Tuesday, April 30, 2024

Workers making more + lower consumer confidence = lower market. Doesn't add up to me.

A usually mundane economic report freaked out some finance types today.

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A 4.2% annual rate to pay and keep employees? THE HORROR! Let's see more from the actual report.
Compensation costs for civilian workers increased 1.2 percent, seasonally adjusted, for the 3-month period ending in March 2024, the U.S. Bureau of Labor Statistics reported today. Wages and salaries increased 1.1 percent and benefit costs increased 1.1 percent from December 2023. (See chart 1 and tables A, 1, 2, and 3.)

Compensation costs for civilian workers increased 4.2 percent for the 12-month period ending in March 2024 and increased 4.8 percent in March 2023. Wages and salaries increased 4.4 percent for the 12-month period ending in March 2024 and increased 5.0 percent for the 12-month period ending in March 2023. Benefit costs increased 3.7 percent over the year and increased 4.5 percent for the 12- month period ending in March 2023.

Compensation costs for private industry workers increased 4.1 percent over the year. In March 2023, the increase was 4.8 percent. Wages and salaries increased 4.3 percent for the 12-month period ending in March 2024 and increased 5.1 percent in March 2023. The cost of benefits increased 3.6 percent for the 12-month period ending in March 2024 and increased 4.3 percent in March 2023. Inflation-adjusted (constant dollar) compensation costs for private industry workers increased 0.6 percent for the 12-month period ending in March 2024. Inflation-adjusted wages and salaries increased 0.8 percent for the 12 months ending March 2024. Inflation-adjusted benefit costs in the private sector increased 0.1 percent over that same period.
I don’t get what’s so concerning or surprising about this. The monthly jobs reports have already told us that average hourly earnings went up by 1.0% for the first 3 months of 2024, and 4.1% over the last 12 months. And I would figure that a lot of the reason behind Q1’s higher-than-trend increase in benefits was because companies tend to re-set their insurance rates at the start of the calendar year.

Also, wage and salary increases that are above inflation ARE A GOOD THING, and helps explain why consumer spending and economic growth continues well after the “experts” thought it would taper off. But Wall Streeters and central bankers want the good things to end for everyday workers, because that’s the data points that they are looking for to believe that the Federal Reserve will drop interest rates from their 23-year highs.

Then a second bout of bad news hit later in the morning, and turned a minor selloff into a significant loss of 570 points in the DOW Jones Industrial Average.

The Conference Board's Consumer Confidence Index® fell to its lowest level since July 2022. The index retreated to 97.0 this month from March's downwardly revised 103.1. This month's reading was lower than expected, falling short of the 104.0 forecast.

The Present Situation Index, which is based on consumers' assessment of current business and labor market conditions, declined to 142.9 in April from 146.8 in March. Meanwhile, the Expectations Index, which is based on consumers' short-term outlook for income, business, and labor market conditions, fell to 66.4 in April from 74.0 in March. Note that a level of 80 or below for the Expectations Index historically signals a recession within the next year.

“Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income,” said Dana M. Peterson, Chief Economist at The Conference Board. “Despite April’s dip in the overall index, since mid-2022, optimism about the present situation continues to more than offset concerns about the future."

“In the month, confidence declined among consumers of all age groups and almost all income groups except for the $25,000 to $49,999 bracket. Nonetheless, consumers under 35 continued to express greater confidence than those over 35. In April, households with incomes below $25,000 and those with incomes above $75,000 reported the largest deteriorations in confidence. However, over a six-month basis, confidence for consumers earning less than $50,000 has been stable, but confidence among consumers earning more has weakened.”

Peterson added: “According to April’s write-in responses, elevated price levels, especially for food and gas, dominated consumer’s concerns, with politics and global conflicts as distant runners-up. Average 12-month inflation expectations remained stable at 5.3 percent despite concerns about food and energy prices. Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months rose slightly in April but is still well below the May 2023 peak.”
Inflation expectations are running at 5.3%? That’s well above the 4.5% annual rate that we’ve seen in the “elevated” numbers for the first quarter of 2024. And there isn’t a lot to indicate that the increased trend in inflation is going to continue in April, as the runup in gas prices has leveled off, and oil futures are at their lowest levels in 6 weeks.

I think a lot of the gloomier sentiment is caused by financial media being disappointed as indications came that the Fed would delay interest rate cuts until later in 2024, if any rate cuts were to happen at all.

In addition, I think a sizable amount of people are frustrated that the wage increases of 2023 and 2024 aren’t resulting in a significant change in the amount of cushion people have when it comes to paying their bills. This situation still beats layoffs and recessions, but with home prices back on the rise and inflation still above the levels we had gotten used to for the last 20 years, there are people thinking they should be much better off than they are (and I get that).

That grumpiness exists even though wage gains are beating inflation just as much as they were in Trump’s “great economy” of the late 2010s, with better job growth than we had 5 years ago. And negative sentiments haven't translated into a cutback in consumer spending when we've had similar downturns in consumer confidence over the last 3 years. Given that strong US wage growth in 2024 should keep consumer spending rolling along as the Summer beckons, if we get any kind of calming of inflation back to the 2-3% annual rate we saw for much of 2023 (which I think will happen, barring some serious corporate fuckery), and I think some of the unhappiness for both Wall Streeters and Main Street Americans that existed in April 2024 should fade over the next couple of months.

But that won't stop some annoying economic analysis that is sure to come from the "experts" in the next couple of weeks. I just hope Jerome Powell doesn't say something to make these hotshots freak out more when he meets the media after the Fed meeting gets out tomorrow.
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Monday, April 29, 2024

Did the warm Winter freeze finances in some Wisconsin counties?

You may recall that many Northern Wisconsin counties were reporting a significant drop in tourism during the Winter of 2024, because of a lack of snow and record warmth. This resulted in Governor Evers encouraging affected businesses to apply for disaster assistance through a program that usually is applied to droughts.

That declaration came in February, and I wanted to check and see if the lack of business was showing up in sales tax figures for these parts of the state. There is usually a two-month lag between the months when sales tax is originally paid (usually at the point of sale) and when those funds are distributed down to counties that the transactions are charged to.

So with April’s county sales tax distributions in place, is there an area that is suffering in collections? Let’s also add in March’s distributions, which reflect transactions in January, and compare it to those same two months in 2023, and here are the 9 counties with the biggest losses in sales tax revenue.

Most of these counties are rural and several are in the 715, but not all of them. I’m especially surprised by the double-digit drops in Dane and Brown Counties, and am not sure what’s going on with that, although my instinct is that it's just an odd item that isn’t a sign of anything long-term.

