Saturday, June 24, 2017

The hidden ripoff- how "dark stores" raise your property taxes

Next week, there will be a hearing in the State Assembly’s Ways and Means Committee on two bills that seek to better define how commercial properties are assessed and taxed in Wisconsin. AB 386 deals with so-called “dark store” assessments on retail and other commercial property, while AB 387 has to do with the value of leased property.

The two bills have drawn sponsorship from a wide variety of legislators from both parties from numerous parts of the state – a rare feat in this Legislature. And if you look at the ripoff that retail businesses have been trying to pull on Wisconsin homeowners, you will see why these laws should be supported by anyone that is not a puppet for corporate retailers.

The leasing bill is intriguing (it values the property based on how much a renter would pay on the open market for the space vs the current below-market deal), but I want to concentrate on the “dark store” bill, since that has been an increasing issue in local communities, particularly as some retail stores close up in light of consumer tastes shifting to online shopping (Sears at Southridge Mall in Greendale being one of the latest victims).

A lawsuit in suburban Green Bay illustrates how this controversy is playing out throughout the state.
Big-box retailer Menards and the village of Howard continue to battle over a $6.7 million difference of opinion on how much the company's store on Woodman Drive is worth.

The next round will be fought in court, now that the retailer has sued the village in a dispute over Howard's 2017 assessment of its store, on 18.7 acres at 2300 Woodman Drive….

Howard assessed the store at $12.45 million. Menard Inc., which said it spent $10.6 million on land and building costs, claims the store should be assessed at $5.8 million. Menards compares the site to closed stores that include a Beaver Dam Home Depot, a Sheboygan Sears and the long-vacant Cub Foods on Green Bay's east side.

Cub Foods, on an eight-acre site, is assessed for $1.8 million and pays $40,000 a year in taxes. A redevelopment project beginning this month is projected to raise its value to $5.5 million.
That case will go to trial early next year, but for future cases, the dark store bill in the Legislature seeks to decide this question by telling assessors they should use the following criteria
1. Sales or rentals of properties exhibiting the same or a similar highest and best use with placement in the same real estate market segment.

2. Sales or rentals of properties that are similar to the property being assessed with regard to age, condition, use, type of construction, location, design, physical features, and economic characteristics…..

The bill also provides that a property is not comparable to the property being assessed if the seller has placed restrictions on the highest and best use of the property or if the property is dark property and the property being assessed is not dark property. The bill defines “dark property” as property that is vacant or unoccupied beyond the normal period for property in the same real estate market segment.

This store....

Is not this store...

The City of Wisconsin Rapids is among the latest communities to give support to the “dark store” bill, and said that it is a matter of tax fairness to keep homeowners from paying more than they should.
The goal of these bills is to avoid a large tax shift from commercial properties to other classes of property, primarily residential and small business. Alderperson Thaddeus Kubisiak, the council member who introduced the resolution, said, “this legislation will ensure that the dark store tax strategy being used by big box retail chains to cut their property tax bills in half in Michigan and other states does not take hold in Wisconsin.”

The legislation clarifies that when assessors use sales of comparable properties for determining the value of a property they must use properties that are within the same market segment and similar to the property being assessed with regard to age, condition, use, type of construction, location, design, and economic characteristics. Mayor Zachary Vruwink added, “These bills explicitly provide that assessors may not use a dark and vacant store as a comparable for property that is not dark or vacant.”
The City of Sheboygan’s Common Council also gave its unanimous support to the dark store bill this week, and pointed out how much of a tax shift happens in their community of less than 50,000 people.
Sheboygan officials said the city has already been hit by more than $550,000 in lost tax revenue in recent years following challenges by local businesses over their tax bills. The biggest loss came when the former owners of Memorial Mall won more than $800,000 in tax refunds two years ago over contested property assessments.

For the city, the mall case amounted to more than $530,000 in lost taxes between 2010 and 2016, with losses also hitting other local jurisdictions, according to information provided by the city. Local Walgreens stores have also seen reductions in their property bills following challenges to their assessments.
But the taxes aren’t really “lost”, as that $530,000 will now be an extra assessment put onto everyone else that owns property in the community, particularly homeowners. Dark-store assessments are a flat-out subsidy of retailers at the expense of the everyday resident.

And I guess that explains why the greedheads at Wisconsin Manufacturers and Commerce are opposed to this bill, because those guys want all the giveaways that they can get, no matter who else pays the price for those subsidies. For a bunch of guys who complain about paying taxes, WMC sure doesn’t mind if everyone else has to pay up for their free ride!

Any legislator worth salt needs to get behind both of these bills and shoot them through as soon as possible, before more homeowners get screwed over by (elected and donation-receiving) judges decide in favor of these retailers. Sure, dark stores and sub-market assessments might not get a rube’s blood boiling like the thought of some poor black person getting welfare, but it is a much bigger theft from the little guy.

Thursday, June 22, 2017

Dem K-12 plan goes big. Wisconsinites should listen

One of the issues still to be figured out in this budget is the largest expense of state tax dollars- K-12 education funding. And even though their party has been locked out of these closed-door GOP meetings on the budget, the Democratic members of the Joint Finance Committee decided to have a say in the debate about what to do for the next 2 years anyway, and released their own K-12 funding plan.

In looking at that Dem plan, a few things stand out as sizable differences from prior K-12 plans submitted by Governor Walker, as well as the Assembly GOP.

1.The most obvious difference is that JFC Dems are choosing General Aids to be the source of their additional K-12 funding increases, on top of Walker’s and WisGOP’s plans to have the increases concentrated in per-pupil aids. This means that poorer districts with lower tax bases and stagnant populations are likely to receive the largest benefit from the Dems’ plan.

2.The plan also gets rid of two property tax credits- the School Levy credit and the First Dollar credit) and instead folds that $1.09 billion into General Aids. The idea is that this would give districts the flexibility to use that money for classroom expenses or other items instead of requiring it to be given away as property tax relief, like today.

3.It keeps the amount of aid per voucher student at 2017’s levels, instead of increasing it like Republicans plan to do, and it gets rid of the money-funnelling mechanism where a public school district loses funding for every resident student that uses a voucher. It also sets limits on the amount of voucher students a school could take, as well as the amount of voucher students attending from a single district.

4.The end of voucher money-funneling and increased General Aids still means that property taxes for schools would be reduced $25 million below Walker’s proposed. This is even taking into account that the Dem bill allows districts to go over their revenue limits to do energy efficiency projects, and to enhance school safety.

5.It fully funds sparsity aids for small, rural school districts, instead of prorating it like in Walker’s K-12 budget, and includes funding to help forgive student loans and ongoing education costs for teachers that would take jobs in small, rural districts.

6.There are also significant increases to Special Education aids (which haven’t been increased in 8 years), money to increase reimbursement to districts that offer breakfast, and $8.7 million a year for schools to offer assistance for issues related to Alcohol and Other Drug Abuse.

An obvious roadblock to this ambitious plan is the price tag- nearly $728 million above Walker’s proposed increases to K-12 education (although it’s pretty close to the $654 million that the M&A tax credit giveaway is scheduled to cost in the next budget, now that I think of it). And do I think any of these proposals will be seriously considered as the GOP-controlled Legislature tries to break their logjam that’s already going to make this budget go past the July 1 start of the 2018 Fiscal Year? No, of course not.

But it’s a marker that Dems are throwing down, and it also counteracts the common GOP meme that “Dems have no ideas to offer.” And the Dems’ ideas match up with the proposals of State Superintendent Tony Evers’ “Fair Funding for the Future”, which seems to be a good place to be in given that Evers won 70 of Wisconsin’s 72 counties months ago as he cruised to a 3rd term in office.

So with this K-12 proposal that finally restores our public schools to their pre-Act 10 levels, it sure seems like Dems are more in line with the desires of Wisconsinites than the ALEC-owned puppets of Betsy DeVos and convicted criminal Scott Jensen that make up today’s WisGOP. And Dems would be wise to go out of their way to push that message out to the rural areas of the state that need their public schools to be supported more than ever.

WisGOP budget sins continue, no matter whose plan it is

We’re going to wrap up another week in June without any meetings of the state’s Joint Finance Committee, which means there is virtually no chance of getting the Wisconsin state budget done on time. In isolation, this isn’t a big deal in the short term, but the underlying divide between Republicans in the two houses of the Legislature seems to still be out there, and they don’t seem to be getting much closer to an overall solution, and progress is limited to fits and starts.

