality among them. The Western RTW states have the highest growth and the highest standard deviation of growth, reflecting their volatility. (I did not weight these calculations by populations). The southern RTW states are growing faster than the non-RTW states, but at the present rate it would take 50 years for the southern states to catch up in income.
Thompson also points out that promoters of work-for-less often point to the gains in income in work-for-less states while not mentioning that the wages are still much less than in non-work-for-less states. And I will add that those work-for-less honks NEVER bring up the lower social conditions in work-for-less states that the EPI study mentions, such as more people without health insurance and higher poverty and crime rates.

So really the question you want to ask yourself is this. Does lowering wages and quality of life make for a worthwhile trade-off to “compete” with the states that have (right-to) work-for-less laws, or is keeping wages high and maintaining a good quality of life the better way to economic success in the 2010s? It certainly seems like the Walker/WisGOP administration is pointing to the first strategy, but a whole lot of evidence indicates that it’s probably not the right strategy.

Sunday, January 25, 2015

Milwaukee charter schools not measuring up...so take it statewide????

Here's a great expose by the Shepherd Express showing just how a number of Milwaukee's charter schools really operate, with the answer being "often at a substandard level while costing city taxpayers a whole lot of money." Lisa Kaiser's article mentions that 4 of these 10 charters are operating at such a low level that they could be closed, but only 2 were put on probation by city's Charter School Review Committee (CSRC), and that these schools often do a worse job than the MPS schools they're sold as an improvement over. Here's an example of the type of organization operating these schools, with very little oversight or procedure to take care of bad operators.
When presenting their annual review of the city’s 10 charter schools last week, the CSRC limited the discussion to the schools’ academic performance—even omitting the fact that Concept Schools, the Illinois-based national operator of MMSA, has been raided by the FBI in four states as part of an investigation into possible financial fraud. Concept Schools is run by a Turkish Islamic cleric who lives in the Poconos and the organization brings in Turkish teachers on H-1B visas, which are meant for recruiting hard-to-find workers, primarily in the high-tech sector, and not K-12 teachers, according to the Cincinnati Enquirer.

Jeanette Mitchell, chair of the CSRC, told the Steering and Rules Committee that she wasn’t aware of the FBI raids on Concept Schools, even though it’s been widely reported in the press. An MMSA representative denied that the federal investigation had anything to do with his charter school and said that none of the MMSA teachers are here on a H-1B visa.
But the real concerning part to me is the fact that these taxpayer-funded charter schools are operating in a veil of secrecy that wouldn't be allowed with a regular MPS school, and that the charters' financial mismanagement puts other city governmments at fiscal risk.
Jack Norman, a consultant for Schools and Communities United, argued that the charter advocates were providing an incomplete picture of the program for the council members. The CSRC doesn’t discipline schools that are new to the program, but Norman argued that some of the city’s failing charters have long track records as taxpayer-funded voucher schools that should be taken into consideration. The struggling King’s Academy, for example, began as a voucher school in 1999 and became a city charter school in 2010 and has been operating continuously for 15 years. MMSA can trace its lineage to Wisconsin Career Academy, an MPS charter school that was closed in 2012, as well as Wisconsin College Prep Academy, a voucher school that was shut down in 2013. He accused Lighthouse (which received an "F" from the CSRC) of “charter hopping or shopping” because it had received a charter from MPS and UW-Milwaukee before becoming a city charter....

He also argued that the city’s charter school program affects the city’s financial outlook. The program destabilizes Milwaukee Public Schools by reducing student enrollment. A weakened MPS may not be able to make good on its bond payments and Norman warned that could make the city responsible for MPS’s debt. That’s because MPS is treated as a branch of city government for bonding.

“The city is ultimately on the hook for the $300-plus million in bonds that MPS has put out,” Norman said. “To the degree that MPS is put under greater financial pressures, in effect the city is, because the city is the ultimately responsible for that debt. In effect, the city charter program is helping to contribute to possible instability in the city’s own financial reporting.”
Of course, if you're a suburban GOP trying to mess up the City of Milwaukee's finances, so you can beat it up among your constituents and AM 1130 and 620 as a "mismanaged Dem-run area", that's not such a bad strategy. And it works even better if you make the area have to privatize even more of its schools to your campaign contributors!

As usual, these alternative methods of schooling don't seem to be anything that ends up improving education services in Milwaukee, but does seem to be successful in putting unneeded strain on public services and making it harder for them to succeed. Which is the real goal in right-wing world, which helps explain why they want to make this the rule throughout the state.

Saturday, January 24, 2015

DC Republicans screw up, show their Obamacare "fix" won't work

Yeah, that whole idea of Republicans having a better grip on the economy now that they're in power in D.C.? That doesn’t seem to be going so well. Take a look at this summary of Thursday’s Senate committee meeting that was intended to show support for the GOP’s bill to allow businesses to avoid penalties under Obamacare if they choose not to insure employees that work less than 40 hours a week, instead of the 30-hour limit that exists today.

This committee hearing tried to prop up Hardee’s/Carl’s Junior CEO Andrew Puzder (2012 compensation,just under $4.5 million) as an example of a hard-pressed businessman who would be facing extra costs due to the employer mandate hitting his restaurants that have people working between 30 and 39.5 hours a week. We'll let Slate's Alec MacGillis take it from there.
For starters, there is the basic problem that President Obama has made clear that he’ll veto the 40-hour measure. If he does, Republicans could still seek to use the proposal as a cudgel to attack the law politically, but even here there are problems. The Congressional Budget Office has given the measure a decidedly unfavorable review. It estimates that the bill would result in as many as 1 million workers having their hours cut to put them under the new 40-hour limit and thereby losing their employer coverage; about 500,000 workers being left without any health coverage at all; and the deficit increasing by more than $50 billion as a result of fewer employers paying the $3,000 fine, as well as more people turning to Medicaid and federal subsidies to purchase their own insurance after being denied employer coverage.