I also looked to see if there was a corresponding drop-off of sales taxes at the state level for January or February, to see if these double-digit drops were just the worst of a bad two months. But instead, the state had year-over-year increases in sales taxes, albeit tepid ones and below the 12-month inflation rate (1.95% for January, 0.56% for Feb), so some of that could be the drop in Winter tourism.

In contrast, there were big increases in state sales taxes the first 2 months of 2023 vs the same time period in 2022, so counties should be pulling in more sales taxes in 2024 than in 2022.

But combined county distributions for March and April were no different in 2024 than they were in 2022, and if you take out the 49% increase in Milwaukee County (due to their new sales taxes taking effect), they’re actually down more than 10% over that time. Given that the higher sales taxes haven’t trickled down to the county level, some of this might just be a lag in collections and/or distributions, and there should be a sizable increase in May that starts to make up for this. Especially since state sales taxes went up by 5.7% in March 2024 vs March 2023 (likely helped by an earlier Easter in 2024).

So the warm Winter of 2024 has had some effect, and lowered county sales taxes in several parts of Wisconsin. But with strong numbers at the state level for March, I’m going to wait to see what gets sent back to counties in the next couple of months before I think there is a significant fiscal concern. Counties are also slated to get a bit more in sales taxes starting in July, due to a provision in the Brewers stadium bill that reduces the share of money that the state keeps in exchange for collecting and sending out the local sales taxes for the counties.

In all, we can hope the setbacks of the Winter are short-term, and that we see a strong Summer for both everyday consumers and tourists which prevents any of that damage from being permanent declines with job losses, and a lack of resources for the counties to fix their roads and improve other infrastructure and services.

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Sunday, April 28, 2024

Kikkoman and Purina putting up big expansions in Jefferson County. Worth it?

Last week, we got a big jobs and plant investment announcement here in Wisconsin.
Japanese soy sauce maker Kikkoman Corp. announced on Wednesday that it will build a $560 million plant in Jefferson, which will be the company’s third plant in the U.S. to go along with nine production facilities overseas.

Gov. Tony Evers announced that the Wisconsin Economic Development Corp. pledged $15.5 million in tax credits to expand a plant in Walworth and build the new facility in Jefferson. It is expected to create 83 jobs in 12 years.

Kikkoman plans to build a 240,000-square-foot steel frame facility on a 100-acre site and make soy sauce and soy-based seasonings, according to plans. The sauce maker wants to start construction in June and expects to start shipments in fall of 2026. The company will invest in construction over 10 years.

Kikkoman Foods Inc., a subsidiary of Kikkoman Corp., bought the parcel on Industrial Avenue from Jefferson County, state records showed. The new plant will be 37 miles north of the Walworth facility, which was first established in 1973.
I'm generally skeptical of these incentive deals in general, and especially after the Foxconn debacle set up by the Walker/WisGOP folks in 2017, which gave very few benefits while costing state and local taxpayers hundreds of millions of dollars. So I took a look at WEDC's explanation of the expansion plans at Kikkoman. What I found most interesting about it is that most of the investment isn't in the size of factory itself, but in the equipment that's required to handle the extra business.

And it's the capital investments that the WEDC analysis says is the main "job generator" of the Kikkoman expansion. The are only expected to be 83 permanent jobs added at Kikkoman itself along with the 201 jobs that will stay in Wisconsin, but the work related to construction and equipment is expected to add a lot more.
Per the IMPLAN report, the capital investment for the Jefferson project could directly support 1,612 jobs, $131,561,461 of labor income and $148,450,488 in value added products and services upon project completion. Considering the multiplier effect, the project could support 2,593 jobs , $197,928,073 of labor income and $260,958,648 in value added projects and services through the end of the project.....

Per the IMPLAN report, the capital investment for the Walworth project could directly support 183 jobs, $16,121,747 of labor incokme and $18,955,640 in value added products and services upon project completion. Considering the multplier effect, the project could support 440 jobs, $34,508,980 of labor income and $47,182,358 in value added products and services in total through the end of the project.
Likewise, there would only be $1.1 million of the tax credits that would go to Kikkoman for adding jobs, and $14.4 million in tax credits set aside for the $800 million in capital expansion costs. In essence, this kicks most of the benefits to the construction and equipment businesses beyond Kikkoman, which seems to be a lot better than the direct giveaways that Foxconn got in 2017.

Also like Foxconn, Kikkoman is getting local tax breaks from the City of Jefferson, but it only adds up to around $10 million in infrastructure and another $5 million to other incentives as the plant opens and hires people. That's a lot less than the hundreds of millions of dollars in investment that was dumped down into the Foxconn region for a company that still isn't able to tell you much about what they are doing or what they are producing. Then two days later, we got news of more development at that Jefferson industrial park.

Oh? Tell us more about this one.
The Wisconsin Economic Development Corporation (WEDC) is supporting the project by authorizing up to $1.7 million in performance-based business development tax credits over the next five years. The actual amount of tax credits Purina will receive is contingent upon the number of jobs created and the amount of capital investment during that period.

Purina’s $195 million project will increase production of wet pet food brands in Jefferson by nearly 50 percent, including Pro Plan, Fancy Feast, and Beneful IncrediBites, and add 35,000 square feet to the facility. Purina has operated in Jefferson for nearly 115 years and today employs more than 250 local associates.
It also looks like the city of Jefferson is giving $2 million to Purina in TID incentives. That's quite a bit of debt for a city of less than 8,000 people, but I imagine it would give a big boost to the tax base once the expansions are complete. Just hope the local homeowners don't have to pay much more in the meantime.

But it is quite a bit of development and new jobs for a low-population part of the state, so it seems like a big deal. However, you wouldn't know that from the two Republicans that represent Jefferson today - Representative Scott Johnson and Senator Stephen Nass - or from the 2 Republicans who are hoping to represent the city of Jefferson after November 2024, Sen. John Jagler and Rep. William Penterman. None of them have released anything on last week's announcements of new jobs and expansions in their districts.

Wisconsin writer Dan Shafer found that and the "business as usual" reaction by the Evers Administration to the job announcements to be in major contrast with what happened with similar (and sketchier) jobs announcements from the previous Guv.

Also not hearing much on the developments in Jefferson from the "business leaders" at Wisconsin Manfacturers and Commerce. Isn't that wild?

On the whole, I'll take it, and if it comes to fruition, it's going to be good growth in a well-located area between Madison and Milwaukee. But like with all of these things, let's check back in 2-3 years to see what's actually happening (or not happening) in these places.

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Friday, April 26, 2024

A day after soft GDP report, we find US spending and incomes growing strong in March

One day after a disappointing GDP number of 1.6% was released from the Bureau of Economic Analysis, the BEA came back today to tell us that Q1 ended strong when it came to income and spending.

