Budget surprises - less for low-income workers, more handed out by WEDC

There are a few months in between when the Governor of Wisconsin submits the state budget and it gets voted on by members of the Joint Finance Committee and other legislators. And in that time period, we get more information and the situation can change.

Some of this is shown in the updated revenue estimates that the Legislative Fiscal Bureau does every May. And this year’s estimates showed a lot of new money for this Fiscal Year (which allows for more money to be used immediately and/or carried over into the next budget), and a minor increase in available money for the upcoming two years (of $93 million).

But we also get information on individual provisions that change the picture. And we have a few of those in this budget. For example, since the population of the state veterans home at King has dropped by 20%, it means there is no extra money to transfer to the Veterans Trust Fund, and therefore $13 million in tax dollars may be needed instead. And we see a lot of these adjustments (often titled “re-estimates” in budget-speak) on tax provisions, as we find out how much some item is being used.

Let’s start with a few provisions which aren’t being used as much, which is a “savings” when we’re talking about the budget.

Tax credits with lower estimates than Evers budget
First dollar Property tax credit -$1.5 million
Cigarette/tobacoo product refunds -$2.9 mil
Wis Earned Income Tax Credit -$6.3 million
Homestead credit -$14.6 million

The Homestead and EITC features are intriguing, as Evers wanted to expand these credits to have it reach more lower-income people. But the Republicans shot it down in their opening vote in the Joint Finance Committee, while restoring more than $500 million in tax cuts to manufacturers. Huh...

There also are several tax provisions that are proving more costly than anticipated, which lessens the ability of money to be available for other items. And it’s not hard to notice the corporate and agricultural beneficiaries of some of these.

Tax credits with higher estimates than Evers budget
Business Development Tax Credit +$2.3 million
Aid to communities with public utilities +$3.9 million
Farmland Preservation Credit +$4.1 million
Enterprize Zone +$31.0 million

That last one jumps out at me. Enterprize zones are costing $31 million more than the Evers Administration thought it would a few months ago? Let me look into the LFB’s explanation to find out why.

5. The cost estimate used under the bill for the enterprise zone sum sufficient GPR appropriation was based on projections of credit claims under contracts between WEDC and participating businesses through October, 2018. Since that time, WEDC entered into three new contracts which allocated $106.0 million over a twelve-year period, including $3.5 million in 2018and $14.7 million in 2019. In addition, two contracts were amended to increase awarded amounts by $21.5 million, including $9.5 million allocated in 2019.

6. Based upon more recent information described above, it is estimated that enterprise zone tax credits relative to the bill will be $31,000,000 GPR higher in 2020-21 (Alternative 1). The reestimate reflects projections of credit claims for major economic development projects for which WEDC has, to date, contracted tax credit awards including recent contract amendments.

The ability for WEDC to increase the amount of the awards to these corporations on their own is part of the reason Evers wants to have his office notified of any changes to contracts with WEDC that are more than $5 million.

And that Evers budget provision could lead to a fight tomorrow in Joint Finance and in the gerrymandered GOP Legislature, as JFC recently was given the right to oversee those changes, albeit only for contracts for new enterprize zones (changes in contracts created during the Walker era can’t be pre-screened at all). There’s also an alternative in the paper that would prevent changes in contracts associated with the Foxconn project from being subjected to oversight from either JFC or the Governor.

And who needs strings with that money?

That oversight of WEDC contracts and changes seem like an important provision to watch for this week. Not only because a recent report from the Legislative Audit Bureau indicated that WEDC still can’t track whether companies are living up to their job promises in these handouts, but because the costs of these handouts are spiraling higher and taking away from the ability to fund other budget priorities.

Maybe Foxconn isn’t the only contract we need to cut the cord on when it comes to these WEDC welfare cases….