Even worse, perhaps, several prominent conservatives have come out against the revision—notably Yuval Levin, one of the right’s most influential policy wonks, who wrote in National Review that changing to 40 hours would inevitably cause more Americans to lose hours than the 30-hour rule does, because there are far more workers just at or above that threshold than at the 30-hour threshold. “By setting the definition lower, Obamacare’s architects were trying to mitigate the damaging effects of the employer mandate some,” Levin wrote in a burst of intellectual honesty, “and by setting it higher Republicans would be worsening those effects.”…

The Democrats on the panel, in the minority for the first time in eight years, relished cross-examining the Republicans’ witnesses. Sen. Patty Murray of Washington, the panel’s top Democrat, noted that Puzder’s claim—that Hardee’s and Carl’s Jr. workers who did not get coverage at work could get Obamacare coverage instead—did not hold up in the many states that have rejected the law’s Medicaid expansion. Sen. Elizabeth Warren of Massachusetts quoted Yuval Levin’s criticism of the 40-hour change and noted the irony that Republicans were pushing a measure that would both raise the deficit and make more people reliant on Obamacare. “This bill is corporate welfare,” she said. “Big corporations would be able to cut their coverage, and taxpayers would get stuck with the tab. I’m against adding $53 billion to the deficit so corporations can push their responsibilities onto the government.”

This provoked Puzder, the CEO, into taking a shot at the CBO’s deficit estimate. “I love the CBO, but have they ever estimated anything that is accurate? I mean, really?” This off-message outburst — delivered with former CBO director Holtz-Eakin sitting right next to him — in turn earned Puzder a rebuke from his putative ally, Alexander, who reminded him that it was the CBO that had done the fast-food industry a big favor with its estimate of high job losses under a minimum-wage increase.
And may I remind you that same CBO report that claimed a minimum wage increase might end up reducing job growth by 500,000 also estimated that poverty would be reduced by more than 900,000 and real incomes would grow by more than $2 billion. That’s a good trade in my opinion, especially in times of rising job growth that would blunt quite a bit of the potential job loss (in 2014, this would have translated to 2.45 million new jobs being added instead of 2.95 million).

Gee, what a surprise that Republicans find it a lot easier to strike poses against Obamacare provisions they don’t like, but the bills they produce would end up working a lot worse than what we have today under the ACA. Sort of like their attempts to still argue that “tax cuts pay for themselves” when we have 35 years of evidence proving that they do not (in fact, the only “dynamic” part of tax cuts on the rich and corporate seems to involve rent-seeking by those people, who run to the tax breaks and reduce job growth and tax revenues).

Not surprisingly this hearing is being underreported in our “liberal” media, because it doesn’t fit the narrative that their corporate buddies and the new GOP-controlled Senate wants, and it's not as sexy as 2016 speculation. But I encourage you to take heed of what was said in there, as the testimony and the CBO figures on this bill that would raise the threshold to avoid ACA penalties has exposed the lie behind the alleged “reform” in the GOP's Obamacare bill. It is nothing but a clear attempt to allow corporations to continue to freeload off of the government by paying low wages and no benefits to just-less-than-full-time employees, forcing us as taxpayers to pay for these businesses’ negligence (aka the Wal-Mart business model).

In addition, the appearance by the fittingly named Andrew Pu(t)zder at yesterday’s hearing certainly is going to keep me from stopping at Hardee’s the next time I want a fast-food fix, joining Papa John’s and Darden Restaurants on the “let’s not eat there” list. So way to go, Andy, you hurt your cause and your company with your lame, whiny performance on Capitol Hill this week.

Is "added workforce investment" merely taking money from MKE?

One item that grabbed headlines this week involved Scott Walker’s call for programs and funding in workforce development and training. Among these is a provision in the Department of Children and Families known as the Transitional Jobs program, which evolved out of the state’s Transform Milwaukee program. A look at the DCF’s Informational Paper from the Wisconsin Legislative Fiscal Bureau helps to explain how the current Transform Milwaukee program works, and I’ll add a bit more explanation in italics.
The Transform Milwaukee program, which was created under 2013 Act 20 (the state budget bill) and took effect on July 1, 2013, provides employers in the City of Milwaukee with financial subsidies if they hire eligible low-income individuals. In contrast with W-2, childless individuals may qualify for the Transform Milwaukee program, and the income eligibility limit is higher. The program is a public-private partnership focusing on the area of Milwaukee encompassed by West Silver Spring Drive, West Mitchell Street, North Sherman Boulevard, and Highway 43 (which entails most of the poorest areas of Milwaukee). A total of 587 participants were placed in Transform Milwaukee jobs in 2014.

Under the program, DCF may reimburse an employer or contractor for a minimum of 20 hours per week for any of the following costs that are attributable to the employment of an eligible individual: (a) a wage subsidy equal to the amount of wages paid to the individual for hours actually worked, not to exceed 40 hours per week at the applicable federal or state minimum wage; (b) federal social security and Medicare taxes; (c) state and federal unemployment taxes; and (d) worker's compensation insurance premiums. An employer or, subject to DCF's approval, a contractor, may pay a participant an amount that exceeds the wage subsidy. Participants can work in the program for a maximum of 1,040 hours.
Basically it reduces the cost to those employers in that part of Milwaukee that hire people at or near the poverty line.

Now those 587 people that got placed through Transform Milwaukee may sound like a lot, but it’s really not, especially when compared to how the program was sold, which was an outgrowth of a $100 million package that Walker announced in April 2012 (just weeks before the 2012 recall election). News reports at the time quoted Walker as saying 2,000 jobs would be created in construction and other industries, which seems like a whole lot more than 587 often-temporary jobs. But maybe other areas are being touched by the program and it’s going OK.

With that in mind, here’s what the release from the Governor’s Office has to say about the plans for that program in the next state budget.
Transform Milwaukee Jobs Program – Invests $5 million annually, and extends to high-need rural areas of the state, including Racine and Kenosha, at $3 million over the biennium.
Sounds good on the face, as certainly there are other high-need areas with underemployed skilled workers throughout the state, not just in Milwaukee.