Sure, the media wants to make the 0.3% PCE inflation index a major part of this report. But given that the BEA told us yesterday that the same gauge went up by a 3.5% annual rate in Q1, 0.3% would be what we’d expect.

What we didn’t know is that spending and income growth picked up at the end of the quarter, well above the rate of inflation. Real Personal Consumption Expenditures were up 0.5% for March, and Real Disposable Income was up 0.2% last month. Multiply that by 12, and both stats are more than double the Q1 annualized rates of 2.5% consumption growth and 1.0% growth in real disposable income.

Even more heartening is that wage and salary growth had a second straight month of strong growth (0.7%, just like February), which are the largest back-to-back month increases since the Summer of 2022. But we aren’t seeing anything close to the 8-9% inflation rates that we were seeing in the Summer of 2022, so this translates into real wage and income gains instead of catching up to price hikes.

My only concern with this report is the fact that the increase in spending ($172.2 billion on an annual basis) was ahead of the $122.0 billion increase in income for March. This means that the savings rate fell to 3.2%, which is well below the 5.2% rate we had this time last year, and back down to the levels we saw in 2022.

Put it together, and this indicates that we are far away from recession, and in fact, the US economy was likely accelerating as the quarter ended. The one time setback in inflation-adjusted growth and spending that happened in January (largely due to price hikes at the start of the year) has been overcome, and it portends a strong start for Q2.

So no, I don't think the slowdown to 1.6% GDP for Q1 reflects anything beyond a jump in imports, and isn't a sign that we are heading to stagnation for the rest of the year. It doesn't necessarily mean things are clear and easy, and we especially need to see if corporations try to take advantage of the strong consumer spending and wage growth by jacking prices and profits higher. But with oil and gas prices plateauing in April and unemployment claims staying low, I would hope we see some of the economic and monetary fear-mongering calm down as we get the monthly data reports between now and Memorial Day.

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Thursday, April 25, 2024

GDP disappoints and inflation high in Q1. But people have no reason to be freaked out

Today featured the first look at 1st Quarter GDP in the US. And given the strong job and spending growth reports that we've seen, it seemed to be another quarter of good overall growth.

So what did we get?

US GDP for the annualized first quarter grew by 1.6%, well below the forecast decline to 2.5% from the previous 3.4%. It represents the slowest pace of GDP growth since September of 2022, but an uptick in Core PCE in Q1 kicked the legs out from beneath rate cut hopes. Q1 Core PCE rebounded to 3.7%, climbing over the previous 2.0% and overshooting the forecast 3.4%. Headline PCE inflation also overshot, printing at 3.4% versus the previous 1.8% as inflation remains hotter than investors hoped.
Ugh. But then you look at the actual numbers and the components involved in the GDP print, and it doesn't seem too bad to me.
The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
In fact, there was more home-building at the start of 2024 than at the end of 2023, and consumer spending growth stayed at a strong pace. It was only the trade and government sectors that caused the declines in GDP at the start of 2024.

The big jump in imports doesn't seem like a long-lasting drag, especially with more reshoring starting to happen in the country. I'd be a lot more concerned if consumer spending or home-building declined in Q1, but none of that happened.

The flip side of the report that spooked the markets was the inflation figures.
The personal consumption expenditures index, the Fed's preferred inflation gauge, rose at a 3.4% annual rate last quarter — much higher than the 1.8% in the fourth quarter of last year and the hottest print in a year.


The price index for gross domestic purchases — prices paid not just by U.S. consumers but also businesses and government agencies — rose at a 3.1% annual rate, up from 1.6% in the final months of 2023.


That led investors to further push back their expectations of when the Federal Reserve might cut interest rates and a new spike in bond yields. Two-year U.S. treasury yields rose 0.05 percentage points Thursday morning to a hair below 5% (4.995% as of 10:30am ET, to be precise).
But we already had indications inflation had risen in Q1. Two weeks ago, we got a third straight monthly reading of 0.3% or above, and the 3-month annualized increase of CPI was around 4.5%. So why would a 3.4% bump-up in the PCE index change what we thought our situation was?

Seems pretty stupid, and given that oil prices have leveled off in the last month, I'm not overly concerned with inflation running away to a higher level. I think it'll be more likely that it heads back toward the 2-3% level that we were at since last Spring.

Wall Streeters are still trapped in a 1970s mentality where inflation is caused by a lack of capacity and that it somehow cripples everything else. In reality, a lot of this will likely be one-time factors and "greedflation" where corporations tried to reset prices at the start of the year to hit the quarterly profit numbers. But reality-based or not, it caused a selloff on Wall Street today, and likely guaranteed a very bad April for the market, which is annoying in its own right.

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Tuesday, April 23, 2024

Your assessments are likely up, but your property taxes? It depends.

Given my geekdom on the subject, I’ve had a few friends and relatives ask me over the years about how property taxes get figured in Wisconsin for each parcel of property, and how it relates to their assessments. And given that you may have recently gotten a new property assessment for this year (as we did in Madison over the weekend), you might be especially intrigued right now.

Fortunately, Forward Analytics has put out a good explainer that lays out how a community’s total levy interacts with the assessments that individuals get.

To begin with, let’s go with this one-sentence summary from FA.
The key to understanding the property tax bill is this: Your share of total assessed property value equals your share of the property tax.
That’s because state law requires all properties that reside in a certain taxing area (school district, municipality, county, etc.) to have the same “base” tax rate, which calculates the total gross property tax. Forward Analytics uses a cute scenario to explain it further.
A simple three house example (base scenario) illustrates why revaluations are needed when assessed values are out of sync with market values. The village of Badgerville has three residents: Ashley, Ben, and Carol, who each own a house. Ashley’s house is assessed at $200,000, Ben’s at $300,000, and Carol’s at $500,000. There is no other taxable property in the village, so the total assessed value in Badgerville is $1 million with the three residents owning 20%, 30%, and 50% of the total, respectively.

The total property tax levy in the city is $10,000. Recall that the share of total assessed values is the same as the share of total property tax. Since Ashley’s property is 20% of assessed values, she pays 20% of the levy or $2,000. Ben pays $3,000 (30%) and Carol pays $5,000 (50%). The left side of Table 1 on page 7 displays this situation.

While this “share” method is critical to understanding revaluations, property owners are more familiar with property tax rates. In this case, the assessed tax rate (tax per $1,000 of assessed value) is $10. Applying that rate to each property yields the same tax liability.

And then when property is revalued, and communities change their total tax levies, the taxes change proportionally.

You can see where Ashley’s property went up by 20%, but her taxes went down by $214 in the first scenario, and even as the total levy went up by $1,000 in the second scenario, the taxes she pays to her community still went down.

