Thursday, May 30, 2013

Sometimes others say it better- vouchers and unemployment cuts

Hey, you have nuptials in 9 days, you get tied up. Regardless, here's a couple of excellent updates along the Cheddarsphere that breaks down recent budget developments.

First, I'll send you to the Wisconsin Soapbox discussing the possible deal on K-12 funding and vouchers. According to Andy's read on the news reports, this would possibly expand vouchers statewide (on a limited basis for the short term, on a bigger basis in the future if we're stupid enough to keep WisGOP in power), and has the double whammy of potentially raising property taxes by $116 million on top of this.

So it's a pathetic giveaway for the failed voucher system of education, while raising taxes and state spending in the process. If these guys wanted to raise K-12 spending by $150 a student, why didn't they simply fund that raise 100% (which would cost $289 million instead of the $173.4 million state increase over Walker budget that the Soap Box says is proposed), and keep the tax relief. Obviously, the fact that they might be choosing the route they are shows that throwing vouchers out statewide is the WisGOP priority (as a subsidiary of the voucher lobby), and what they don't really care about is offering quality education at a decent savings to property taxpayers.

The other article I'll point you to is John Peterson offering an excellent takedown of the Republicans screwing with the state's unemployment insurance system at Democurmudgeon.
This is almost too hard to believe:

jsonline: Under changes to the state's unemployment insurance system adopted by the Legislature's budget committee Wednesday, taxpayers would spend $26 million over two years to prop up the unemployment fund, To avoid having employers face new assessments this year, the committee voted to use $26 million in general tax dollars to pay down interest on that loan.

Think that’s bad? Taxpayers will be used to scam the federal government. Republican will borrow our hard earned taxpayer dollars to shore up the unemployment fund so the fed won’t raise taxes on EMPLOYERS, the ones who actually fund the account. This is actual fascism:

Additionally, the committee proposal would allow the state Department of Administration to lend up to $50 million in taxpayer money to the unemployment insurance fund. That loan would help the state ensure that the unemployment fund has a positive balance in 2014, which in turn would keep the federal government from raising taxes on employers by $191 million in 2015.

Again, taxpayers are paying the state's private employers interest on unemployment, and loaning private employers money, so the fed won't raise taxes on them for underfunding unemployment.
Well said John, this is a total giveaway to employers, who are taxed on unemployment benefit payments because (wait for it...) they're the ones who make the choice to cause people to go on unemployment in the first place. They're basically using our tax dollars to subsidize employers who refuse to do the right thing by continuing to keep workers on the job.

And given that our lousy job numbers caused us to be the only state in the Union to have MORE weeks of unemployment claims allowed as of last month, this is a major bailout, since the state is liable to have additional payments for unemployment, meaning that the tax on employers would be slated to last longer.

There is little doubt who these guys are working for, and the donations these lobbies are handing out to WisGOP seem to be having a helluva payback. Won't do much for the vast majority of us who have real jobs or try to get by day-to-day, but WisGOP couldn't care less about our type anyway.

Tuesday, May 28, 2013

A Koo-Koo tax cut idea

After taking a weekend off for the holiday and to take care of some personal needs, I'm back with a brief overview of the additional tax cuts State Rep. Dale (Koo)Kooyenga is proposing and trying to stuff into the state budget at the last minute.

Who gets the tax cuts
Kooyenga's tax cut plan will shut down a number of tax credits, and in return would cut income tax rates for many income levels beyond what Gov. Walker has proposed for this budget.
Currently, Wisconsin employs five tax brackets with marginal rates ranging from 4.60% to 7.75%. Under the proposal, the number of tax brackets would be reduced to four, and the marginal rates would range from 4.50% to 7.60% in tax year 2014, as follows. First, the rates for the two lowest brackets would remain the same as under the Governor's proposal. Second, the rate for the top tax bracket would be reduced from 7.75% to 7.60%. Finally, the third and fourth bracket would be combined, and that bracket would be taxed at 6.27%.....

Beginning in tax year 2015, the number of tax brackets would be reduced to three. Relative to current law, the second, third, and fourth tax brackets would be collapsed into a single bracket, and the income that falls within that bracket would be taxed at a rate of 5.94%.
The upshot of this is that people with 6-figure taxable incomes in Wisconsin would see a significant tax cut, with marginal rates dropping from 6.5% and 6.75% down to 5.94%, or which'll reduce the total taxes paid by these people by 9-13%.

Marginal tax rates, Kooyenga tax plan, 2013 vs. 2015
$0 - $14,510- 4.60% (2013), 4.50% (2015)
$14,510 - $29,020- 6.15% (2013), 5.94% (2015)
$29,020 - $217,630- 6.50% (2013), 5.94% (2015)
$217,630 - $319,460- 6.75% (2013), 5.94% (2015)
$319,460 and up- 7.75% (2013), 7.60% (2015)

And while that marginal tax rate cut for the highest incomes seems small, Kooyenga's plan also gets rid of the state's Alternative Minimum Tax regulations, which tend to grab the richest earners. This means that not only do 6-figure income-makers get an income tax cut from the rates itself, they also are more likely to have the amounts of taxes owed to be near ZERO because of no AMT. When you combine these two variables, it is obvious that the Koo-Kooyenga tax cut has the lion's share of benefits going to the rich.