But here comes the part that made me stop and become suspicious. A sizable amount of those 587 people listed as being placed through Transform Milwaukee may not have taken that job, or started work after July 1, 2014, so the expenses didn’t show up in the 2014 Fiscal Year. But even so, Transform Milwaukee paid less than 3% of the money that was set aside in the 2014 budget. These figures from Page 43 of the DCF Informational Paper.

Transform Milwaukee/Transitional Jobs funding
2013-14 Budget $3,750,000
2013-14 Actual Expenditures $103,900
2014-15 Budget $5,716,100

And the ability to expand the Transform Milwaukee/ Transitional Jobs program has already been put into law, as also noted in the DCF paper.
Transitional Jobs Program. Subsequent to the enactment of the Transform Milwaukee program, 2013 Act 113 authorized DCF to establish a similar program in areas outside Milwaukee, to the extent funding is available. DCF must give priority to areas having relatively high rates of unemployment and childhood poverty. The same eligibility and program requirements apply to both programs. To date, the program has not been expanded beyond Milwaukee.
So is the press release that Walker’s office sent out saying that he will “invest” in the Transform Milwaukee program merely mean that he will continue to ask for DCF to keep getting $5.7 million a year, while diverting a sizable amount of that funding away from Milwaukee (the $3 million "extended to other high-need areas in the state")? In other words, there would be no change at all, other than possibly designating the Transitional Jobs funds to areas outside of the City of Milwaukee. Or are they merely going to carry over the left-over funding from this budget and apply it to the next one, to make it look like an "added" investment?

It sure makes me wonder if there’s something beyond the press release that the Governor’s office doesn’t want to reveal until after the budget is released on Feb. 3. And it would certainly go with the cynical way this administration has operated, as the press release is designed to make the state and national media believe Gov Walker is doing some “innovative and bold” in this budget. In reality, he may simply be clarifying details of funding that already exists, and not adding or changing a thing. Sneaky, sneaky there Scotty!

Friday, January 23, 2015

LFB confirms- Wisconsin budget deficits now, and for the future

Here’s my quick reaction to the newly-updated revenue figures from the Wisconsin Legislative Fiscal Bureau that were released this afternoon.

As predicted, the LFB found the November estimates from Scott Walker’s Department of Revenue to be too rosy for this current fiscal year, which means we have to fix a larger budget hole over the next 5 months.
Based upon the November report, the administration's general fund condition statement for 2014-15 reflects a gross ending balance (June 30, 2015) of -$132.1 million. Our analysis indicates a gross balance of -$283.4 million for 2014-15. This is $151.3 million below that of the administration's report…..

The factors that cause the $151.3 million variance are as follows. First, based on economic forecasts and tax collections to date, the estimated tax collections of this memorandum are $173.5 million below the projections of the November 20 report. Second, departmental revenues (non-tax amounts deposited into the general fund) are projected to be $2.7 million less than the estimate of the administration. Third, it is estimated that net appropriations will be $24.9 million below the amount reflected in the administration's report. The primary reason for this difference is a reduction of $18.4 million in debt service payments.
In other words, this would have been worse if it wasn’t for the fact that our falling deficit and stronger dollar are putting interest rates at 2-year lows, which means we pay less in debt service (thanks Obama!).

Looking ahead, the LFB is slightly more positive on revenue growth than the relatively-optimistic figures from the DOR. A lot of this is due to the expectation of strong growth continuing in the U.S. for 2015 and 2016, with the LFB paper quoting Global Insight forecasts of 3.1% GDP growth and 2.83 million more jobs for this year, and 2.7% GDP growth and 2.49 million more jobs next year (thanks, Obama!).

The LFB predicts revenue growth of 4.7% in Fiscal Year 2015-16, and 3.8% in 2016-17, which puts total tax revenues modestly above the DOR’s estimates for those two years (by $110.9 million in ’15-’16, and $65.9 million in ’16-’17). However, this still leaves a massive budget hole, based on the budget requests made by the state’s many departments.

2015-17 projected budget, based on LFB revenue est.
2015-16 Starting balance $65 million (required reserves)
2015-16 proj. revenues $15,651.3 million
2015-16 proj. expenses $16,636.4 million
2015-16 TOTAL DEFICIT $920.1 million

2016-17 Starting in the hole -$920.1 million
2016-17 proj. revenues $16,191.4 million
2016-17 proj. expenses $17,243.6 million
2016-17 TOTAL DEFICIT -$1,052.2 million

Plus $65 million required reserves
TOTAL 2015-17 DEFICITS $2.037 BILLION

Yes, the $2.3 billion plus in deficit are lower than the $3.5 billion I was predicting earlier this week, but it's still a whole lot to make up, and we aren't even mentioning the additional troubles in the Transportation Fund. Given the strong economic expectations and the LFB’s estimates of significantly higher tax collections in early 2015 due to a “bounce back” in investment income in 2014 (the LFB says this, along with the lower withholding rates should lower tax refunds and increase revenues), I’d say the risk is to the downside for revenues. Remember, it just takes a small revenue shortfall in this fiscal year to balloon the shortfalls in the future years, due to the lower tax base.

Somehow I’m guessing our governor won’t mentioning these new deficit numbers on his weekend trips to Steve King’s race-bashfest in Iowa or the Koch Brothers’ soiree in Palm Springs. But unlike the star-fucking Wisconsin media, let’s see if some in the national poitical reportage start to take notice of these numbers, and start asking real questions, as Scott Walker’s and WisGOP’s “fiscal responsibility” doesn’t seem to be working out the way they are claiming it to be.

Thursday, January 22, 2015

Strong Wisconsin jobs continue for December. Is it real?

Apparently the country’s job boom has finally been hitting Wisconsin over the last few months. We saw further evidence of this in the Wisconsin Department of Workforce Development’s release of the December 2014 jobs report for the state. The top-line numbers are very good, with 7,600 private sector jobs added, and 5,100 overall, and November’s figures being revised up by 1,500 more private sector jobs.