Why? Because Carol’s property value assessment went up by a higher percentage, and now takes up a larger chunk of the community’s property value. Carol’s taxes go up by more than the 10% that the total levy is going up by as a result.

I’ll take this down to my personal example for the house my wife and I own here in Madison. Our property assessment went up a little over 9% for this year (uh oh!) and the total citywide assessment of property values went up …a little over 9%.
Locally assessed real estate increased 9.3% for 2024. Commercial assessments increased 10.5% ($15,584 to $17,223 million) and residential assessments increased 8.5% ($25,826 to $28,021 million). Steady growth and continued development contributed to the increase.
So in theory, if the total property tax levy for Madison stays the same for this year vs last year (HAH! I kid!) this would means our property taxes paid to the city would also stay the same. Or if the city’s property tax levy goes up by 2%, our taxes should also go up by 2%, and so forth. It also likely means that our property tax rate will continue to go down (unless we get an increase in the tax levy of 9%!).

The frustrating part to me is not that we are paying higher property taxes than we were a decade ago. Higher costs that the city needs to cover and a lack of increase in state funding means that property taxes take on some of those extra costs – it happens. But we have to pay almost all of these additional property taxes in full, with very little allowed to be written off.

The maximum state tax credit for homeowners and renters has been frozen at $300 for 24 years, and on the federal side, the SALT exemption (which includes state income taxes and local property taxes in Wisconsin) has been frozen at $10,000 for joint filers since the GOP Tax Scam was put in place in 2017.

About the only break we get is that our increased school taxes give us higher School Levy and Lottery Tax Credits – a credit that the Wisconsin Policy Forum notes is regressive in nature, as people that have higher property values end up being the ones with a higher write-off.
These provisions will help hold the statewide property tax increase much closer to those seen in the years preceding the pandemic – likely about 2% to 3% – while allowing a healthy increase in local revenues. The school levy credit is distributed based on how much in K-12 property taxes is paid in each community. As a result, the increase in the credit will deliver the most benefit to communities such as Brookfield or Madison with high property values, since they tend to pay more in property taxes for K-12 schools.

Lawmakers could have placed the money for the credits into state general school aids instead, and doing so would have produced a similar statewide benefit for property taxpayers as a whole. The school aids formula, however, distributes more of this type of funding to communities with low property values per pupil. So that alternate approach would have sent more of the benefit to communities with low property values such as Beloit and Milwaukee.
It wouldn’t help us as much in Madison, but I’d rather trade more state funding being distributed into the general aids, and not having property taxes be as much of a basis in funding for K-12 schools overall. Seems a lot easier vs having these extra kickbacks and credits that aren’t needed. But those are policy debates that won’t have any changes passed into law before the next property tax bills come out in 7 1/2 months.

In the short-term, what I’d tell you is to remember that when it comes to property taxes, it isn’t as much the increase in your assessment that matters as how much you’re going up compared to everyone else in your community. Given that increases in property tax levies are still severely limited at the local level (barring referenda or a lot of new construction going online in 2024), that big jump in property value isn’t likely to mean a bunch of sticker shock when your property tax bill comes.

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Monday, April 22, 2024

In almost all aspects, Wisconsin's finances are in great shape

Wanted to riff on a recent report from the Wisconsin Policy Forum on the state's strong fiscal situation. One positive side-effect of the state’s ongoing budget surplus is that there’s less of a need to take on debt. The Policy Forum notes that Wisconsin’s debt has plummeted over the last decade, and especially since 2017.

But some of that is due to paying bills that were put off by the Doyle and Walker Administrations as the state dealt with and recovered from the Great Recession. This meant that the state’s expenses going to pay off debt jumped in the rest of the 2010s, and only recently has declined to give the budget more breathing space.
In times of economic stress, however, the state is most immediately affected not by its total outstanding debt but by its annual debt payments, which can reduce the funds available for other spending priorities or put upward pressure on state taxes. The state has long sought to keep annual debt payments made with its main tax revenues, or General Purpose Revenue, to less than 4% of total spending to avoid crowding out other state priorities. (These figures are calculated using reports aligned with the state budget, not with the state’s comprehensive financial reports).

The state exceeded this target after it delayed making GPR debt payments during and immediately after the Great Recession from 2008 to 2012 to make it through those hard times (see Figure 7). That meant higher payments in later years. During the decade since, the state has been paying down GPR-funded debt and since 2017, it has largely avoided delaying these debt payments. Even during the chaotic pandemic, the state only delayed a relatively small part of its 2020 payment.

The result has been impressive. The share of GPR spending going to debt payments fell below 2.7% in both 2021 and 2022. With the exception of years in which the state skipped making debt payments because of budget challenges, that is the smallest share since 1984, according to the Legislative Fiscal Bureau (LFB) and Forum records.
One area that still has a sizable amount of expenses going to debt is in the state's Transportation Fund. Some of this has been mitigated in recent years with some of the General Fund surplus being used to pay for items in the Transportation Fund, and due to the borrowing spree of the Walker years ending in the last 6 years.

And with added infrastructure spending from the Feds starting to fade out in the next couple of years, it may be a good chance to see if there needs to be more funds sent over on the state level to further lower those debt payments in the Transportation Fund. And if so, will the General Fund surplus continue to be tapped to keep paying for that.

The Policy Forum notes that while the record bank balance is being reduced in this current budget, it is being done in a way that lessens the chances of future budget problems.
During the current 2024 fiscal year that closes on June 30, the state’s general fund is projected to spend nearly $3.3 billion more than it takes in from taxes and fees, according to LFB. As a result, the general fund balance (according to the cash-based accounting used for state budgeting) will fall from nearly $7.1 billion on June 30, 2023 to a projected $3.8 billion at the end of June 2024.

To some degree, spending down at least part of this sizable surplus can be seen as appropriate. Despite the drop in the general fund balance, the state’s rainy day fund will still retain an additional $1.8 billion to bolster state reserves. In addition, much of this new spending in 2024 is temporary or one-time in nature rather than permanent (such as expenditures for constructing and repairing state buildings). Also, the projected drop in the fund balance for 2025 is smaller at $551 million.
It also helps explain why it makes sense for Governor Evers to veto the $2 billion-a-year in permanent tax cuts that the GOP Legislature tried to get through. Because that would have taken away any ability to respond to an economic downturn, and would have put the state back into a deficit after we had finally gotten back to a solid fiscal situation.

We will find out in the coming weeks what tax season did for the state's revenue and overall budget for what is left in the 2024 Fiscal Year. So far the numbers have beem tepid, which is why the Legislative Fiscal Bureau had already reduced its revenue outlook back in January. But let's see if the big stock market gains of 2023 lead to a need for Wisconsinites to send in large amounts of tax payments in April 2024, which may help the state's bottom line, give expanded breathing room and perhaps allow us to continue on the right path going into the 2025-27 state budget.

