Tuesday, May 30, 2017

Are Wisconsin's forests worth $27 a year? We'll find out

One of the centerpiece “reforms” of Scott Walker’s budget is a proposal that would lead to noticeable changes for Wisconsinites’ property tax bills, and the potential maintenance of State Forests. It’s a move that would eliminate the “state” part of a homeowner’s property tax bill, and then make up the difference in that tax cut by using General Fund tax dollars to pay for that part of the Department of Natural Resources’ forestry duties. The DNR’s Forestry Account would lose $180 million of that property tax funding, and instead will have the same amount of money transferred in from the General Fund.

So let’s go into the Legislative Fiscal Bureau’s paper on the property tax proposal, and see what the Forestry Account currently does. It pays for many outdoors-related maintenance and operations, and helps to pay some of the money required for land management and preservation duties. Under today’s Forestry financing system, there is projected to be a surplus of money available to take care of these things.
The forestry mill tax currently provides a dedicated funding source for, and makes up the majority of revenue to, the forestry account of the conservation fund. As noted in LFB Paper 466, under the bill, forestry account revenues would support approximately 617 full-time equivalent staff positions in 2018-19 to fund a variety of activities. This includes approximately 602 DNR staff and the following programs: (a) the operations of 23 state forests; (b) tree nursery operations; (c) prevention, detection, and suppression of forest fires; (d) forest health and productivity, including administration of the MFL program and assistance to county forest administrators; (e) grants, loans, and payments to certain towns and private forest owners; (f) repayment of a portion of stewardship program debt; and (g) a portion of DNR administrative costs. In addition, the forestry account supports approximately 15 staff and certain costs of various other state agencies, including forest pest control by the Department of Agriculture, Trade and Consumer Protection (DATCP) and land management operations of the Kickapoo Reserve Management Board and the Lower Wisconsin State Riverway Board. Expenditures from the forestry account totaled $103.8 million in 2015-16.

4. Also, as noted in LFB Paper 466, under the bill, the forestry account would be expected to have an available balance of approximately $25 million on June 30, 2019. Anticipated revenues ($118.4 million) are expected to exceed authorized ongoing expenditures ($110.9 million) by $7.5 million in fiscal year 2018-19.
So perhaps the 2017-19 would be the right time to take this risk, since there is plenty of money available in the short term. That, or maybe it’s a good time to use Forestry money to pay for upgraded communications and fire detection efforts, which the LFB says is underfunded in the current 2017-19 budget.

But back to the property tax part for a second. If Walker’s measure is approved, the LFB says that property taxes on the average Wisconsin home would be projected to be lower over the next 2 years.
On March 14, 2017, this office released its estimate of the tax bill on the median-valued home taxed at the statewide average tax rate based on provisions in the Governor's budget bill. Because the estimate for 2016(17) included more recent data on actual tax levies that are higher than assumed at the time of the Governor's estimate, the base year estimate ($2,852) is somewhat higher than the administration's estimate ($2,845). Nonetheless, the March 14 estimates for 2017(18) and 2018(19) are lower than the tax bill estimates for 2010(11) and the estimate for 2018(19) equals the 2014(15) calculation.

19. Under current law provisions, the forestry mill tax is levied at a rate of 16.97 cents per $1,000 of the statewide equalized valuation, as determined by DOR. Sunsetting the state forestry tax would reduce statewide property tax collections by $88.8 million in 2017(18) and $91.7 million in 2018(19), relative to current law. Based on this office's estimated median home values, tax bills would be lower by $27 in 2017(18) and $28 in 2018(19), also relative to current law. Table 5 reports tax bill estimates for 2010(11) and for 2014(15) through 2018(19), under the bill. The calculations are rounded to the nearest dollar. The amounts also take into account the Governor's 2017-19 recommendations related to increased funding for school equalization aids and the school levy credit.
This is good news if all you care about is what you pay in property taxes, but very bad news if you care about pretty much anything else. That $180 million in General Fund money could be used for a variety of purposes, including reducing debt on road projects, increasing aid to local governments (and preventing the inevitable cuts that would come under the current budget), or even building a more responsible method to keeping property taxes low.

The $180 million of General Fund money is also a less stable source of funding for Forestry operations, since the availability of General Fund money for any service is going to be an issue with a $1 billion budget deficit looming for 2019-21. Add in the stagnant job and population growth news of the last week, and it is increasingly possible that Wisconsin's structural deficit will go even higher due to low revenues.

This lack of long-term stability for Forestry operations and the uncertain future budget picture are why a Northwoods Assemblyman and several lumber-related businesses and forestry groups have recently released statements asking that the Forestry tax remain.
The Board of Directors of the Great Lakes Timber Professionals Association (GLTPA), the Lake States Lumber Association (LSLA) and the Wisconsin Consulting Foresters (WCF) join the positions taken by the Chairman of the Assembly Committee on Forestry Jeff Mursau (R-Crivitz) and the Wisconsin Council on Forestry in opposition to the sunset of the Forestry Mill Tax.

These organizations, whom are involved in every aspect of the states (sic) timber and forest products industry, believe that elimination of the Forestry Mill Tax would have a negative impact on an industry that is one of the leading economic drivers of the state.

As the state struggles to find a long-term funding solution for the state’s transportation program, and biennially debates how much funding is available to support K-12 education, the Medicaid program, and the Department of Corrections, we don’t need to add further uncertainty into the mix by eliminating a dedicated revenue stream which adequately maintains, grows and protects one the state’s most important resources.

GLTPA Board member Aaron Burmeister released the following statement:
“The Forestry mill tax of Wisconsin is important for us to maintain the forest on a responsible basis. It will allow us to continue valuable research on controlling exotic and invasive plants and insects that could bring doom to our forest resource!

We would much prefer that the Forestry Mill Tax remain in place and that the additional surplus general purpose revenue be used to fix our rural roads and bridges, so that our industry and other industries in Wisconsin can efficiently get raw products from the forests and fields to our respective mills and markets.”
Interestingly, Mursau’s State Senator is Tom Tiffany (R-Climate Change Denial), who sits on the Joint Finance Committee, so let’s see what direction Taconite Tommy and the rest of the JFC Republicans take on this one.

I think $27 is a worthwhile investment for this, don't you?

Also, let’s see if there are discussions in tomorrow’s meeting about how to best use the $180 million in GPR funds, particularly in light of recent declines in income tax revenues, significant slowdowns in job growth, and other competing needs such as transportation, insurance costs and salaries for state employees, or even needing a bigger cushion against a potential downturn in the economy.

As June approaches, we are getting into the big stuff of this budget, and we’ll see how Joint Finance and the Legislature tries to build off of the house of cards that Scott Walker calls a budget. Be vigilant

1 comment:

  1. Sadly, it appears that WISGOP will take the $27 tax cut over the dedicated forest money. But they're working out the details in some combo deal with the School Levy write-off, so we'll find out later.