And in looking at the LFB write-up, there is no corresponding change in the amount of income that is taken off in the standard deduction to take care of basic necessities, so poorer people will have a whole lot less when it comes to disposable after-tax dollars to play with than richer people will. This makes what already looks to be a regressive tax cut all the more so.

Now Kooyenga argues in today's J-S story on the tax cut plan that "It's nearly impossible to create a tax cut that doesn't disproportionately lower taxes for upper incomes." But that's simply not true, as tax savings could be targeted to the lowest-income individuals, or the standard deduction and related exemptions could be expanded. Both moves would give a lot of help to lower income individuals, but not affect richer people as much.

Kooyenga's plan actually goes the other way on this measure, as it repeals the "Working Families Tax Credit", which goes to individuals making under $9,000 and joint returns that make under $18,000, which will raise the taxes that these low-income individuals would have to pay. Especially when combined with the sizable rate reductions on 6-figure earners and the AMT repeal, this tax cut plan is designed as a clear giveaway to the rich.

It also blows a major hole in the state's budget, especially for the future. This year's fluky upside revenue surprise might be able to cover some of this Koo-Koo cut for this year and next year, but not by much. Here's what LFB says about the revenue drop that this tax cut would cause (these numbers are in addition to Walker's proposed tax cuts, expense changes, etc. that are already in the budget), and as you'll see, the loss in revenue from tax rate cuts outpaces the money made back by ending tax credits by 80 TO 1.

Change in funds, Kooyenga tax cut plan, 2013-15
Tax rate cuts, etc. -$408.6 million
Tax credits ended +5.3 million
Increased Gen Fund costs in package $16 million (-$16 million for deficit)

Fee cuts -$8.0 million
Decreased fee revenue with shift to Gen Fund $16 million

Total GPR deficit added = $419.3 million
Total cuts in fees, other revenues = $24.0 million

As you may recall from the revenue estimates given, with current projections and no changes from the Governor's budget, the base state budget would have a surplus around $582 million for 2013-15, and that's before any money is added to K-12 schools (as many legislators have been indicating). This $419 million basically takes care of all but $163 million of that surplus, which would pretty much put the kibosh on any significant increases in K-12 funding ( the LFB paper for tomorrow indicates that $163 million wouldn't even pay for a $100 per pupil increase). So there's a clear choice to be made between funding schools and related services, and giving some property tax relief for the next two years, and going along with these tax cuts.

But the real damage follows in the next budget and later years, as the lower tax cuts fully hit, and the numbers expand.
In the 2015-17 biennium, the proposal would reduce income taxes an estimated $443 million in 2015-16 and $471 million in 2016-17. Those effects come from combining the third and fourth tax brackets with the second tax bracket and taxing income that falls within that bracket at 5.94%.
So that's $914 million that needs to be made up in those years. But wait, there's more! The Fiscal Bureau adds that the Koo-Koo tax cut assumes that the feds will choose not to continue bonus depreciation after this year, despite the fact that this was extended in the fiscal cliff deal and has tended to be extended by members of both parties. If the current 50% bonus depreciation continues, that's another $60 million that goes away, and stays away in later years.

So now we're up to $1 billion in reduced revenue from these tax cuts, and that's a problem, because the LFB figured back in March that the 2015-17 budget already had a $664 million deficit. So while the fluky revenue increase from the Fed-fueled stock market boom might take care of the original $664 million, it doesn't account for the additional BILLION DOLLAR DEFICIT that the Koo-Koo tax cut would cause.

Which leads to the obvious question- what's the other shoe to drop to take care of this tax-cut caused deficit, if this were to become law? Is this where the no-bid sale of state assets comes in? Would it require an increase of the sales tax to 6% (which would make up that billion dollars)? Or would it mean even more cuts to local communities, workers, and/or schools?

Don't deny that this is part of the WisGOP plan. It's classic "starve the beast/ disaster capitalism" economic policy designed to FUBAR Wisconsin's services beyond the point of repair, leading to services being forced to be sold off to campaign contributors for pennies on the dollar.

So no, I don't approve of the Koo-Koo tax cut, and encourage Dems and GOPs that give a crap about the state's future to stand against what is a clear giveaway to the rich that will send the state back into serious deficits without any increase in services or employment to show from it.

Wednesday, May 22, 2013

Your primer on DOT budget items

Tomorrow features a number of topics for the Joint Finance Committee to deal with, in a classic case of "cram as much BS together as you can so you can't focus on one thing". Near the top of the list will be discussions about the Department of Transportation's funding for highways and transit. So let's dive into these two topics, see what direction the Governor has chosen, and how that translates over into other parts of the budget.