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Sunday, April 21, 2024

Warm winter giveth to Feb home-building, and takes from it in March

One of the few items that made Wall Streeters give a temporary pause to the thought that interest rate cuts would get delayed was when home-building info showed a sizable drop in activity in March.
Privately‐owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,458,000. This is 4.3 percent below the revised February rate of 1,523,000, but is 1.5 percent above the March 2023 rate of 1,437,000. Single‐family authorizations in March were at a rate of 973,000; this is 5.7 percent below the revised February figure of 1,032,000. Authorizations of units in buildings with five units or more were at a rate of 433,000 in March.

Housing Starts
Privately‐owned housing starts in March were at a seasonally adjusted annual rate of 1,321,000. This is 14.7 percent (±9.9 percent) below the revised February estimate of 1,549,000 and is 4.3 percent (±9.4 percent)* below the March 2023 rate of 1,380,000. Single‐family housing starts in March were at a rate of 1,022,000; this is 12.4 percent (±12.5 percent)* below the revised February figure of 1,167,000. The March rate for units in buildings with five units or more was 290,000.

Housing Completions
Privately‐owned housing completions in March were at a seasonally adjusted annual rate of 1,469,000. This is 13.5 percent (±11.0 percent) below the revised February estimate of 1,698,000 and is 3.9 percent (±13.5 percent)* below the March 2023 rate of 1,528,000. Single‐family housing completions in March were at a rate of 947,000; this is 10.5 percent (±10.1 percent) below the revised February rate of 1,058,000. The March rate for units in buildings with five units or more was 502,000.
Whoa, are the high interest rates leading to further pullback in home construction?

I don't think so, because some of this seems to be a natural adjustment to new housing construction that was “pulled forward” in a warm February. Housing starts is a very good exampkle of this, with the 14.7% decline being a snapback from a 12.7% increase in February.

One red flag that I do notice is that we have the smallest number of total housing units under construction in over a year, despite having the most single-family units being built since last Spring. That's because housing projects of 5 or more units have had a sizable drop since last Summer.

There was a similar theme from the National Association of Realtors, as they reported that existing home sales fell in March.
Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – receded 4.3% from February to a seasonally adjusted annual rate of 4.19 million in March. Year-over-year, sales waned 3.7% (down from 4.35 million in March 2023).

"Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves," said NAR Chief Economist Lawrence Yun. "There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market."

Total housing inventory registered at the end of March was 1.11 million units, up 4.7% from February and 14.4% from one year ago (970,000). Unsold inventory sits at a 3.2-month supply at the current sales pace, up from 2.9 months in February and 2.7 months in March 2023.

"More inventory is always welcomed in the current environment," Yun added. "Frankly, it's a great time to list with ongoing multiple offers on mid-priced properties and, overall, home prices continuing to rise."
But if you take away February's numbers, the 4.19 million sales rate was also the fastest since May, and the 3.80 million in single-family sales was the fastest since March 2023. Looking over the last year, it appears sales got pulled ahead into February, and that the overall trend is moderate growth for the last 6 months after a decline in sales in the middle half of 2023.

It’s also intriguing that housing sales continue despite mortgage rates bouncing higher in the early part of 2024, as the prospects of a softer economy and a quicker start to Fed rate cuts began to fade. Let's see if that one continues for April.

I do find the trends of higher inventory and more completions and construction on single-family homes to be a good sign, as housing affordability is one of the few real headwinds in the current economy, and that's been compounded by the higher interest rates that exist in early 2024. But it's still nowhere near as good for potential buyers as it was 3 years ago, both in cost and interest rates, and while it's nice for millions of us to have large levels of housing wealth "banked", there still aren't a lot of places to turn to if we wanted to cash in those gains.

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Wisconsin loses most jobs in U.S. in March??!! But Feb revisions show a strong Q1

Got a new Wisconsin jobs report for March this week. And not all that great, to be honest.
Place of Residence Data: Wisconsin's March 2024 unemployment rate held steady at 3.0%. The labor force decreased 3,500 over the month, to 3,140,000. The number of people employed decreased 800 over the month, to 3,047,100. The number of unemployed people decreased 2,600 over the month, to 93,000.

• Place of Work Data: Total nonfarm jobs decreased 1,700 over the month and increased 22,700 over the year, to 3,034,400 in March. Private sector jobs decreased 2,900 over the month and increased 14,300 over the year to 2,623,400. Construction jobs grew by 3,100 jobs over the month, to a record high 143,900 jobs.
The construction boom in Wisconsin and nationwide is a story that isn’t told enough, as nearly 8,000 jobs has been added in that sector in our state since October, and over 15,000 have been added since the start of 2022.

But as good as construction was for hiring, manufacturing employment was just as bad for losses, down by 2,900 in March, and over 5,000 below our post-COVID peaks. It also gave away much of the recovery that sector had been seeing for jobs since bottoming out last September.

Add in the loss of 1,800 jobs in warehousing and 1,300 jobs lost in Health Care and Social Assistance in a month when 2 hospitals closed in the Eau Claire area, and you get a bad month for March. Remarkably, Wisconsin was 1 of only 6 states that lost jobs last month, with our total loss of 1,700 being the largest drop in jobs out of any of those 6 states.

In looking at the reports from other US states, Wisconsin’s loss of jobs in March is in complete contrast to what happened in the rest of the Midwest, which had strong job growth in all of the other states in our part of the country.

Job growth, March 2024
Ill. +12,700
Minn +11,000
Ohio +11,500
Mich +6,100
Iowa +4,400
Ind. +4.100
Wis. -1,700

But I also looked back and noticed that February's job gain was revised up by 5,200 jobs, for a newly reported increase of 8,400 jobs in that month, and a total of 14,300 for the first 2 months of 2024. So perhaps March just reflects a correction to what is a still a strong 1st Quarter of job growth in our state.

We also haven’t seen much of an increase in unemployment claims in the state during April. In fact, Wisconsin had a drop of nearly 1,800 initial unemployment claims last week, the second-largest drop in new claims in the US. Continuing claims in Wisconsin declined by more than 2,100 the week before, and reversed an unusual increase for March.

If claims continue to decline for the last 2 weeks of April, I’ll think that March’s disappointing jobs numbers was a blip likely triggered by the closings of hospitals in the Eau Claire area, and a snapback from big numbers in a warm February that pulled forward some work that usually ticks up in Spring.

So I'm not going to worry too much about whether Wisconsin's strong job growth is suddenly reversing, unless the bad trend continues in April and May. We just need to keep trying to attract talent and expand our capacities, as we aeren't likely to get much further below the 2.96% unemployment we had last month.