Given the statements from Assembly Speaker Robbin' Vos and JFC Co-Chair John Nygren in this summary, we may see some action on K-12 spending by June 30, but that the main events will still largely be held behind closed doors without Dems or the public being allowed to give input on shaping things.
The Joint Finance Committee won’t meet this week, though Nygren said it’s possible the committee will meet next week to finalize education and a few other topics where there is no disagreement. Transportation and tax cuts won’t likely be resolved before July 1, when the new budget calendar begins.

If a budget isn’t signed into law by then, funding for state government will continue at current levels. In 2015 the budget wasn’t signed until mid-July, and Vos and Nygren remained hopeful this year’s budget would be completed by then.

Vos said he preferred to continue meeting with Senate Republicans to work out a deal before scheduling another budget committee meeting.

“It’s not for lack of working on the budget, it’s just doing it in a process to try to find consensus,” Vos said.
The biggest difference is still in transportation funding, where Senate GOP Leader Scott Fitzgerald’s solution to rising debt costs and increasing potholes is to follow Governor Walker’s plan of kissing up to DC lobbyist Grover Norquist with a “no tax, no fee” pledge, and borrowing into oblivion- except Scotty Fitz and the Senate GOP want to use even more debt to hamper schools and the poor even more for the future!
Fitzgerald spokeswoman Myranda Tanck said $350 million of that borrowing would be supported by Wisconsin's general fund, which gets its revenue from income and sales taxes and pays for expenses like schools, prisons and health care for the poor, elderly and those with disabilities.

Most borrowing for roads is typically paid back by Wisconsin's dedicated transportation fund, which gets its revenue from gas taxes and vehicle registration fees.

Tanck said paying for the new borrowing Fitzgerald supports would cost the state's general fund a total of $8 million in the next budget.
This is a horrible idea that somehow not only continues the problems of excessive debt in the Transportation Fund, but also raises expenses in a General Fund that already is looking at a $1 billion deficit starting in 2019, in part due to similar borrowing stunts that have been pushed off debt payments into future years.

To their (limited) credit, the Assembly GOP doesn’t seem too keen on keeping the cycle of “borrow and pay later” as a strategy for DOT funding, as both Vos and Nygren are saying that continued reliance on borrowing without a long-term plan on revenue isn’t an acceptable answer to them (Vos called more borrowing “a Band-Aid to us.”).

But the real problem with this budget remains the same issue that hit most places run by Republicans after a while- tax cuts to the rich and corporate mean that there isn’t enough revenue to fulfill all the needs that still exist (along with a refusal to raise taxes for items such as transportation). At the same time, gimmicks that were used to balance the books have already had their benefits be used up. In Wisconsin these gimmicks include the one-time savings of Act 10 (and the resulting damage to the economy), skipped debt payments, and massive DOT borrowing. Now these bills are coming due.

And there is little evidence that there will any kind of population or job boom or outside help from DC that’ll bail this budget out. In fact, Wisconsin’s population growth has slowed to near zero and 2016 featured our slowest job growth in 7 years. On top of that, the Trump/GOP gang in DC wants to cut spending and/or pass the burden of paying for programs down to the states…when states like Wisconsin don’t have enough money to begin with.

The GOPs that are huddling in the Capitol won’t say that in public, but I sure will. It is their negligence and “politics over policy” mentality that has caused this mess of a budget, and no solution they will end up with over the coming weeks (or months?) will solve the problems that they have caused.

Wednesday, June 21, 2017

In DC or in Madison, closed-door, GOP-only legislation is bad news

With the state budget still in a three-way logjam between Assembly Republicans, Senate Republicans, and Republican Governor Scott Walker, there were plans for a closed-door summit Tuesday at the Capitol between legislative leaders to try to get things moving on a budget that is supposed to be passed into law within 10 days.
Assembly Speaker Robin Vos, R-Rochester, and Sen. Scott Fitzgerald, R-Juneau, are set to meet tomorrow with representatives from the Legislative Fiscal Bureau to “discuss a number of outstanding budget issues,” according to Fitzgerald spokeswoman Myranda Tanck.

Tanck declined to name the issues, saying she couldn’t “guarantee they will get to all of the outstanding items nor what exactly will come up.”

Individuals with knowledge of the meeting said K-12 education would be on the agenda, as Assembly Republicans and the Senate GOP try to reconcile differences surrounding per-pupil funding levels and approaches to low revenue limits, among other things.
Notice who’s not part of those meetings? DEMOCRATIC LEGISLATORS AND THE PUBLIC. Sounds just like DC and the TrumpCare bill, doesn’t it?

This has gotten so bad that even some Republicans are going public and saying that WisGOP leadership should clean up the secrective way they have been handling the budget. It’s a draft proposal that’s being sponsored by Rep. Scott Allen and Sen. Steve Nass (!), is intended to limit the last-minute add-ons and notorious “999” maneuvers that seem to be coming more frequently and in larger scale in recent years. These are ideas that more of us from all political persuasions should get behind.
The bill provides that the Joint Committee on Finance may not consider or take executive action on any motion relating to the biennial budget bill unless the motion has been distributed to all members of JCF at least 48 hours before JCF considers or takes executive action on the motion. The motion must also be posted on the Legislative Fiscal Bureau Internet site at least 48 hours before JCF considers or takes executive action on the motion.
That works for me, because these sneak-attack omnibuses are garbage that don’t help anyone but the inner circle of connected individuals that are telling their puppets in the Legislature to insert these things.

However, there is a loophole in this bill that might need to be ironed out.
The provisions of the bill, however, do not apply to a motion that relates to an emergency, as determined by three-fourths of the members of JCF, or to a motion that contains minor substantive differences from a motion that has met the bill's requirements.
The ¾ threshold to define an “emergency” sounds like a lot, but it would simply be a 12-4 party-line vote among the GOPs that currently control Joint Finance today. By that definition, they could just yell “Emergency!” and nothing would change from the secrecy and last-minute omnibuses of today.

So maybe make that threshold be 13-3 (so a minority party member has to say “yes”), or make it only so that items outside of the 2-year budget document are the only ones that can be “emergencies”, so this designation is limited to items such as repairs from a storm, where money needs to be released immediately.

Even with the Kochs’ Americans for Prosperity and the Racine Journal-Times offering public support for the “Budget Transparency Act”, I don’t see the GOPs in legislative leadership taking the hint in June 2017. Instead, WisGOP’s legislative leadership is following the example of Mitch McConnell’s GOP Senate and preferring to do their work in the dark, without any input from the other party or the taxpayers that pay their salary.

And just like what’s happening in DC, the GOPs were reporting "progress" in the budget talks, but we in the public have no idea what that really means and no documents that can help us figure out what's changed. You can bet we won't find out until the Joint Finance Committee calls a hasty meeting to cram through much of these outstanding budget issues, and the outcome won't end up helping anyone except for a few self-interested jagbags and their politicians they own.

Monday, June 19, 2017

Senate GOP K-12 plan has familiar problem- WHERE'S THE MONEY?

Even though the 2017 Fiscal Year ends a week from Friday, there is still plenty left to decide on the 2-year state budget that is supposed to be in place for July 1 (even though it likely won't be in place). One of the biggest items of debate involves K-12 spending, where Assembly Republicans came out with a plan a couple of weeks ago that would allow for some reallocation of money that would give more flexibility for districts who are currently not allowed to spend as much per student as richer and larger districts (I discussed much of this proposal in this post).

Well today, we found out through the Journal-Sentinel's Jason Stein that the Senate GOP is working out a K-12 plan of their own. Like the Assembly GOP, the Senate GOP plans would push more money toward school districts with low revenue and spending limits, but it wouldn’t use property taxes to do it.
GOP senators have come up with an education framework that would use state money to help those districts — meeting part of the Assembly's goal — while also accommodating Walker's target of holding the line on property taxes.

Senate Majority Leader Scott Fitzgerald (R-Juneau) confirmed the plan and said he and his colleagues are still discussing how much state money to pour into it.

"It's the same concept that the Assembly had targeted," Fitzgerald said. But "the state would pay for it."
If the Senate GOP wants to trade state funds for extra funding and keep property taxes down, that makes sense in theory. Except there’s one big thing missing- THERE’S NO STATE MONEY TO GIVE OUT.