The biggest-gaining sector in the state was in Construction, which had lower-than-normal seasonal layoffs in December (7,000), resulting in a seasonally-adjusted gain of 2,900. The Transportation, Warehousing and Utilities category also did well, up 1,900 with the seasonal adjustment. Manufacturing took a bit of a dip in December (down 200 jobs) but with November’s figures being revised up by 600 in that sector, even that number is better off than we knew last month. The state's unemployment rate did not change from 5.2% while the U.S. dropped by 0.2% to 5.6%, but it still indicated slight gains in both the number of people employed and in the total labor force, which should be taken as a positive sign.

It’s been a remarkable run-up of jobs in these monthly reports since June, with 46,300 private sector jobs added in the last 6 months, and 45,300 overall. It’s cut a significant chunk out of the Walker jobs gap from more than 74,000 private sector jobs in August to less than 53,000 today, and it ends the first Walker term at just over 158,000 jobs. Not exactly the 250,000 the Guv predicted, but it was apparently enough to keep a sufficient amount of Wisconsin voters from kicking him out. You can see the upswing on this chart which goes back to the start of Walker's term in office.



This all sounds good, and certainly the “Help Wanted” signs I see around Madison indicate things are in a better spot than they were at the start of this decade, at least in the Capitol City (funny how these things happen in a highly-educated liberal town where people want to move to). However, I’d approach the recent positive job reports with some skepticism. These alleged gains have yet to manifest themselves in increased tax revenues (as mentioned earlier this week, Wisconsin’s income tax revenues continue to badly lag projections), which shouldn’t be happening if the job market is truly booming. There’s a disconnect here that does not make sense, unless all of the jobs being added pay very low wages (which is a possibility, as UW-Milwaukee Professor Marc Levine noted last year that low-wage jobs were the only ones that had increased in the Age of Fitzwalkerstan).

Secondly, these figures are due for annual benchmark revisions that come out with the next monthly jobs report, which will be in early March. These revisions are often based on figures from the “gold standard” Quarterly Census on Wages and Employment, and those figures have yet to show the same amount of growth- Wisconsin still lingered in last place for Midwestern job growth in the 12 months leading up to June 2014. Now maybe that’ll change with upcoming QCEW releases, but we saw this same pattern last year, when the monthly reports indicated private sector job growth of 39,700 for all of 2013, but the QCEW said the state only added 29,723 that year.

Those caveats certainly won't stop Scott Walker from trying to take credit for the latest good job figures in this monthly report, as a way of selling his presidential campaign to unsuspecting folks from out of state. You can see why he might do this, but watch for more information over the next few weeks that confirm or deny whether we are really living through a “Wisconsin comeback” or a “dead cat bounce" that'll soon see the state reverting to the subpar job growth that has been the general rule in the Age of Fitzwalkerstan.

Wednesday, January 21, 2015

Stop the Koch-funded deceptions. Build the streetcar

With today's headlines showing preliminary approval for the Milwaukee streetcar finally being built, I would encourage you to read Bruce Murphy’s column in Urban Milwaukee on the big-money interests behind the people trying to stop the project from proceeding. Much of the funding and organizaed media campaign can be traced back to Koch front group Americans for Prosperity, as well as the Milwaukee County GOP front group Citizens for Responsible Government. Murphy’s article shows this opposition to be a minimal and weak combination of loudmouth political opportunists (Alders Bob Donovan and Joe Davis) along with anti-city Astroturf organizations. And like most things in Milwaukee’s right-wing world, these people have had to desperately resort to lies, exaggerations, and paid AM radio propagandists (Hi Icki!) to even have a semblance of a movement.

With that in mind, I’d like to clear up some misconceptions about the streetcar project. Given that I have had dealings with both the City of Milwaukee and the Federal Transit Administration in my past career, I think I can help explain the different agencies and funding involved, and show you that almost all Wisconsinites will not pay a DIME toward this project, unless they choose to use it themselves when visiting the Brew City.

First of all, the streetcar project will be built using federal money that goes to the City of Milwaukee, and this money from the U.S. DOT’s Federal Transit Administration can only be used for rail-type transit such as a streetcar. Before he became a reporter for Urban Milwaukee, Jeramey Jannene gave a good timeline of this issue for onmilwaukee.com 6 years ago, explaining that the source of funding for this project goes all the way back to 1991. Squabbling over whether to have a bus lane on Milwaukee’s freeways led to some of the money to be taken back, and then some other parts went into Milwaukee-area freeway projects such as the Marquette Interchange, leaving $91.5 million specifically earmarked for start-up costs for an electric-based transit system in downtown Milwaukee.

In the late 2000s, the debate on what to do with the money came to a head with two familiar Milwaukee-area elected officials butting heads, and ultimately having the situation resolved by an act of Congress.
2007-2008 - Tom Barrett and Scott Walker each pushed the issue of the $91.5 [million] much more publicly. Barrett unveiled a plan that included a downtown streetcar loop and two express bus lines, and talked of reconfiguring existing bus service to work with new, express service. Walker unveiled an express bus plan scant on details, but complete with attacks on the Mayor's plan. It appeared he had the intention to simply cut all standard bus service in the areas to be served by express buses. Both, being career politicians, cleverly avoided any mention of the money needed to operate such a system after building it.

September 9th, 2008 - Tom Barrett and Scott Walker debate the merits of their respective proposals at a forum at Marquette moderated by Mike Gousha. Barrett offers to split the $91.5 million 50/50 in person to Walker (an idea he had been proposing for weeks if not months prior), Walker refuses.