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Wednesday, April 17, 2024

US economy is doing too well? The Fed and Wall Street seem to think so

As 2023 ended, there were questions as to whether the strong US economy that we've been in for the last 3 years was going to continue. We'd seen softening numbers for both inflation and consumer spending growth, and even job growth had fallen off some in the later part of 2023.

But for the first three months of 2024, we've seen US job growth pick up and inflation bump up to its fastest 3-month increase since last Summer. And that's leading to some changes in outlook. For example, International Monetary Fund said this week that the US is going to outpace the rest of the developed world in economic growth this year.
The IMF revised its forecast for 2024 U.S. growth sharply upward to 2.7% from the 2.1% projected in January, on stronger-than-expected employment and consumer spending. It expects the delayed effect of tighter monetary and fiscal policy to slow U.S. growth to 1.9% in 2025, though that also was an upward revision from the 1.7% estimate in January.

European Central Bank President Christine Lagarde has cited the stark divergence between the U.S. and Europe, which is facing slower growth and faster-falling inflation.

The latest IMF forecasts bear this out, with a downward revision to the euro zone 2024 growth forecast to 0.8% from 0.9% in January, primarily due to weak consumer sentiment in Germany and France. Britain's 2024 growth forecast was revised down by 0.1 percentage point to 0.5% amid high interest rates and stubbornly high inflation.
Soon after that IMF report came out, we got confirmation that US consumer spending in America was robust for the 1st Quarter of 2024, coming in above what the "experts" were predicting.

This strong economic performance and outlook led Fed Chair Jerome Powell to say this week that interest rate cuts are going to come later in 2024, if at all.
Federal Reserve Chair Jerome Powell cautioned Tuesday that persistently elevated inflation will likely delay any Fed interest rate cuts until later this year, opening the door to a period of higher-for-longer rates.

“Recent data have clearly not given us greater confidence” that inflation is coming fully under control and “instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said during a panel discussion at the Wilson Center.

“If higher inflation does persist,” he said, “we can maintain the current level of (interest rates) for as long as needed.”…

In the past several weeks, government data has shown that inflation remains stubbornly above the Fed’s 2% target and that the economy is still growing robustly. Year-over-year inflation rose to 3.5% in March, from 3.2% in February. And a closely watched gauge of “core” prices, which exclude volatile food and energy, rose sharply for a third straight month.

As recently as December, Wall Street traders had priced in as many as six quarter-point rate cuts this year. Now they foresee only two rate cuts, with the first coming in September.
Not great if you're a borrower, or if you were anyone else counting on interest rates dropping from their 23-year highs. It's also spooked the stock market, which has seen all of the gains of the first three months of the year go away in April, as the odds for rate cuts have declined.

I'm not going to complain about increased job and consumer spending growth, and you shouldn't either. Unless inflation stays at or above a 4% annual rate for the next 3 months, there's not much that's going to cause real concerns in the actual economy. I'd still argue that our current rates are too high and are making the market for single-family homes even tighter than it already was, but I'm also starting to accept the reality that those rates won't go down any time soon. So adjust and invest accordingly.
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Monday, April 15, 2024

JFC - Can WisGOPs give out the money they already OK'd?

After months of stalemate, Governor Evers took actions last week to try to get $140 million released from bills that have already been signed into law.

“It’s been 279 days since I signed the biennial budget and approved a $125 million investment to fight PFAS—the first real, meaningful investment Republicans have sent to my desk to address and prevent PFAS contamination statewide,” said Gov. Evers. “And it’s now been more than 40 days since I signed a bill to secure $15 million in crisis response resources that would help ensure folks in Western Wisconsin have access to the healthcare services they need when and where they need it, including OB-GYN services, mental health and substance use treatment, urgent care, and so much more.

“That’s $140 million in already-approved and agreed-upon investments to address urgent, pressing issues facing our state, but these funds are sitting unspent in Madison because the Republican-controlled Joint Finance Committee has refused to release even one cent—and that’s just wrong,” continued Gov. Evers. “PFAS are affecting communities across our state, and Western Wisconsin is facing serious challenges due to recently announced hospital closures—there is no reason Wisconsinites should have to wait any longer than they already have for these funds to be released. This is about doing the right thing for our kids, our families, and our communities, and it should’ve been done a long time ago. This must get done.”

The $140 million investment includes $125 million to combat PFAS contamination across the state that was made available through the 2023-25 biennial budget passed by the Wisconsin State Legislature and enacted by Gov. Evers last July. The PFAS funding has languished unspent in Madison for more than nine months—279 days.

The remaining $15 million of the $140 million awaiting the Republican-controlled Joint Finance Committee’s action is crisis response resources to help stabilize the healthcare industry and healthcare access in Western Wisconsin. Over a month ago now—41 days ago—Gov Evers signed 2023 Wisconsin Act 97 to secure $15 million in crisis response resources to support healthcare access in Western Wisconsin. Gov. Evers approved Act 97 with improvements through line-item vetoes that provide additional flexibility for the $15 million crisis response investment, enabling the resources to be used to fund any hospital services meeting the area’s pressing healthcare needs, including urgent care services, OB-GYN services, inpatient psychiatry services, and mental health substance use services, among others. Without the governor’s vetoes, these services would not have been eligible under the legislation. JFC continues to let these funds sit idle in Madison, even as HSHS closed HSHS Sacred Heart Hospital in Eau Claire and HSHS St. Joseph’s Hospital in Chippewa Falls on March 22, 2024—approximately a month earlier than had previously been announced—underscoring the urgent need for these funds to be released and distributed to partners in the community working to offset the burden of these closures.
And we find out tomorrow if anything will come from it (don't bet on it).

So how did we get to this standoff? Because both items require the approval of a Joint Finance Committee that has 12 Republicans and 4 Democrats, as required by the gerrymandered GOP Legislature to get these $125 million to fight PFAS into the state budget last June.
Under the provision, the PFAS fund would have no amounts appropriated in the 2023-25 biennium. Transfers and other revenues would be available for DNR to request for release by the Joint Committee on Finance, or the fund balance could be further directed or appropriated in separate legislation.
That's a common thing the GOP Legislature has done in the last 5 years, as a power play against the Democratic Governor. Sure, the Legislature might allow funds to deal with a problem to be set aside, but they often have allowed the JFC to keep those funds from going out if they don't like how the Governor and his Administration plan to use the money to solve the problem.

Same goes for the $15 million that is intended to help Eau Claire and Chippewa Falls-area health providers handle the strains that are resulting from the 2 HSHS hospitals closing, along with the loss of over 1,400 jobs. These funds were initially given out in 2021 as a Legislature-initiated grant of $15 million to have HSHS hospitals expand with increased behavioral health service beds in the same Chippewa Valley facilities that are now closing.