As I’ve mentioned several times throughout this budget process, Scott Walker’s original 2017-19 budget had only $12 million in breathing room built into it, and a $1 billion deficit looms for the next budget. And with the Legislative Fiscal Bureau saying last month that they saw no need to increase revenue projections, and some expenses being re-estimated to end up costing more than what was projected in the budget, that tightness hasn’t subsided over the 4 months this budget has been debated.

Now, maybe some funds can be cleared up by getting rid of Gov Walker’s stupid plans for a sales tax holiday, and perhaps legislators could avoid losing $200 million in revenue to give a $1-a-week income tax cut. And maybe that extra money is enough to have the state backfill this revenue limit increase to low-spending schools.

But we haven't heard that the WisGOPs are going to dump the $1-a-week income tax gimmick, and even if they do, using state money to give relief to low-revenue districts means extra spending will be projected in the next budget (and there already isn’t enough state funding to pay for what's already on the books, let alone more). So there’s a connected shoe to drop here on taxes, either in the 2017-19 budget talks, or in the next 2 years. Because the math tells you that there is no way that WisGOP can continue all of these pre-election property tax handouts and the related state spending increases without raising taxes on someone in some other fashion.

That part of the shell game is what we have to watch for in these coming weeks, because that’s likely to be buried in some late-night maneuver that WisGOP isn’t going to want to promote. I’m not seeing how else they can pull off their big talk of “lower taxes and more spending.”

Hey SCOTUS- I got a redistricting map for ya!

The biggest news affecting Wisconsin didn't happen in the state today, but instead happened in DC, as the US Supreme Court chose to give a closer to look as to whether the Wisconsin GOP illegally gerrymandered the state in 2011.
The U.S. Supreme Court agreed on Monday to decide whether the U.S. Constitution limits how far lawmakers can go to redraw voting districts to favor one political party over another in a case that could have huge consequences for American elections....

The justices will take up Wisconsin's appeal of a lower court ruling last November that state Republican lawmakers violated the Constitution when they created state legislative districts with the partisan aim of hobbling Democrats in legislative races. The case will be one of the biggest heard by the Supreme Court during its term that begins in October.

The case involves a long-standing practice known as gerrymandering, a term meaning manipulating electoral boundaries for an unfair political advantage. The lower court ruled that the Republican-led legislature's redrawing of state legislative districts in 2011 amounted to "an unconstitutional partisan gerrymander."

A panel of three federal judges in Madison ruled 2-1 that the way the Republicans redrew the districts violated the U.S. Constitution's guarantees of equal protection under the law and free speech by undercutting the ability of Democratic voters to turn their votes into seats in Wisconsin's legislature.
The unfortunate news is that SCOTUS also stayed that lower court's decision requiring the Legislature to redraw the maps by November 1, which means the current districts stay in place until the decision.

Given that SCOTUS won't rule on the case for the better part of 12 months, it probably makes sense that the districts can't be redrawn before the 2018 elections, which means GOPs get a "mission accomplished" for the 2010s, since only the 2020 elections would be affected (maps will get redrawn anyway after the 2020 Census). Granted, the precedent that could be set would be a much bigger deal in the long-run, as it would give limits to partisan hackery in redistricting. But for Wisconsin politics, the damage from this gerrymander will have already been done.

However, if SCOTUS does get pissed off at WisGOP and feels the need to redraw Wisconsin's districts ASAP, I'm glad to be of assistance. With a huge boost from Twitter superstar/redistricting fan BobbyBigWheel, and the awesome Dave's redistricting website, I worked out a new Assembly map of Wisconsin.

To give a comparison, here's what the current, 99-member Assembly redistricting map looks like.

And here's what my map looks like. I tried to ignore the hometown of a legislator, and generally ignored the partisan leanings of a place. I did keep in mind which areas could be majority-minority districts in the Milwaukee area (both African-American and Hispanic), and tried to keep cities, counties and metor areas together as much as possible.

One of the biggest changes between my map and the current WisGOP one is in Western Milwaukee County, where I tried to end districts at or near the county line. This results in one Wauwatosa-centric district and a district largely based in West Allis/West Milwaukee, instead of the current WisGOP imperialism that splits up Tosa and ‘Stallis into numerous districts, with the voting power of those Assembly districts and Leah Vukmir’s Senate district residing in Waukesha County.

You'll also see that I repeated the pattern on the North side of Milwaukee County, where I put Whitefish Bay, Brown Deer and Glendale together. This avoids the atrocity that we see now where Whitefish Bay is in the district as Mequon and Grafton, and Brown Deer and part of Glendale are in the same district as Germantown and Menomonee Falls. All of these communities are currently "represented" by State Sen. Alberta Darling, who really speaks for the WOW Counties, and not where she lives in Milwaukee County.

I also tried to keep Appleton and Green Bay regions together, particularly on the Senate side (each 3 Assembly seats = 1 Senate district), which is different than the current WisGOP maps where the countryside is included to dilute pro-Dem city votes in those areas.

Lastly, I wanted to make sure suburban and rural Dane County wasn’t being watered down by more conservative districts to the east and north, like the current WisGOP map does. So you’ll see those districts are almost entirely within Dane County, and stay within the Madison TV/radio market. This avoids the issue of having someone like Joel Kleefisch live in Oconomowoc, but “represent” Eastern Dane County under WisGOP's maps.

And while WisGOP would still be likely to hold the Assembly in a 50-50 year under this statewide map, due to “Great Sort” reasons, it wouldn’t be near the absurd levels that they have today, and would result in actual changes of power when the people demand it. That would lead to a level of responsiveness to the public that should be better for a whole lot of us that live in this state. And maybe we could start to get this state back towards sanity and stop falling further behind without any needed changes occurring.

I'd been working on this on and off for about a month as a spare-time brain teaser (yes, this makes me a nerd), but feel free to let me know what you think.

Sunday, June 18, 2017

Household vs payrolls? Which number's closer to the truth?

Just a quick follow up from my questioning of the significant difference between Wisconsin's payroll "jobs" survey, and the household "employed/unemployed" survey.

Let's add a wider perspective of other states into this equation, based on Friday's release of the state-by-state jobs figures by the Bureau of Labor Statistics. If you go by the payroll figures over the last 12 months, Wisconsin is in its typical place during the Age of Fitzwalkerstan- in the bottom half of job growth in the Midwest, and well behind our neighbors in Minnesota.

Change in private sector jobs, May 2016 - May 2017
Minn +1.86%
Mich +1.64%
Ind. +1.36%
Iowa +1.31%
Wis. +1.22%
Ohio +1.09%
Ill. +0.70%

But if you look at the household survey, the numbers are very different. This chart shows the 12-month difference in jobs reported in the payroll survey and number of people described as "employed" in the household survey, and you'll notice that while some states are right in line, other states like Ohio and Wisconsin have major gaps.

Which goes back to my point from a few days ago- why is there such a huge gap in these two surveys in Wisconsin, and which number is likely to be correct? one thing that I want to see is if this disparity is reduced over the next few months.

Seasonal vs. non-seasonal totals, March - May 2017
Payroll jobs
Non-seasonal total +69,300
Seasonally adjusted +11,700

Household employment
Non-seasonal total +54,300
Seasonally adjusted +29,500

Yes, it looks like Wisconsin is adding jobs above and beyond the typical increase in April and May as the weather warms, but can you explain how this is such a difference? When the total number of people reporting as employed becomes more than twice as many people working when the "seasonal adjustment" hits? That has to be changed in the upcoming months, and let's see what happens to those unemployment numbers in the coming months- particularly when we constantly hear businesses complaining about the inability to find workers in a time when workers are usually added.

The answer will likely become clearer in the next 2 1/2 months leading up to the next release of the "gold standard" Quarterly Census of Employment and Wages (QCEW) in early September. But there are jobs reports in the meantime to come out, and we need the picture to clear up soon enough.

Saturday, June 17, 2017

WisGOPs want DC to do what they won't in Wisconsin- reduce debt

You may have heard that the Wisconsin Assembly passed a resolution this week that was promoted by the American Legislative Exchange Council (ALEC), and calls for a convention to pass changes to the US Constitution. You can read State Rep. Chris Taylor's column on what a load of crap this oligarch-driven movement is, and how dangerous it could become.