March 2009 - Senator Herb Kohl and Representative David Obey include an earmark provision in the bill that became the Omnibus Appropriations Act of 2009 that divided the $91.5 million between the City of Milwaukee and Milwaukee County. Milwaukee County received 40% ($36.6 million), with the City of Milwaukee receiving 60% ($54.9 million). Barrett and Walker are each now free to pursue using their respective allocated funds to build a new mode of transit service in Milwaukee.
The Milwaukee County portion of the funding went toward buying new buses in 2012 and 2013, in an attempt to reduce the backlog of maintenance and fleet needs that had ballooned under Walker. The City of Milwaukee’s $54.9 million has yet to be used, and can only be used for rail-based systems such as light rail or streetcars – it cannot be repurposed to buses or other transit without another act of Congress (much like how the state’s $800 million of high-speed rail money could not be used for other transportation needs, as we all found out in 2010 and 2011).

Which brings us to where we are today. If you look at the actual bill that was procedurally delayed today (and likely to be passed next month), you’ll see that the City already has the money set aside for the non-federal share of the streetcar line.
Further Resolved, That the $44.0 million local share of capital costs for the Phase 1 Starter System and $15.0 million local share of capital costs for the Lakefront Streetcar Line shall be funded as follows:

· $9.7 million - Tax Incremental District No. 49 (Cathedral Place); previously approved through adoption of Common Council File Number 110372.

· $18.3 million - Tax Incremental District No. 56 (Erie/Jefferson Street); subject to Common Council adoption of File Number 141264.

· $31.0 million - Tax Incremental District No. 82 (East Michigan Street); subject to Common Council adoption of File Number 141263.
This simply sets aside funding in a TID with the idea that property values and development will occur on and near the streetcar line, and that the added property values will then help reduce the property tax burden for homeowners and businesses throughout the city. Now you can debate whether funding streetcar development is a good use of a TID (I say yes, others may disagree), but you don’t get to say that funds are being diverted from other needs such as cops or libraries or street repair, because that’s not the truth.

And if you’re concerned about ongoing costs of operating the streetcar, the legislation notes that the City has in its hands $3.18 million dollars from the FTA on a CMAQ air-quality grant that helps defray those costs. This is the same type of CMAQ grant that the Milwaukee County Transit System has used to operate its express buses since 2012, including four new routes that started up this month. The City also plans to use revenue from fare-paying customers, corporate sponsorships, and (if necessary) Parking Fund revenues to pay for the locally-based costs of running the streetcar.

If you look at the Wisconsin Department of Transportation’s budget request for 2015-17, there are no state operating funds currently being set aside for a Milwaukee streetcar project, nor are any funds being requested, and the City of Milwaukee’s proposed legislation does not count on getting any (the resolution does ask for a “dedicated local funding source for public transit in Milwaukee County” - much like what existed in the former SE Wisconsin RTA). So why should suburbanites care about whether the CITY wants to build its streetcar line in the CITY? In fact, the start of a streetcar line’s operation could open up MCTS for some efficiencies, as the bus system could cut back on some of their downtown buses since the streetcar would be a duplication of service, and instead use their limited resources to give or increase bus services to other parts of the county. You would think that would be a good thing for the ‘burbs, in addition to the positives that would come from having a more vibrant anchor city with new development and an image that the Milwaukee area is moving forward.

Honestly, a lot of the complaints against the streetcar just seem to be based in the Walker-esque “divide and conquer” mentality from a group of anti-city right-wingers. These people don’t like Mayor Tom Barrett, don’t like transit in general, and are more than willing to shill for the Kochs and the Bradleys on AM radio and elsewhere in right-wing bubble world if it gives them a few more dollars and public attention. And they often like to dump on the state’s largest city and economic engine because….it makes their mediocre selves feel superior? And stopping the streetcar would be a “victory” for the righties that would result in.....what?

The useful idiots that are being used by people such as the Kochs and Bradleys to obstruct the streetcar are people who don’t really care about how tax dollars are being used (many of these dimwits don’t seem to even know the sources and limitations of the funds that I’ve laid out above), and they don’t care about improving the quality of life for the City of Milwaukee by making it more attractive for businesses and employees with talent. They just want to stamp their feet like the adolescents they are, and don’t offer any solutions to these issues of transportation and economic development other than a cynical demand to get their way and get more money out of it for themselves. There is no concept of a "big picture" in Milwaukee-area right-wing world.

Which is why these ignoramuses should be laughed out of the public debate, and their wasteful and pointless delay tactics should be ignored and ridiculed. After 6 years of debate and numerous stall tactics by the big-money oligarchs, it is well past time to get the Milwaukee Steetcar built.

Tuesday, January 20, 2015

December revenues widen Wisconsin's budget hole even further

Another month, and another subpar report on Wisconsin tax figures from the state’s Department of Revenue. This time, it shows that income and corporate taxes collected are going down even faster, and even sales tax growth slowed some. The state’s overall tax intake also on the decline.

Wisconsin tax revenues, Dec. 2014 vs Dec. 2013
Income taxes -3.2% vs Dec 2013
FY 2015 Year-To-Date -6.4% vs FY 2014 YTD

Sales taxes +3.7% vs Dec 2013
FY 2015 Year-To-Date +4.7% vs FY 2014 YTD

Corporate taxes -11.2% vs Dec 2013
FY 2015 Year-To-Date -8.0% vs FY 2014 YTD

Excise taxes -2.1% vs Dec 2013
FY 2015 Year-To-Date -2.6% vs FY 2014 YTD

Total taxes collected -2.6% vs. Dec 2013
FY 2015 Year-to-Date -2.6% vs FY 2014 YTD

To control the damage from that report, the DOR quickly followed with this document, which tries to indicate that revenues are doing juuuuust fine, and that there’s nothing to worry about. However, a quick look inside the numbers shows that there is plenty to fear from what our current and future budget numbers are likely to hold.

Let’s start with the income tax figures, since those make up the majority of the state’s General Fund revenues. These figures have been down compared in Fiscal Year 2015 compared to Fiscal Year 2014 in no small part due to two rounds of Koo-Koo tax cuts, and the moving of withholding tables in April 2014 that have reduced the amount of money that was coming in to the state (what, you didn’t notice the extra $10 a paycheck you got?). The Legislative Fiscal Bureau estimated this change in withholding tables to be equivalent to about $55 million a month (as noted under Provision 16 on Page 10 of this PDF). As a result, it is only fair to adjust the income tax figures accordingly, to make an apples-to-apples comparison, which means that we should add $330 million to the income tax totals for FY 2015 at this time.