To deal with the crisis, the GOP-run Legislature passed a bill that would earmark that $15 million for emergency department services in that part of the state, with the Wisconsin Department of Health Services administering the funds. Evers vetoed the language referencing the "emergency department", which means that the money could be used for pretty much any need that exists, then signed the rest of it into law.

But again, the Legislature gave Joint Finance the ability to hold up the money until they liked what they saw from the Governor's Office.
In the schedule under s. 20.005 (3) for the appropriation to the joint committee on finance under s. 20.865 (4) (a), the dollar amount for fiscal year 2023-24 is increased by $15,000,000 for grants to support hospital emergency department services.
For both these bills, the Governor and Joint Finance have had some discussions behind the scenes, but JFC has refused to meet to approve or deny the funds. So you get to the special meeting that Evers called for tomorrow, and let's look at what the Evers Administration says the money would be used for.

The PFAS holdup came to a head after Evers vetoed a GOP bill last week that would have released the money on the GOP's terms, which isn't something Evers was willing to go along with.

So let's look at what the Evers Administration wants to do with the DNR PFAS funds.
1) $100 million in financial assistance to carry out the following eligible activities consistent with the structure outlined in the Municipal PFAS grant program in Senate Bill 312, as amended:

a. Provide financial assistance to municipalities for PFAS testing performed at properties owned, leased, managed, or contracted for by those municipalities based on the cost of testing and the amount of testing needed in each community;

b. Provide financial assistance to non-municipal public or community water systems for the entity to test its drinking water supply for PFAS;
c. Provide financial assistance to the owner or manager of, or the holder of a solid waste facility license issued by the department for, privately owned solid waste disposal facilities to test for the presence of PFAS in leachate.

d. Provide financial assistance to municipalities to test for PFAS levels at locations that are owned, leased, managed, or contracted for by a municipality and where PFAS may be present, including airports, water systems, wastewater treatment facilities, or contaminated lands, and to test for PFAS levels in leachate at solid waste disposal facilities that are owned, leased, managed, or contracted for by a municipality;

e. Provide financial assistance to municipalities and the owner or manager of, or the holder of a solid waste facility license issued by the department for, privately owned solid waste disposal facilities to dispose of PFAS-containing biosolids or leachate at facilities that accept such biosolids or leachate or to purchase and install on-site treatment systems to address PFAS contained in biosolids or leachate;

f. Provide financial assistance for capital costs or debt service, including for facility upgrades or new infrastructure, to municipalities that are small or disadvantaged or in which rates for water or wastewater utilities will increase by more than 20 percent as a direct result of steps taken to address PFAS contamination, and;

g. Provide financial assistance to municipalities for capital costs or other costs related to PFAS that are not otherwise paid from the environmental improvement fund. Assistance may be provided to municipalities for costs for addressing solid waste disposal facilities or other contaminated lands owned, leased, managed, or contracted for by the municipality; costs incurred by fire departments, including to replace PFAS-containing firefighting foam; costs for the preparation and implementation of pollutant minimization plans; and costs incurred by municipal public utilities or metropolitan sewerage districts created under ch. 200 for pretreatment or other PFAS source reduction measures for an interconnected customer or other regular customer if the costs incurred are less than the costs of the upgrades otherwise required at the endpoint treatment facility and if the costs are approved by the governing body of the municipality or the metropolitan sewerage district.
In addition, there would be $25 million to "Innocent Landowners" affected by PFAS to:
...provide financial assistance to landowners whose land was used for permitted biosolids or wastewater residuals landspreading; fire departments or municipalities that responded to emergencies that required the use of PFAS; solid waste disposal facilities that accepted PFAS; and landowners of property on which PFAS contamination did not originate.
The desire to protect Innocent Landowners from a loss of land value was a main excuse reason given by JFC member Eric Wimberger (R-Green Bay) this weekend as to why the JFC has yet to release the money.

Worth noting, within days after Evers announced the special session last week, we saw national news on the PFAS front that gives a clue as to what WMC DOESN'T want to see more of in Wisconsin.
An embattled producer of firefighting foam with a production facility in northeast Wisconsin reached a $750 million settlement with public water systems impacted by "forever chemicals."

Tyco Fire Products, a subsidiary of Johnson Controls, announced the settlement Friday, according to a press release from the Napoli Schkolnik environmental law firm, which is representing a number of PFAS-impacted communities that have filed lawsuits.

The money will be distributed among the cities that have filed lawsuits to remediate PFAS contamination, though it was not immediately clear which communities could see money from the settlement. The settlement stipulates it is not an admission of guilt or wrongdoing.
Those WMC campaign checks won't write themselves to GOP members on the JFC, which helps explain why they'd like to control and kill this enforcement power against PFAS in any way they can.

Moving over to the $15 million in hospital funds, here's how the Evers Admnistration would have the Department of Health Services try to help Eau Claire-area hospitals. The Evers Administration said there were 6 areas where they would help pay for an expansion of services that was done after January 2024 (when the HSHS closings were announced).
a. Increase Emergency Department capacity/service, including accepting patients in crisis in need of potential evaluation under Chapter 51. 
  b. Expand Urgent Care Services  
c. Expand Inpatient Psychiatric Unit accepting adults and/or adolescents. The unit must accept emergency detentions under s. 51.15 and voluntary admissions. 
d. Expand Inpatient OB/GYN services.
e. Expand mental health and/or substance use services.  
f. Expand or establish hospital-owned and operated ambulance service to transfer patients to an appropriate patient care setting. 
So JFC, what's the problem here? Do they still want the funds limited only to Emergency needs for behavioral services (and can they explain why that would be better)?

Or when it comes to the PFAS and hospital funding, are the GOPs on JFC refusing to not let the Evers Administration get to work on helping Wisconsinites in need solely due to this mentality?

Yeah, it's probably that lame. This gerrymander can't end soon enough.
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Sunday, April 14, 2024

Since GOPs have no answers, and lose on real issues, they waste our time on non-issues

So Congress is back in session this week. With Ukraine getting bombarded by Russia and seeing their defenses run low, and with Israel and Iran exchanging hostilities, it seem like an important time for our lawmakers to get work done. Let's look at what the GOP-led House has planned for this week.

Yes, the GOPs in Congress are defending your right to...keep buying appliances and limit any kind of requirements to improve energy efficiency.

Oh, but I do see the Speaker of the House was dispatched to discuss things with the presumptive GOP nominee for President. So maybe there will be important policy items and reforms to come out of that.

Tired Big Lie stuff that doesn't exist anywhere beyond AM radio, Faux News, and GOP's BubbleWorld of BS.