But I wanted to concentrate on the fiscal arguments which were used by Wisconsin Republicans to pass this resolution. They claimed that the US's national debt was a fiscal problem that threatened to destabilize the country, and required this drastic measure.
During debate in the Assembly on Wednesday, several Republicans cited a nearly $20 trillion national debt as the reason that states need to push for a federal balanced budget amendment.

"If you look at history, at the great empires, it wasn't the sword that brought those empires down, it was the financial burden," said Rep. Dale Kooyenga, R-Brookfield. "One of the greatest threats to our national security is excessive debt."
Assembly Speaker Robbin' Vos also used the "$20 trillion number" as a scare tactic, and implied a Constitutional Convention to pass the balanced budget amendment (and any other piece of ALEC crap they decided to try to jam through) would be a way to keep Congress in check from the "dangers of overspending".

But these Republicans need to take care of their own backyard first, and need to learn a little about government finances before they start trying to slash federal spending (and make no mistake, that would be what they would do. Raising taxes on the rich to shore up the regular budget and Social Security/Medicare is not something the ALEC crew will consider).

Let's go into detail about two terms that are frequently thrown around in this "balanced budget" talk, since many people mess them up, including elected officials. And then we will also show why Federal finances and state finances should not be put on the same level, and I will leave out the obvious point that states don't have a military that can be called into wars and other international issues.

1. Deficit/surplus- The difference between revenues and expenses in a given amount of time. Part of this calculation includes payments on debt in a given year or years, but doesn't reflect the overall amount of money that has to be paid out over time. In addition, when people like Robbin' Vos and other ALEC stooges say "states have to balance their budgets," they are referring to the amount of money coming in and out in that year. What they aren't mentioning is that borrowing isn't taken into account in a state's "balanced budget", except for the amount of money used to pay off debt (aka "debt service") in a given year or biennium.

This is how a state's debt can rise while a state budget is balanced, and their expenses to pay off the debt may even be lower. This is much like how you may take out a mortgage or pay for something with your credit card, but your checkbook balance won't change other than when you make payments to pay back that debt. Another important difference is that when we hear the Federal Budget is running a deficit, that's because the Feds count ALL spending in their budget as it happens, regardless of whether they are borrowing or paying "cash" for their services. When we run a deficit in DC, most of the funds are paid back by selling Treasury Bonds and notes, including buildings and highway construction that are usually "off the books" in Wisconsin's calculation of a "balanced budget."

If this ALEC convention were ever to happen, we'd need to define whether borrowing could also be taken off the books in DC. If so, it's possible not much would change at all, but it doesn't seem like the definition of a "balanced budget" is ever given when these bills come up. This difference between federal deficits and state "balanced budgets" is never mentioned, perhaps by design by the ALEC crew to scare the average dope into approving of spending cuts that harm their own communities.

2. Debt- The total amount of money that is owed and has to be paid off at some point. That time period could be 30 days from now, or it could be 30 years, and it could be refinanced down the road into better terms or extend the time that the bills should be paid off. I bet many of you owe more on your houses + credit cards + student loans than what you make it a given year, but I also bet you're not claiming bankruptcy, because you are confident in making enough money now and in the future to be able to eventually pay these items off. But Robbin' Vos and Koo-Koo Kooyenga are crying crocodile tears about the alleged "Strongest Country in the World" not being able to pay its bills because it has racked up nearly $20 trillion in debt. That number sounds like a lot, but that debt takes a variety of forms, and some of it includes 30-year US Treasury Bonds and Social Security and Medicare payments on young workers that won't have to be paid for 40 years.

In fact, if you look at the Federal Government's debt payments during the Obama Presidency, it hasn't really hurt our overall budget that much. In recent years, we are paying less for interest on the federal debt than the $244 billion that we paid 20 years ago in 1997. Low interest rates and a declining deficit throughout most of the Obama presidency means that these expenses have been stable for much of the 2010s, with the only notable increase coming in 2016.

Of course, the economy has grown throughout that time period shown, so revenues have been more than sufficient to cover these extra expenses. This means there is no immediate debt crisis issue to worry about in America, although if you want to care about what happens in the future as Boomers retire and fewer people replace them, then you may have a point. But the size of our country's debt isn't causing any real fiscal strain as of now, and with us coming on 6 straight years of our 10-year note being below 3%, and a current 10-year yield of 2.16%, lenders aren't showing concern about taking our debt or debt-related inflation any time soon.

(Side note, this reference page from the Congressional Budget Office is a great place to find historical budget information, so you can cut through the BS).

And you know who else doesn't care about adding debt? Scott Walker and the WisGOP Legislature. Heck, Walker and Senate GOP Leader Scott Fitzgerald seem to be fine with borrowing the state into oblivion to repair roads rather than make people pay another dime in gas or property taxes. This includes the possibility of using General Fund borrowing to do it, even though that would squeeze funding for schools and human services in future years.

That's not a new trend either. Since Scott Walker and the Wisconsin GOP have taken power in 2011, Wisconsin's General Obligation debt (for regular government borrowing) and total debt (which includes items like debt for the Transportation Fund and other dedicated funds) have risen, and both are now at record levels.

(numbers are taken from Wisconsin's Comprehensive Annual Fiscal Report (CAFR) as well as the offering document for the state's latest plans to refinance $342 million in debt)

What's ironic is that while the debt for our Federal Government won't cause any problems in our current budget (other than interest rate risk from more borrowing or possibly increasing the deficits in future budgets from increasing debt payments), increasing debt is a problem for the 2017-19 and 2019-21 budget because those debt payments have to be accounted for every year, and the payments count against a "balanced budget". If those debt payments go up, then it crowds out other state spending in that given 1-2 year period.

Of course, the ALEC crew is fine with this, which is why they want to impose this stupid requirement on the federal government, because as State Rep. Jimmy Anderson (D-Fitchburg) pointed out, this could lead to cutting programs like Social Security and Medicare, which is something that Republicans could not away with if they tried it as a standalone bill.
"If that's what you want, there's a process to accomplish those goals that doesn't require a constitutional convention," Anderson said. "They're called elections. Run on it. Run on cutting Medicare. Run on cutting our military budget. Run on dismantling the federal government."
But Jimmy, then Republicans would have to actually admit to their bad policies and fiscal recklessness from cutting taxes for unproductive rich people and corporations, and that's not something they want the voting public to know.

And if Koo-Koo Kooyenga and Robbin' Vos are so concerned about the size of our debts at both the state and national level, then maybe they should stop supporting tax cuts to the rich and corporate that are a big reason behind that problem. Until they say that, they truly don't give a damn about the national debt, and are crying crocodile tears as an excuse to screw over poor people and other constituencies that aren't GOP donors. It's well past time that these duplicitous dimwits be called out for their cynicism and fiscal illiteracy.

Chrissy Schneider still trying to sell trickle-down BS- it ain't working

After the fiscal and economic disaster in Kansas and related screw-ups in the state of Wisconsin, you’d think that right-wing Bubble Boys would be backing off and not trying to float the absurd “tax cuts raise revenue” meme. But apparently Milwaukee Journal Sentinel paid mouthpiece of the Bradley Foundation columnist Christian Schneider still thinks he can try to get this garbage over on some readers.

Schneider tries to claim that because the Wisconsin budget is projected to have enough revenues to increase spending on K-12 education, that it proves that Governor Scott Walker’s tax cuts worked, and that Republicans should continue to insist that “lower taxes makes us better off.”
In fact, in Gov. Scott Walker's proposed 2017-2019 state budget, he plans to spend more in general purpose revenue (generally income, sales and business taxes) than the state ever has before. Walker's last budget spent $33 billion in tax revenue — his latest proposal spends $34.6 billion. And he can do it because tax receipts are up.

What's most interesting is that state collections have increased despite Walker and the Legislature enacting significant tax cuts over the past six years. Since 2011, Wisconsin has cut taxes almost $4.8 billion, including over $2 billion in cuts to income and business taxes. And yet receipts still continue to rise, allowing Walker to, for instance, increase funding to schools by nearly $650 million in his new budget.

In fiscal year 2016, Wisconsin took in an estimated $15.2 billion in taxes. The next year, that number increased to $15.7 billion, with recent state estimates increasing the number to $16 billion in 2018 and $16.6 billion in 2019.