Adjusted income tax revenues YTD, FY 2015 vs FY 2014
FY 2014 YTD $3.617 billion
FY 2015 YTD $3.714.8 billion (+2.7%)

A 2.7% increase in income taxes looks good on first glance, and that $330 million in added revenue also means the adjusted overall tax revenue increase is just under 2.3%. But this hides a second concern that will become more apparent in the coming months, because what goes down must come back up when it comes to adjustments for this. And the LFB spells out how that’ll happen.
In 2014-15, withholding taxes will be reduced for twelve months, which will be partially offset by lower refunds (and larger remittances) paid in the Spring of 2015. However, the lower refunds will reflect only nine months of reduced withholding taxes in calendar year 2014 (from April through December), which means there will be a second one-time loss in 2014-15. Beginning in 2015-16, the reduced withholding taxes will be offset by lower refunds and higher remittances during the tax filing season [in Spring 2016].
That’s right, we’re looking at lower tax refunds for this year, so I hope you didn’t blow all of that $10 a paycheck already.

As a result, income tax collections should go up compared to 2013-14 solely on the basis of these lower tax refunds. Here’s my crude calculation of how that adjustment will work:

Jan ‘15 adjust -$55 million due to lower withholding vs 2013-14
Feb ’15 adjust -$55 mil for withholding, +$165 mil for lower refunds
Mar ’15 adjust -$55 mil for withholding, +$165 mil for lower refunds
Apr ’15 adjust NONE for withholding, +$165 mil for lower refunds
May- June 2015 no adjustments either way.
NET CHANGE IN ADJUSTMENTS +$330 million

So now that we know the adjustments for income taxes, let’s go back to the DOR projection of revenues, and see what needs to happen to hit the target by the end of June.

Jan-June 2015 change needed to hit DOR income tax target
Adjusted income tax change needed +9.9%
Current adjusted income tax change FY 2015 +2.7%
PROJECTED SHORTFALL $247.5 MILLION

We can do the same analysis for the other 3 main taxes in Wisconsin as well, and you’ll notice corporate taxes are especially lagging (calling Dr. Morbius!).

Jan-June 2015 Sales tax change needed to hit DOR target
Sales tax change needed +3.7%
Current sales tax change FY 2015 +4.7%
PROJECTED SURPLUS $26.3 MILLION

Jan-June 2015 Corp. tax change needed to hit DOR target
Corp tax change needed +16.1%
Current corp tax change FY 2015 -8.0%
PROJECTED SHORTFALL $118.4 MILLION

Jan-June 2015 Excise tax change needed to hit DOR target
Excise tax change needed +3.7%
Current excise tax change FY 2015 -2.6%
PROJECTED SHORTFALL $24.6 MILLION

I’ll be generous and assume all of the remaining minor taxes add up to the DOR projections, so based on these four categories, here’s what we get.

Projected budget revenue pace vs DOR projections, FY 2015
Income tax -$247.5 million
Sales tax +$26.3 million
Corporate tax -$118.4 million
Excise tax -$24.6 million
ESTIMATED TOTAL SHORTFALL $367.6 MILLION

And remember, the DOR estimated a $132 million budget shortfall for this fiscal year even with their rosy revenue projections, so add $367 million onto that, and you are right at $500 million that has to be made up in the next 6 months. And with another $735 million or so that must be added onto the $2.2 billion deficit for the next budget, because the revenue shortfall means a lower base to start from, you're looking at a looming 2015-17 deficit near $3 billion.



Yep, we're still in the ditch, and no matter how the Walker appointees try to spin it, we’re going to stay there, barring some miraculous boom in revenues between now and the end of June. And as Sunday's Packer debacle reminded us, the only miracles in these parts recently seem to be the negative kind.

Monday, January 19, 2015

The reckoning of the morning after

Yeah, I can't see myself forgetting that Packer meltdown yesterday. To see your team blow a chance like that....this really hurts. You never know if a chance that good will come around again.

How unlikely was this loss? I'll let ESPN's win-probability and X and O guru Bill Barnwell explain, with my added thoughts in italics.
When [Seahawk QB Russell ] Wilson had his fourth interception of the day bounce off Jermaine Kearse’s fingertips and into Morgan Burnett’s hands with 5:04 left, the Packers were up by 12 points and had the ball near midfield. ESPN Stats & Information estimates that Seattle’s chances of winning in that exact situation were a lowly 3.9 percent. Take the team with the best point differential in NFL post-merger history, the 2007 Patriots, and have it travel back in time to take on the worst team in post-merger history, the 1976 Buccaneers, in Tampa Bay. The Bucs’ chances of winning that game per the log5 method are 4.3 percent, narrowly better than where the Seahawks stood with a little more than five minutes to go.

Seattle needed just about everything to go right from that point forward, and as you already know, that’s exactly what happened. Outside of Lynch narrowly stepping out of bounds on a wheel route that otherwise would have been the first touchdown in Seattle’s comeback, the Seahawks suddenly exhibited an ability to cast miracles on demand. Of course, there was the expected onside kick, a 21.1 percent shot that went Seattle’s way in a spot where the game all but surely would have ended had the Packers recovered. More on that in a moment. There was the only 2-yard Hail Mary you’ll ever see, a two-point conversion that somehow fell into the waiting arms of Luke Willson. (that play absolutely killed me, how Ha-Ha Clinton-Dix and the rest of the Packer defense just stood around and let that crap get completed). That play ended up saving Seattle’s bacon when the Packers were able to kick a field goal on their ensuing drive. With a defense riddled by injuries, it was a blessing that the Seahawks won the overtime coin toss, never giving the ball back to Aaron Rodgers & Co.
Of course, it never should have come down to a 1 in 25 chance of losing, because this game should have been put away well before the last 5 minutes. Barnwell notes that Packer Coach Mike McCarthy deciding to kick field goals two times from the 1-yard-line in the 1st Quarter ended up costing the Packers a total of 2.6 points in win expectancy. Now maybe the play-calling menu was a little light due to Aaron Rodgers not being as mobile as normal (so rollouts and run-pass options were less likely), but if even 1 of those 2 attempts to go for it work, that's 7 points vs. 6, and even getting stuffed leaves Seattle in horrible field position, which often ends up resulting in points for the Pack within the next 2 possessions.