But maybe things are better in the Senate. Given that Wisconsin's senior senator has 4 years before he has to fact the voters (if he doesn't retire), he has the latitude to do real work and governing. So let's see what's he's been up to.

As someone who has worked several elections in the last 4 years, this is NOT A THING in Wisconsin, and by law it is not a thing in America for elections to Congress or President. But we know why Ron Johnson says this garbage.

If 15,000 people had decided they were done with this clown show and chose to vote for the Black guy instead of RoJo in November 2022, us Sconnies wouldn't be saddled with this embarrassment, and we'd have a better functioning Senate today. Oh, but that was a bridge too far for some of you, wasn't it? (speaking of weak acts, why haven't Senate Dems ever tried to censure this Russian agent for his lies and abuses of power)?

When you see GOPs bringing up non-issues like this, it's a tell that they are losing on real issues, and are desperately trying to change the subject. This is especially true in Bubble World of BS, and The New Republic's Greg Sargent recently had an excellent podcast showing how this works in GOP-perganda broadcasts. He was joined by John Whitehouse of Media Matters on the pod, which was recorded right after Arizona's Supreme Court outlawed virtually all abortions by reactivating a law from 1864.

You can guess how that development was (not) covered by Faux.

Out of sight, out of mind, you know.

This is why Dems need a presence in every corner of the state and the country. Because if they're not being intrusive with media and messaging to try to burst the GOP's Bubble of BS, casual voters will think the Faux News non-issues are worth caring about and getting distracted by. And corporate media won't care to ask GOP politicians about real issues if Dems don't keep pressing with real questions and concerns.

But if Dems confront media and voters with how GOPs refuse to deal with real problems, and back actions that make everyday people's live worse, then they may make some inroads in Trump Country that will make it near-impossible for GOPs to win in this state, and nationwide.

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Friday, April 12, 2024

UW audit says things have to change for campuses to stay afloat. But how should it change?

With several UW campuses facing layoffs and cutbacks, and some 2-year branch campuses ending in-person classes or closing up entirely, the UW System's central administration took the step of having a third party look into where things stand, and if/how this spiral can be stopped. We found out what the consultants had to say this week.
The University of Wisconsin System paid outside firm Deloitte $2.8 million to assess the financial health of its individual campuses. The reports released this week underscore the difficult financial forces facing most UW campuses and their unsustainable reliance on reserves to cover year after year of budget deficits.

None of the reports raised the possibility of consolidation or closure. UW System President Jay Rothman said he isn't entertaining the idea of closing any four-year campus. The struggle for chancellors is finding a path to remain financially sustainable while enrollment declines, concerns about college affordability grow and state funding in the most recent budget remained flat.

"I'm confident that all of our universities can get there," Rothman said. "The question is, what is the depth of those cuts going to have to be, because we have a responsibility on the expense side of the ledger to run as efficiently as we possibly can be. But in terms of having additional state support so that we can invest in things that are going to be important for our state going forward, I think that's what the balance is."
One of the reasons for the fiscal issues for many of these campuses is because of a consistent and significant decline in enrollment that has been going on since the early 2010s, reflecting the demographic challenges that many colleges have had to deal with.

The report looked at 7 of the 12 4-year schools in the UW System that aren’t Madison, with the other 5 being part of a separate report. But the 7 campuses listed in the first Deloitte report (Green Bay, Oshkosh, Parkside, Platteville, River Falls, Superior and Whitewater) seem to have the most immediate concerns, with the report saying of both Oshkosh and Platteville, "the future of the institution is at risk,", and it's not a coincidence that both campuses announced significant staff layoffs last October.

Deloitte also said River Falls and Green Bay were in need of "right-sizing" (cough -MORE LAYOFFS- cough), and that the other 3 schools also were in need of some kind of operational adjustment. I know that consultants are paid to report bad things and come up with solutions on how to fix them (no matter how necessary or useful those solutions may be), but I also note that the combined of enrollments of the financially analyzed campuses dropped by more than 5,000 between Fall 2017 and Fall 2022, before slightly recovering in this school year.

Then remember that all 4-year UW System schools have been under a tuition freeze for the past decade (one that is apparently going to end next year). So there is a general drop in tuition funds going to these schools, in a time period when costs have gone up, and especially accelerated in 2022 and 2023.

(Quick side note - River Falls is likely going to be the campus that will get the most help on the tuition side due to a recently signed law that will let them and all other UW campuses keep the additional tuition that students from Minnesota pay as part of the reciprocity agreement between those two states. So that's at least one UW financial reform that's coming in).

Not having Madison be part of Deloitte's financial analysis feels like the correct way of looking at it. because as I’ve harped on before, UW-Madison is a very different entity than the other schools, as it is a research-centered institution and flagship campus than now has more than 50,000 students, with enrollment rising by more than 8,000 since 2011.

And unlike many of the other UW campuses, Madison can draw a lot of funds from the much-higher tuition that out-of-state students pay. In fact, all of Bucky's increased enrollment (and then some) can be accounted for by out-of-staters.

Add in an alumni base that can do things like give $140 million for a new computer science facility or to chip in $150 million to replace and modernize its Engineering building, along with $1.5 billion in research grants from public and private sources, and Bucky stands alone among UW schools in the number of places it can find to help pay for its expenses. This is not to say that the Madison campus doesn’t deserve taxpayer investment - it adds a massive amount to this state’s economy and is a big reason why the Madison area adds more population than anywhere else in the state - but Bascom Hill has got a lot more in non-state financial resources to draw from than the other UW schools do.


You can even make a sizable amount of this separate state funding be designated as subsidies to ensure Madison charges significantly lower tuition to in-state students. So a key part of how I would stabilize and improve the UW System in the future would be in allowing Madison to be its own entity, with its own state funding stream (separate from what is distributed to the rest of the System). In return, I would have the State Legislature BACK THE FUCK OFF of its affairs.

The other UW System schools don't have the luxury of Madison's donor base, research funding, and rising enrollment, which makes them more reliant on state aid to make ends meet. But the GOPs also cut funding to the System during the Age of Fitzwalkerstan, leaving the campuses well below the national average when it comes to funding from state taxpayers.
The nonpartisan Wisconsin Policy Forum found Wisconsin's four-year university system ranked 43rd in the country in per-pupil funding. Rothman said it would take an additional $440 million annually to move to the median level of funding nationally.
OH? Perhaps we should lower that $440 million deficiency to help these schools' financial solvency as well? Maybe?

We're still slated to have $3 billion in the bank when the next state budget begins in July 2025. I think the non-Madison campuses can be shored up with some of that, if we actually care to stop the spiral of less revenue and higher costs that is crippling many of our UW campuses. But it likely will take more than just that to reverse the damage that has been done under the GOP's gerrymandered Reign of Error over the UW's purse strings.

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