This effect lends credence to what conservatives have argued all along: Allowing people to keep their own money and spend it how they wish stimulates economic activity and job growth, and thus stimulates tax receipts. When tax rates creep too high, they provide a disincentive for work, thus reducing government revenues.
First of all, Schneider sneakily includes sales taxes in these revenue totals, when sales taxes haven’t been cut at all in Wisconsin over the last 6 years (with some rare, targeted exceptions for specific businesses). And it’s not like Wisconsin has had the sales boom that Schneider theorizes would happen after income tax cuts, as Wisconsin sales tax revenues had an average growth rate of just over 4% between 2011-2016, while US retail sales outside of grocery stores, food and beverage stores and gas stations (aka- most of the places that people pay sales tax on products in Wisconsin) grew close to 5.5% a year in the same time period.

Retail sales isn’t the only place where Wisconsin has lagged in the Age of Fitzwalkerstan. Let’s go into the numbers and see what has happened with federal tax receipts for both individuals and corporations, and then compare it to what Wisconsin’s tax revenues look like. Obviously tax changes at both levels of government will affect this, but if Chrissy Schneider is correct that it’s the lower tax rates have led to higher revenues in Wisconsin, then we should be near or above the rate of revenue growth that they’re seeing in the rest of the country, right?

And let’s start in 2010, so we can see the last year under Jim Doyle and the Dems’ budget and then look at the Age of Fitzwalkerstan after that.

Change in tax revenues, 2010-2016
Individual income taxes
2010-11 Feds +21.48%, Wis. +10.04%
2011-12 Feds +3.73%, Wis +5.09%
2012-13 Feds +16.27%, Wis +6.46%
2013-14 Feds +5.94%, Wis -5.81%
2014-15 Feds +10.48%, Wis +3.74%
2015-16 Feds +0.35%, Wis +5.66%

In particular, note how badly Wisconsin lagged in 2013-14 and 2014-15, when they used the one-time bump in revenues that everyone got from 2012-13 to put new (Koo-Koo) income tax cuts in place.

Corporate income taxes
2010-11 Feds -5.38%, State +2.20%
2011-12 Feds +33.79%, State +6.30%
2012-13 Feds +12.88%, State +2.07%
2013-14 Feds +17.26%, State +4.52%
2014-15 Feds +7.20%, State +3.90%
2015-16 Feds -14.75%, State -4.17%

And it’s not like this lower corporate tax growth led to more hiring in Wisconsin, as the Walker jobs gap grew in every year from 2011 onward.

Overall, the growth in revenue into state government over the last 6 years in Madison is far behind what was being sent to DC.

Cumulative change 2010-2016
Individual income taxes Feds 72.08%, State +27.12%
Corporate income taxes Feds +56.53%, State +15.40%

So the feds have had an income tax growth rate 2 ½ times faster than Wisconsin, and a corporate tax growth rate nearly 4 times faster. And much better job growth happened in the rest of the country as well as most of the Midwest in that same time period, so it shows that Schneider is clueless (and likely lying on his bosses' behalves) when he says that Walker’s and WisGOP’s tax cuts have led to better growth. Instead, Schneider should instead be saying “Thanks for keeping us above water, Obama!”

Why does this hack keep pulling a paycheck from the state’s largest newspaper again? Promoting these Bradley Foundation liars and other regressive pro-oligarch crap is why I haven’t given the Journal-Sentinel a cent for years, and won’t until they blow out dishonest brokers like Chrissy Schneider.

Thursday, June 15, 2017

3.1% unemployment in Fitzwalkerstan? Don't bet on it being real

Through all of the other things going on in the state, there was another Wisconsin jobs report that was sent out by Scott Walker’s Department of Administration. And given that it was released before 9 am, you knew there was something that the Walker boys wanted people to know.
Place of residence data: A preliminary seasonally adjusted unemployment rate of 3.1 percent in May 2017, down 0.1 percent from April and at its lowest rate since October 1999. The rate remains lower than the national unemployment rate, which was 4.3 percent in May 2017.

•The rate of 3.1 percent is the second-lowest rate on record for Wisconsin (the lowest rate was 3.0 percent in May-July 1999).

• Wisconsin's January (3.9 percent) to May (3.1 percent) unemployment rate decline of 0.8 percentage points in 2017 is the steepest January-May decline since 1983.
And Walker’s DWD notes that their figures show that more Wisconsinites are “employed” than ever before (not a big deal, since the state’s population is also higher than ever before). All of these employment/unemployment stats were tweeted out by Governor Walker and numerous other WisGOP elected officials.

What wasn’t tweeted out by WisGOPs was this other part of the report.

Nonfarm payrolls, Wisconsin May 2017
Total jobs
May 2017 -3,100
April 2017 revision -1,700

Private sector jobs
May 2017 -1,700
April 2017 revision -1,500

And among the biggest sectors of seasonally-adjusted lost jobs were in manufacturing (-1,200 with revisions) and construction (-1,600 with revisions). If we focused on that part, May would be a bad jobs report.

So why is there such a difference? Let me remind you that the numbers in the monthly employment reports come from two different surveys.
Current Employment Statistics (CES): compiled from a monthly survey sent to about 5,500 employers (3.5 percent of Wisconsin employers). CES data has been shown to be volatile and subject to revision.

•Local Area Unemployment Statistics (LAUS): compiled from a monthly survey of 985 households and unemployment insurance claims. Measures the labor force, employment, unemployment, and the unemployment rate.
These numbers may be different from each other from month to month (partly due to differences in sample size and also due to variation of who is surveyed), but should generally be in the same direction over a decent span of time.

But if you look at the payroll vs household numbers from those two surveys for more than 5 seconds, and compare them to the start of the year, your BS detectors should be on full DefCon 1. Tell me how these two numbers could possibly come from the same state.

Total Non-farm Payroll Employment, Wisconsin Dec 2016- May 2017
Dec 2016 2,934,300
May 2017 2,957,100
CHANGE 22,800

Household employment/unemployment Dec 2016- May 2017
Dec 2016 2,988,100
May 2017 3,059,000
CHANGE 70,900

So household employment is three times more than payroll employment? I don’t think so. I have a hard time buying that there are tens of thousands of Wisconsinites that still live in the state, but just started working in another state in the last 5 months (which would be an explanation for this disparity of nearly 50,000 workers). There are either some serious adjustments that need to be made to the state’s household survey, or there’s a major hiring boom going on and it’ll be registered in the next 2 QCEW reports that’ll come out over the next 6 months (riiiight).

If we were truly seeing job gains of 14,000 people a month (which is what the household figures say) then we’d be seeing it reflected in strong revenue numbers. We haven’t, and in fact, income tax revenues have fallen on a year-over-year basis in 3 of the 4 months measured in 2017 (including April, which is the last month that has been released to the public).

In addition, are we to believe that Wisconsin went from 15,420 jobs gained in all of 2016 (according to the “gold standard” QCEW) to 70,000 IN FIVE MONTHS? Come on. And this would not the only time Walker’s DWD has overestimated household employment and labor force. Go back to what they were saying at the end of 2016, and the DWD ended up being way off.

Household, labor force 2016. Wis DWD estimate vs revision
Household employment, Dec 2015- Dec 2016
DWD estimate +42,400
Revised +10,200

Labor force, Dec 2015- Dec 2016
DWD estimate +24,300
Revised +7,500

Notice that those revisions happened after the Bureau of Labor Statistics looked at the QCEW and saw that all attributes of the state’s jobs numbers were being overstated. And it seems likely that 2016’s pattern of “high DWD reports revised down by the QCEW” will repeat for the start of 2017, which will come out over the next few months.

But why is this happening again? While I’m not accusing Walker’s DWD of intentional malfeasance, their constant spin and happy-talk about the state’s job market along with Walker’s and WisGOP’s having to convince the Wisconsin public that their policies haven’t failed leads me to be very skeptical of these employed/unemployed numbers. And these guys would not be below juicing up jobs numbers in order to get headlines and false memes to the public ahead of an election.

Wednesday, June 14, 2017

Economy getting soft, but Fed still tightening up

As expected, the Federal Reserve’s Open Market Committee agreed to raise interest rates another 0.25% today, and in its statement, the Fed indicated that they were doing so because the US economy keeps expanding at a decent, steady pace.
Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has continued to expand. On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.
This largely makes sense, but a couple of reports released today indicated an economy that slowed in May. Retail sales disappointed, falling by 0.3%, which was the largest drop in over a year. Some of that is due to lower gas prices, but overall sales were also (barely) down for May.