But the even more egregious coaching error comes from the fact that the injury-riddled and tired Seahawk defense wasn't exactly tested by the likely NFL MVP in the 4th quarter. And that's where me and Barnwell have a special issue with the way this game ended up, and why I look to the sidelines for the reason behind this collapse.
The first was the more egregious of the two. Taking over on their own 13-yard line with 6:53 to go after a 57-yard drive that led to a field goal on their last possession (a really good drive that featured a key 3rd-down conversion pass to Richard Rodgers) , the Packers took over and got ultra-conservative. They ran twice with James Starks before calling for a hitch route to an isolated Andrew Quarless versus linebacker K.J. Wright on third-and-4, which fell incomplete under some pressure from Wright. It was the same play call that won Green Bay the game against Miami late in the fourth quarter, but that was versus abysmal coverage linebacker Philip Wheeler; Wright is one of the better linebackers in football.

The second drive was mostly circumstance. After the interception, the Packers ran the ball with Lacy for a loss of 4, at which point the Seahawks called timeout. I can understand wanting to run clock on the next play, which went for a loss of 2 and another timeout. At third-and-16 and with the clock stopped, a third running play seems reasonable enough.
The results are bad enough, 6 plays, 2 yards, 2 punts, and only 2:52 taken off the clock. But let's note that the mix was 1 pass, 5 runs, when you have the best QB in football and Seawhawks star DB Richard Sherman is playing with one arm. Running the ball may take time off the clock and/or force the other team to take timeouts, but you know what's even more effective at that? GETTING FIRST DOWNS. Sure enough, on the Packers' drive to tie the game at the end of regulation, 3 straight pass plays netted the team 42 yards. Yes, Seattle wasn't playing as tight on defense given the end-of-game situation as they may have been when they were losing and pressing to make a play, but that also opens up opportunities for the Packers' 3 wideouts and Rodgers' usually-strong accuracy. It's just an idiotic, risk-averse strategy to grind the ball into the line at a time when the Seahawks are selling out for the run.

And when you're the Green Bay Packers and lucky enough to have the best QB in the game in his prime, you don't let opportunities slip away like this. The only positive for me in this disastrous Packer loss is that it has happened after I've lived to see the Pack make 3 Super Bowls and win 2. If this was the 1995 season, and 21-year-old Jake was watching this giveaway without having ever seen the Pack in the Super Bowl in his lifetime? I might not be out of bed or able to even read anything about the game, instead of continually shaking my head and seething like I am today.

Fuck it, onto college hoops season.

Sunday, January 18, 2015

Today's Sunday priorities

I could do a long post on why I'm loving the idea of President Obama asking for higher capital gains taxes (LOOOOOONG overdue, as this disparity in "legalized gambling vs. working" income taxes has led to a lot of our country's economic problems), but I gotta focus. And that's not just because there's no way the corporate-owned GOP Congress would ever allow their benefactors to have their casino get taxed more fairly. There are more important things going on in the world today.

Like this. Yes, the players are a bit dated and have moved on, but this team never is. Shock the world, Pack!



And if you want the best analysis over the air of this game as well as last week's, you need to check out Milw Alder Nik Kovac and others on Packerverse. You'll sound smarter when you're watching the game with your friends later today, and not just because of the X's and O's.

Saturday, January 17, 2015

Michigan continues state trends of tax breaks = budget deficit

Add Michigan to Wisconsin, Kansas and North Carolina onto the growing list of states that have budget problems after offering tax breaks to businesses and rich people. Yesterday the Wolverine State revealed it has a $325 million current-year budget deficit, and future year deficits as well, although as Michigan-based MLive notes, some of the reason is oddly related to Michigan's bounce back from the Great Recession.
Ironically, the growing economy may be largely to blame for the budget crunch. More companies are meeting job number requirements to cash in refundable credits issued under the old Michigan Business Tax, which was scrapped in 2012.

An unexpected number of refunds this year means the state is generating significantly less revenue than officials had anticipated in May. The state has a hard time anticipating when refunds will be requested, and some of the credits can be redeemed through at least 2032.

“We’re talking about something that isn’t going to go away any time soon, and as the economy picks up … taxpayers may be more likely to claim them than they would have been during the recession,” said Jim Stansell of the House Fiscal Agency.

Republicans have largely blamed the budget crunch on previous administrations that relied on tax credits as an economic development tool. [Gov Rick] Snyder and the GOP-led Legislature scrapped the MBT in 2011 and replaced it with a flat Corporate Income Tax, exempting a number of small and medium-sized businesses in the process.
Michigan was hit as bad as any state by the lousy economy of the mid-to-late 2000s, which helps explain the desperation to attract and keep jobs by any means possible, but it has generally bounced back well once President Obama's bailout of the auto industry began in 2009 and the national economy began to recover. Its job growth has slowed some in 2014 compared to the previous years (guess that (right-to) work-for-less thing wasn't a magic pill, was it?), but since there's still growth, it makes it likely that some of these businesses hit their thresholds in 2014, and will write that off when they file their taxes this year.

And if you remember, it was an unexpectedly high amount of tax refunds that started to lead to Wisconsin's budget shortfall in 2014. This time last year, we were halfway through Fiscal Year 2014, and Wisconsin's income tax collections were up 4.7% vs the halfway point of Fiscal Year 2013. Corporate tax collections were way up, at 20.6%, and those figures were instrumental in having the Legislative Fiscal Bureau up their revenue estimates for the rest of the 2013-15 budget by $893 million. But the lower revenue effect of the first round of Koo-Koo tax cuts that affected the 2013 tax year had largely yet to be seen, since the withholding tables hadn't been adjusted, and so the only time it would hit the state treasury would be as people handed in their tax returns.