Inflation sure isn’t acting like the economy is booming either, as the Consumer Price Index fell for the second time in three months. As the Fed alluded to, inflation excluding food and energy over the last 12 months is now at 1.7%, the lowest it’s been in 2 years. And average hourly earnings for workers are also being held in check, as they’re up 2.5% year-over-year, the same as it was in May 2016. A big reason behind any “gain” in real wages in recent months is because of the lower inflation, and even then, 12-month real hourly wages are only up 0.6%.

Regardless, the Fed indicates they think things will continue to get better in the near future and are going to get rid of some of their many Treasury holdings, which also has the effect of tightening money and “taking away the punch bowl” from Wall Street.
The Fed also described its plans to wind down its $4.5 trillion balance sheet, which it expects to begin this year. The program, in which the Fed would gradually reduce its holdings of Treasuries and agency securities, will decrease the Fed’s reinvestment of principal payments. Payments will only be reinvested when they exceed gradually rising caps of $6 billion per month for Treasuries and $4 billion per month for agency debt and MBS.

“The Committee currently anticipates reducing the quantity of supply of reserve balances, over time, to a level appreciably below that seen in recent years but larger than before the financial crisis; the level will reflect the banking system’s demand for reserve balances,” the Fed wrote in an addendum to its statement. The unprecedented size of the Fed’s balance sheet is a lingering a result of the extraordinary easing measures it took in response to the financial crisis.
The greedheads didn’t take kindly to this last part, and stocks dropped in the immediate aftermath of the Fed’s statement (it later recovered to end up near even). But for now, even with the soft data in the early part of 2017, it doesn’t seem like we're so bad that the Fed will stop its plans to wind down the last 9 years we’ve had of easy money, and give some incentive for people to save. We’ll see if that trend continues if we stay at or near full employment in America.

Tuesday, June 13, 2017

GOP Rep: Make big trucks pay for the repairs they cause

Midday on Tuesday, Jason Stein from the Milwaukee Journal-Sentinel emerged with a story on a new idea that might help break Wisconsin’s logjam for road funding. And it’s something that at least stands a chance of preventing the state Legislature from following Scott Walker’s plans to borrow the state into oblivion.
State Rep. Amy Loudenbeck (R- rural Rock County) has a plan that would add revenues to the state’s deficit-ridden Transportation Fund, and do so by shifting the burden away from the average Wisconsin driver and put it on the trucking industry. Loudenbeck’s proposal would put a per-mile fee onto the registrations of heavy trucks, similar to an idea that has been previously floated for all vehicles.

The per-mile fees are a way to not only add to DOT revenues, but also make the DOT less reliant on the consumption of gasoline, as vehicles become more fuel-efficient. The Milwaukee Journal-Sentinel notes that Loudenbeck’s plan to limit the new fee to trucks would make it relatively easy to carry out, and matches a law that is already in place in 4 other states.
Unlike tolling, with its tolling plazas, electronic card readers and coin machines, the per mile fee would be relatively easy to administer, she said. That's because trucking companies that cross state lines already track their miles traveled as part of a diesel tax compact between the United States and Canada known as the International Fuel Tax Agreement.

One notable exception to that would be truckers who only haul loads inside Wisconsin. They would need to start tracking that information.

Four states already place fees on heavy trucks: Kentucky, New York, New Mexico and Oregon, Loudenbeck said. Wisconsin could mimic the approach of one of those states and be on firm legal ground, she said…

The heavy truck fee could be a flat fee or be graduated by the weight or size of trucks, Loudenbeck said. If Wisconsin adopted Kentucky's 2.85 cents per mile fee, it would raise more than $250 million for the state over two years and cost truckers or their customers the same amount.
This makes a lot of sense to me, mostly because heavy trucks are a significant source of the damage to roads, and they should pay more of the freight (pun intended) to go into the costs of repair. It’s also a fee that most Wisconsinites would not pay, which makes it a lot more politically palatable than a registration fee increase on all cars or a gas tax hike.

It’ll be intriguing to see how this proposal turns out, and not just because a miles-traveled fee on trucks would be a new revenue source for WisDOT. The trucking industry and particularly Green Bay’s Schneider National are big GOP donors, and the daughter of Schneider’s owner has been mentioned as a potential GOP candidate for Senate in 2018.

Yeah, make these guys pay!

On the other side of the DOT funding question, Wisconsin’s Transportation Development Association (aka “The Road Builders”) are keeping up the heat with the release of a recent poll of Wisconsinites. The Road Builders point out that the poll indicated support of higher gas taxes and other fees, and opposition to borrowing and budget cuts as a method to handle the DOT’s deficit.
….Nearly half (47%) believe Wisconsin’s roads have gotten WORSE; only 21% believe they have gotten better.

· Walker’s handling of transportation issues is underwater. Governor Walker’s handling of transportation issues is 44% approve –47% disapprove.

· Given voters’ intensity on this issue, voters’ voice strong opposition to construction delays. Given Wisconsinites’ intensity on this issue, it is not surprising to see voters opposing the delay of highway reconstruction in the Milwaukee area; including, the Zoo Interchange by a two-to-one margin (62%-31%). 67% of voters in the Milwaukee DMA oppose reconstruction delays with 50% strongly opposing.

· They also voice strong opposition to using debt to fund road construction. Wisconsin voters support only two sources of money for transportation and road projects:
oIncrease taxes and fees (41%)
oTake money from other areas in the budget (40%)
Obviously, the Road Builders wouldn't have released this poll if it went against what they wanted, but the findings do indicate that the road funding issue is sinking in with voters (how can you avoid it when you car feels all the bumps?), and that they aren't going to accept fealty to DC lobbyist Grover Norquist and having talking points about "I didn't raise taxes" as an excuse to avoid fixing the highways.

Maybe Loudenbeck's idea of a miles-traveled fee for trucks is the start of a way for the GOP Legislature to try to work its way out of the pickle that Walker's "kick the can" mentality has put them in. But even $250 million a year isn't nearly enough to pay for the increasing needs, even if that fee were to be implemented. As I said yesterday, keep an eye on the shell games and trial balloons in these last frantic weeks, there's likely more "ideas" and head fakes to come.

Self-insurance scam to die on Thursday. Not a moment too soon

We already knew that even Scott Walker’s fellow Republicans on the Joint Finance Committee weren’t planning to go along with Scotty’s scheme to self-insure state employees. But some others that may be wavering have a fresh bit of evidence ahead of Thursday’s JFC meeting.

That’s because the Legislative Fiscal Bureau took a deeper look at Scotty’s plan, compared it to reality, and says that “several calculation errors were identified.”
Specifically, errors resulted when estimated ACA and self-insurance savings for all expenses of group health plans administered by the Department of Employee Trust Funds (ETF), including local plans and contributions from retirees and employees, were converted into the amounts of GPR savings that would be realized by state employers. In total, savings were overestimated by approximately $16.8 million GPR over the biennium (difference of $0.1 million shown in Table 4 is due to rounding). Table 4 shows the overall GPR funding that was reduced under the bill and a reestimate of the amounts based on a corrected application of budget allocations: 36.9% is equal to the state employer share of total program costs noted previously (81.8%) multiplied by the percentage used by the administration to budget for state employer GPR expenses for health insurance (45.1%). As shown in Table 4, the bill estimates were based on Segal's midpoint projections of savings. [Segal Consulting is the GIB's consulting actuary for health benefit programs.]…

8. Corrected figures for the Governor's recommended budget provisions, which are based on Segal's calculation of the ACA health insurer fee and self-insurance savings as well as DOA's budget allocations of GPR funding for state employers, are provided in Table 5 below. Amounts are separately indicated for compensation reserves and the UW System. It should be noted that the figures in Tables 4 and 5 only represent a correction to the bill's calculations based on assumptions of the state's actuary and the administration. The figures do not represent projections or assumptions made by this office. If the Committee approves the Governor's recommendation to self insure and adopts the administration's estimates, an additional $16,832,400 GPR over the biennium would be needed.
OOPS! Looks like Scotty’s scheme will require nearly $17 million more in taxpayer dollars to add up. Then add in another $2.2 million in stop-loss insurance that may be prudent to avoid having to pay massive medical bills, and the total additional money becomes $19 million! Not a good thing when Walker’s 2017-19 budget had only $12 million in breathing room to start.

Also, this jeopardizes the last $30 million of Walker’s proposed increases to K-12 per-pupil aid, as that was based on the state lapsing $30 million of the self-insurance savings, and then adding that $30 million to the K-12 totals. That majority of that $30 million now wouldn’t be there to send to K-12, and it’s hard to see a source of funds where they come up with the difference.

In addition, Walker’s Department of Administration estimated that staying with the old system would result in a 10.4% increase in premiums over the next 2 years, which helped to explain the “need” for the switch. The LFB says that would be above than recent history indicates.
Final premium increases for calendar years 2009 to 2017, which would include any cost shifts to employees or draw-downs of reserves, averaged 3.7%. The only years in this period in which significant draw-downs of reserves and cost shifts to employees did not occur were 2011 and 2017. The average preliminary bid increase for these years was 7.5%, and the average final premium increase was 4.0%. Additionally, based on information in Table 6, negotiations with participating health plans reduced estimated premium expenditures by $19 million to $56 million each year (approximately $31 million annually on average). State health program reserves were used in seven of nine years to reduce program costs. Due to the dynamic nature of negotiations, health program reserves, and other factors, it is difficult to predict the final percentage increase in health program expenses.
To further keep costs to taxpayers down, LFB notes that legislators could choose to tap the reserves in the state health program, which current total $144.0 million, and well into the safe zone where some of that money could be taken to cushion premium increases.
The Group Insurance Board approved a program reserve policy in August, 2011, recommended by the state's health program actuary at the time, Deloitte Consulting, to maintain a fund balance that equals 15% to 25% of the sum of: (a) 100% of annual self-funded medical claims; and (b) 20% of annual fully-insured medical claims. The policy has not been modified since its adoption in 2011. Table 7 provides the actual amounts of year-end reserves (2016 figures are unaudited) for the past five calendar years and the estimated amount of year-end reserves that would correspond to the Board's reserve policy based on actual or estimated medical claims expenses for the same years. As shown in the table, as of the end of calendar year 2016, program reserves were $18.4 million greater than the maximum 25% medical claims benchmark and $68.8 million more than the minimum 15% medical claims benchmark.
So if the Joint Finance Committee chose to take enough reserves to get down to that 15% minimum level, the costs to taxpayers to stay in the current system would be $1.4 million less than what it would cost to self-insure ($3.6 mil if you include the stop-loss insurance).
And if the anti-Obamacare Walker Administration want to claim that self-insurance keeps the state taxpayers from potentially paying some of the ACA’s fees that are scheduled to hit (which LFB has estimated down to $21 million)? That theory seems pretty damn stupid, since we have no idea what the ACA will look like (or what any replacement might look like, since the GOP Senate is hiding it from the public), so why would we have those potential fees even enter in the equation?

Thankfully this dog of a self-insurance scheme is going to be put down tomorrow before we find out about more hidden costs and overstated savings. But again we see more money going out the door to cover things when we don’t have any funds coming in to replace them. Even scarier, dealing with self-insurance and Corrections (Thursday’s main topics) are the “easy” items left for JFC. The real train wrecks are yet to come.

Monday, June 12, 2017

No taxes + no fees = spending cuts and long waits for Wis highway work

Driving back from a family wedding yesterday, as soon as I hit the state line and saw the "Open for Business" sign, I felt the THUMP that told me I was back onto Wisconsin's battered highways. With that in mind, I wanted to dig more into the state's transportation funding issues, and particularly look into the DOT's highway program. Scott Walker claims that there are no delays imposed as part of his budget, but what he's not telling Wisconsinites is that those projects were delayed last year, and there's much less spending than we had 8 years ago due to a lack of resources.

Yes, there is $145 million scheduled to be carried over on July 1, and $101 million in cushion for the 2017-19 budget. But do not forget some of that is due to the Walker’s Administration choosing not to spend $44.8 million of that money on major highway projects today, and instead they banked that money so they could use some of the carryover funds to pay for things in this next budget (when the same work will cost more due to inflation).

Even with the use of that $44.8 million in banked funds, Walker’s 2017-19 DOT budget only planned to spend an extra $28.75 million (+4.5%) on major highway projects than what is projected for 2015-17. The Legislative Fiscal Bureau also notes that each of the last two biennial amounts involve less highway spending than what Walker’s first two budgets had, despite growing needs.
6. The 2011-13 and 2013-15 biennial budget acts provided $743.6 million and $728.4 million for the major highway development program, respectively. Before the contingent bonding reduction noted above, the 2015-17 budget provided program funding of $685.9 million resulted in the delayed, estimated completion dates of several major highway development projects (noted in Attachment 3). Then, in October, 2016, the program's funding was reduced by $44.8 million to $641.1 million in the biennium.
This means that several big highway projects will not be complete for at least 2-3 years, despite Walker’s claims that his budget will offer no further delays (leaving out that some of these have already been delayed). And other large projects won’t start in this 2-year cycle.

Estimated completion date for Wis highway projects
I-39/90 Madison Beltline to Illinois State Line 2021
US 18-151/Verona Road (Madison) 2019
US 10-Hwy 441 (Appleton area) 2020
Highway 15 (New London) 2021

Estimated start dates for Wis highway projects
I-43 Milwaukee and Ozaukee Co’s 2019
I-94 in St. Croix County 2019

Walker also proposed cutting nearly $293 million in funding for the Zoo Interchange projects and in expanding and improving I-94 from the Milwaukee airport to the Illinois state line. The LFB says that this will mean that you will see orange barrels throughout those parts of Southeastern Wisconsin for many years.
Given the remaining, $878.2 million in estimated costs associated with these existing projects, if the Governor's recommended biennial funding of $121.9 million is maintained over time, both projects could be completed in slightly more than 14 years ($878.2 million / $121.9 million per biennium). This calculation includes no adjustment for the inflationary costs that would occur beyond the current schedule of 2022-23. Further completion delays would occur if the Governor's 2018-19 funding level, the base year funding ($50.7 million annually) for the next biennium, is provided on an ongoing basis. In addition, if maintained over time, former Secretary Gottlieb indicated that an ongoing biennial funding level of $121.9 million would mean that the reconstruction of all planned southeast Wisconsin freeway megaprojects could be completed over a 70-year schedule ($4.3 billion in estimated costs / $121.9 million per biennium). Similarly, this completion schedule would not include the effects of inflation.

2017-19 is not the only two years that Walker has been taking money out of Southeastern Wisconsin freeways. Total expenses for Wisconsin highway work have declined since Jim Doyle’s last budget in 2009-11, with a cut of over $400 million between then and 2017-19… before inflation. In addition, note how funds have been reallocated to projects outstate.

Expenditures for highways, Wisconsin 2009 vs 2017
State Highway Rehab 2009-11 $1,545.8 million
State Highway Rehab 2017-19 $1,701.6 million (+$155.8 million)

Major non-SE Wis Hwy Development 2009-11 $713.6 million
Major non-SE Wis Hwy Development 2017-19 $669.9 million (-$43.7 million)

SE Wis Freeways 2009-11 $643.0 million
SE Wis Freeways 2017-19 $121.9 million (-$531.1 million)

Proportion of DOT highway spending
State Highway Rehab 53.3%
Major non-SE Wis Hwy Development 24.6%
SE Wis Freeways 22.2%

2017-19 proposed
State Highway Rehab 68.2%
Major non-SE Wis Hwy Development 26.9%
SE Wis Freeways 4.9%

The only way this trend of lower expenses and deteriorating roads can be reversed is to come up with more money. But how? The $93 million in extra funds for the next 2 years doesn’t come close to filling the needs that exist today, let alone fill in the cuts in spending that Walker’s and WisGOP’s past budgeting have caused. The amount that has to be set aside to pay off debt continues to rise in the Age of Fitzwalkerstan, so more borrowing makes things even worse for the future. Tolls wouldn’t start raising money for at least 4 years. And there’s no extra money in the General Fund to tap (hell, we have another $1 billion deficit there starting in 2019).