Sure enough, as the tax returns came in for January, February, March and April, Wisconsin's tax income and corporate tax revenues plummeted.

Wisconsin income and corporate tax revenues, Jan-Mar 2013 vs. Jan-Mar 2014
Jan-April 2013 income taxes $2.408 billion
Jan-April 2014 income taxes $1.982 billion (-$426 million, -17.7%)

Jan-April 2013 corp. taxes $352.4 million
Jan-April 2014 corp. taxes $290.2 million (-$62.2 million, -17.6%)

Only about $55 million of the income tax decrease was due to the lower withholdings that started in April 2014, so you can't blame that either. In addition, these lower revenues did not spur businesses into hiring people on any great scale, as only 9,500 private sector jobs were added, and 14,000 overall in a time when the U.S. job market started to take off. Sure, there has been 3 months of good jobs numbers since then, but that could simply be catching up to the hole that we were already in, and our tax revenue collections certainly have not benefitted from those allegedly higher job numbers in the Fall, as we are likely to be more than $400 million in the hole for this fiscal year, and more than $2 billion down for the next.

What this tells me is that cutting taxes for the rich and corporate do little if anything for job growth, but because the rich and corporate have more time on their hands to do tax-avoiding behavior, they tend to be more likely to take advantage of the breaks they are given. The problem is that these people pocket the profits and extra tax refunds instead of putting it back into the economy for a useful purpose, or even worse, they take it out of the economy and into more risky and unproductive ventures because the tax code encourages them to.

So if we want to balance budgets and create jobs, maybe a better strategy is to make the rich and corporate pay back some of the excessive profit and income they've been able to grab by gaming the tax code, and instead concentrate on giving raises to workers who not only will pay more taxes on higher incomes, but also might use some of that extra money to do something worthwhile that helps other businesses and individuals in the state get by. It's just a thought.

Friday, January 16, 2015

Brewers and Bucks don't pay property taxes? Yes, it's true

Bruce Murphy had a very intriguing article in Urban Milwaukee discussing how the City of Milwaukee has lost over $100 million in property tax revenue in the 14 years Miller Park has been open. And with the financing of a new Bucks arena sure to be debating in the comijng months, Murphy notes that any Bucks arena deal will likely add to the amount of property that can be taxed in the city.

How did this happen? It starts back from when the Brew Crew played at County Stadium in 1991, and the State Legislature passed a provision to give the Brewers a break.
The change in the law came at a time when the Milwaukee Brewers were doing poorly and then-owner Bud Selig was constantly harping about the travails of a small market-team. Once Miller Park was built, the revenue flowing to the team and its market value rose incredibly, yet that law was still on the books, so Miller Park remained completely tax exempt. As City of Milwaukee assessor Mary Reavey noted in an email responding to my question, “this means that all the businesses like TGI Fridays, the Brewer stores, etc are all now exempt from property taxes for both real estate and personal property.”

Legislators were apparently unaware this exemption was on the books, until 2003, when they asked the Legislative Audit Bureau to review the Brewers’ finances, and the LAB revealed that the team was exempt.

Indeed, the assumption was that the Brewers, who own 31.5 percent of Miller Park, based on their contribution to construction of the stadium (a contribution which was itself controversial since almost none of it came from the team), would be paying property taxes on at least their share of the stadium. Nope.
Murphy estimates that this exemption means that the Brewers have avoided $106 million in property taxes over time, and city residents and businesses have to take up an extra share of property taxes to make up for that difference.

Regarding the Bucks and their property tax situation, the Bradley Center is already considered to be a non-profit and exempt from taxes, because it was donated by the Pettit family and is overseen by the state (which is part of the reason the state has ponied up money for Bradley Center maintenance in the past). What Murphy notes is that the law that exempts the Brewers from Milwaukee property taxes can also come into play with a new Bucks arena is under the provision.
So how will the Bucks manage to claim this exemption? I’m guessing their lawyers have concluded that the 1991 law covering pro sports “stadiums” will cover this new arena. The law, 70.11(36)(a)(a), covers “Property consisting of or contained in a sports and entertainment home stadium, except a football stadium” which is “leased to or primarily used by a professional athletic team that is a member of a league that includes teams that have home stadiums in other states.” The exclusion of football allows the argument that the legislature intended to include all other pro sports team facilities, including a basketball “stadium.”

If so, this means that unlike all other businesses in Milwaukee, which pay property taxes to help support all the city services they receive — police, fire, garbage collection, snow-plowing — the billionaires who own the Bucks will pay nothing. Similarly, Brewers’ owner Mark Attanasio (with an estimated net worth of $700 million) pays nothing in property taxes.
Remember, the City of Milwaukee doesn't collect a dime in sales, income or excise taxes, which means the property tax, fines and fees become pretty much the only way the city can generate its own revenues. And when the State of Wisconsin has continually reduced shared revenues to the state's largest city over the last 20 years, with the 2010s featuring a GOP-run State Legislature that almost seems to enjoy hurting Milwaukee to make their suburban base in the 262 area code feel superior, the City of Milwaukee is already having a hard time coming up with the money paying its bills. Losing hundreds of millions of dollars worth of property due to exemptions given to the Brewers and the Bucks is a major hit for city finances, and puts an unfair burden on the city's already-stressed homeowners and businesses.

With the Miller Park tax seeming to be within 5 years of finally sunsetting and the Bucks arena issue sure to heat up over the next few months, Murphy's article is a good reminder that the City of Milwaukee's two sports teams are already receiving major tax breaks due to their property tax exemptions. It also suggests that we should be hesitant to give these guys everything they ask for, since they're already taking advantage of a very good deal at a whole lot of expense to many others in Milwaukee.