As the budget bounces ahead (well, it'll go forward at some point, right?), I’ll talk more about ways that we can could up with the money to pay for these projects, even if it means Walker has to break his “no-tax, no-fee” promise to DC lobbyist Grover Norquist. And part of that will look into whether Walker’s talking point about a “9.9% increase in highway maintenance” will ever be put into state roads that continually are being washed out and falling apart in the Age of Fitzwalkerstan.

But in the meantime, the state’s major highways are slated to take a significant step back as things stand under Governor Walker’s budget, and the WisGOP Legislature’s attempts to fix it open up new problems for the rest of this house of cards. Keep your eye on the budget shell game and the moving parts associated with this.

Jackpot in Cali means Wis budget still messed up

Late Saturday night, Governor Walker and legislative Republicans in Wisconsin got some bad news on their 2017-19 plans, and it came from an unusual source.
Jackpot! A lucky lotto player in California had all the winning numbers after Saturday's Powerball drawing, lottery officials said.

The grand prize reached an estimated $447.8 million.

The winning ticket was sold at a store in Menifee, southeast of Los Angeles.

Why does this matter to the Wisconsin state budget? Because most of the proceeds from the state’s lottery are kicked back to taxpayers in the form of property tax relief. The winning jackpot means the Powerball resets to $40 million, meaning there is no chance of another massive Powerball jackpot spurring ticket sales between now and the end of June. This means that the projections that the Legislative Fiscal Bureau gave last month on lottery sales will likely hold for the rest of the 2017 Fiscal Year, and therefore this winter’s property tax write-off will also likely be as the LFB predicted.

The LFB notes that Powerball and other Lotto games have the biggest variation in sales based on how big the jackpots are, and the lack of massive jackpots has caused those sales to fall significantly from 2015-16, when Powerball hit record levels.
On-line game sales appear to be lower in 2016-17 than estimated in October, 2016, primarily because large Powerball jackpots, which can increase sales dramatically, have not been generated in 2016-17 as often as they were in 2015-16. The Powerball game accounted for slightly more than 48.5% of all on-line (lotto) game revenue in 2015-16. In 2015-16, there was an occasion when the Powerball jackpot grew high enough to attract weekly sales of more than $20.0 million for at least a two-week period. In 2016-17, there have been no weeks in which Powerball sales have exceeded $5.0 million. Average weekly sales for Powerball tickets in 2015-16 exceeded $2.15 million per week. By contrast, in 2016-17, average sales through April, 2017, have been about $1.52 million per week. Total Powerball sales this year are not likely to reach the estimate of sales made in October, 2016. The reestimate of on-line ticket sales in 2016-17 would decrease from $232 million to approximately $213.5 million….

10. Under the October, 2016, estimate, the opening balance of the lottery fund on July 1, 2017, would be $12,350,300. The 2016-17 payout certified in October, 2016 was $185,311,200 and the actual amount paid out in March was $183,433,000 which produces a balance of $1,878,600 to add to the opening balance. In addition, reestimating 2016-17 [total] lottery sales [down] to $597.3 million has the net effect of decreasing the 2017-18 opening balance to $6,378,000. The net effect of these changes, also, decreases the amount available for the lottery and gaming credit in the 2017-19 biennium.
And that’s why Walker and other WisGOPs are disappointed by someone winning the Powerball- there’s less money they can use for property tax relief.

Walker’s budget projected that there would be $167.7 million in 2017-18 and $169.35 million in 2018-19 in lottery proceeds that could be kicked back to property taxpayers. But when the Legislative Fiscal Bureau looked at the actual numbers, they ended up not being so rosy for homeowners.

Lottery Credit 2017-19, LFB re-estimates vs budget
2017-18 $156.75 million (-$10.95 million vs Walker budget)
2018-19 $165.1 million (-$4.25 million vs Walker budget)

The Lottery Credit falling short means that property taxes will be higher than what was projected by the LFB a few weeks ago. Rough math indicates that this difference is only $7 this year and $2.50 the next year, but that small difference means that property tax bills would be projected to be higher in Winter 2018 than Winter 2014, even with stupid budget gimmicks like a $27 property tax cut to get rid of the state Forestry tax, and an increase in the School Levy Credit (total price tag for these gimmicks - $267 million).

If you watch last week’s edition of Wisconsin Eye’s Rewind, JR Ross of WisPolitics mentions how obsessed Walker is with having a talking point of “lower property taxes on an average Wisconsin home.” Which is why I don’t think it is coincidence that state budget talks derailed right around the time that the Legislative Fiscal Bureau came out with their budget paper showing that the Lottery Credit was going to be lower than expected, and raise property taxes beyond 2014’s levels.

Now Walker (and apparently Senate leader Scott Fitzgerald) are stuck, because they want to claim these property tax decreases ahead of the 2018 elections, but there is no money available to make up the difference while also taking care of numerous other needs that are supposed to be paid for in this house-of-cards budget. That $267 million sure would come in handy to fill those holes, wouldn’t it?

As I’ve said before, what is the point of borrowing ourselves into oblivion on roads, making small school districts have to fold up and consolidate, or making the state’s largest city have to cut the amount of cops on the street just to say “we cut your property taxes by $40”? But this is what you get when you have today’s WisGOPs in power, because they believe in political campaigning instead of governance.

When you have a party so consumed with gimmickry and AM radio talking points that they have to actively root against someone hitting the Powerball in order to make their budget work out, you have a party that isn’t fit to lead. Now the rest of the state budget is likely to be “fixed” some time in the next few weeks by trying to sneak through a last-minute pile of crap that will solve none of the problems, won’t make anyone happy other than GOP campaign contributors, and will stagnate the state’s economy even more in these next couple of years.


Sunday, June 11, 2017

Walker tweets BS on ACA, gets ripped all around America

Was at a family wedding across the border yesterday, but I saw this garbage statement from our fair Governor, ahead of his anti-ACA propaganda event with the VP yesterday.

What's funny is that the "28 million Americans without insurance by 2026" line is true. But that's what makes Walker's comment so infuriatingly dishonest. Because what he leaves out is that if the Republicans in DC pass Trump/Ryancare, there will be 23 MILLION MORE Americans uninsured.

Scotty knows this fact, and that he and his other Republicans have no solution for (or interest in) lowering the amount of Americans that are uninsured. But he thought he could slip this by, and confuse the rubes that wouldn't know the difference between "28 million uninsured" and "23 million more uninsured."

Scotty was wrong. Within hours, he was getting hammered all over social media. His tweet generated over 1,700 replies, almost entirely negative, and Scotty was the source of ridicule from US Senators and national writers.

It's Sargent's comment in particular that explains why Scotty's tweet pissed me off so much. SCOTTY KNOWS HE'S TRYING TO SELL DISHONEST BULLSHIT. He knows his primary strategy with the ACA was not to take the federally-funded expanded Medicaid, and instead push Wisconsinites onto the exchanges to get insured - exchanges that US Sen. Marco Rubio and other Congressional Republicans sabotaged with their defunding of risk corridors intended to encourage more insurance companies to make it worthwhile to sell insurance on the exchanges.

This is a classic case of the lie of omission, also known as paltering, and Walker does this a lot.
Past research has shown that people are more willing to lie by omission than they are to tell an outright falsehood, and over a series of six experiments, the researchers found that paltering is no different — to the teller, it feels more ethical, like something between the truth and a total lie. (They also found that it’s incredibly common: In one survey administered to Harvard business students, roughly half admitted that they had previously used paltering as a negotiation strategy.)

The problem is, those on the receiving end don’t feel the same way: Across the various experiments, people who learned that their conversation partner had paltered to them said they considered the move to be just as ethically rotten as telling a bald-faced lie. “A palterer may focus on the veracity of her statements, whereas a target may focus on the mistaken impression that was conveyed,” the authors wrote. “As a result, palterers may perceive their behavior to be moral even as targets perceive palterers to be dishonest and immoral.” In other words, telling some highly literal, incomplete version of the truth may ease your guilty conscience, but it won’t help your case if you’re caught in the act.
This makes sense, because Scott Walker's past shows him to be "ethically rotten".

Dems need to be loud and active in exposing the GOP's rottenness to a public that might not know the facts on health care and policy as well as we and Scotty do. If the people find out just how sleazy and dishonest Walker and other anti-Obamacare Republicans are being, maybe that'll get them off the sidelines and lead to the Dem wave in 2018 that this state and this country badly needs.