To review, the General Fund is taken from regular income taxes, sales taxes, corporate taxes, and pays for much of the state government's core services, like schools, prisons, Medicaid, general Shared Revenues for local governments etc. The Transportation Fund is derived from items such as gas tax, vehicle registrations, and license fees, and is a set-aside for roads, highways, and aid to local communities for transportation purposes like street repair and transit. With that in mind, we'll start with the Transit budget paper, which is a heavy-detail write-up that not only goes into the history of transit funding for Wisconsin, but also compares a few other aspects of Transportation Finance. First of all, the Governor's budget keeps the 10% cut given to local transit aids put into law in 2011, meaning the local communities had to make up the difference in either higher local taxes, higher fares, or cuts in service). The only difference from that formula involves moving a little over $277,000 out of the $106 million of transit aids to what is basically a urban system tier (i.e., anything in the area of a decent-sized Wisconsin city outside of Madison Metro and the Milwaukee County Transit System), and taking that money away from rural areas.

The other big change is that for the second budget in a row, Gov Walker wants to move the Transit funding out of the Transportation Fund, and stick it into the General Fund. The LFB paper explains some of the ramifications of such a move, and also gives an overview of the types of money-shifting that Gov Walker is proposing to send more money to the Road Builders to beef up the Transportation Fund at the expense of the General Fund.
...Unless readdressed by a future Legislature, this action would result in the state's mass transit assistance program being funded from the general fund on an ongoing basis, and would result in an ongoing reduction in appropriations for this purpose from the transportation fund.

The proposed conversion of the mass transit operating assistance program funding from the transportation fund to the general fund is one of a number of related proposals being made under the Governor's budget. In addition to the current law deposit of 0.25% of general fund taxes to the transportation fund (estimated at $35,127,000 in 2013-14 and $36,302,500 in 2014-15), the Governor is proposing additional, one-time transfers of general fund revenues ($23,000,000 in 2013-14) and segregated fund revenues ($16,000,000 annually from the petroleum inspection fund) to the transportation fund. Finally, the budget would fund a portion of the Zoo Interchange construction project with $200 million in general fund-supported borrowing.

The use of general fund revenues and general fund-supported bonds has been justified as a means of compensating for past transfers out of the transportation fund. However, under provisions of the bill the cumulative use of general fund revenues and bonds would exceed the accumulated previous transfers from the transportation fund by the end of the 2013-15 biennium.
That's right, the old right-wing radio screech of "Doyle raided the Transportation Fund and we're not even close to paying it back," is FALSE. In fact, the paper illustrates just how these "raids" happened, and notes that much of it was offset at the time by having the General Fund pay back the Transportation Fund by borrowing funds.

Transfers between General Fund and Transportation Fund
2003-05 $161 mil LOSS for Trans. Fund ($682.6 mil to Gen Fund, $565.5 mil from Gen Fund borrowing to pay back, $41.9 mil paid by Trans. Fund for debt service)

2005-07 $181.7 mil LOSS for Trans. Fund ($431.7 mil to Gen Fund, $250 mil from Gen Fund borrowing to pay back)

2007-09 $112.0 mil LOSS to Trans. Fund ($162 mil to Gen Fund, $50 mil from Gen Fund borrowing to pay back)

2009-11 $79.1 mil GAIN for Trans. Fund ($125.6 mil to Gen Fund, $204.7 from Gen Fund borrowing to pay back)

2011-13 $275.5 mil GAIN for Trans. Fund ($115.4 mil FROM Gen Fund, $160 mil from Gen Fund borrowing)

2013-15 $400.9 mil GAIN for Trans. Fund ($94.3 FROM Gen Fund, $106.4 mil for Transit aids, $200 mil Gen Fund borrowing)

And this doesn't count the additional debt service that the General Fund has taken on from the borrowing they had in order to help pay back the Transportation Fund. So we were probably near even before Walker released his 2013-15 giveaway Transportation budget. In addition to that, I'll also point out that the biggest years of the "Doyle raids" were in his first term, when the Legislature was entirely controlled by Republicans. Funny how that detail slips past the Sykes types.

Speaking of the Highway funding budget it seems to have re-caught the attention of the Journal-Sentinel (as usual, they decide to go into this stuff at a point where it's hard for the outcry against this policy to reach critical mass until it's too late). The article seizes upon the $400 million in transfers and fund-shifting mentioned in the LFB memo on Transit, and also discusses the additional borrowing that is slated to take place inside of the Transportation Fund - bills that will have to be paid off in future years.

The LFB has papers on the three huge highway projects in SE Wisconsin that are in Walker's budget - one on the Zoo Interchange and I-94 freeway work south of Milwaukee , one on the Hoan Bridge and related work on I-794, and work on I-94 between the Zoo and downtown.

For the Zoo and the I-94 South work, the plan is to borrow from the General Fund and the Transportation Fund, and pay for most of the costs later. To clear up confusion, in these summaries GPR is General Fund, and SEG is the Transportation Fund.
Authorize $200,000,000 in general fund-supported, general obligation bonds for southeast Wisconsin freeway megaprojects and authorize $107,000,000 in transportation fund-supported, general obligation bonds for the Zoo Interchange and I-94 North-South freeway projects. Decrease base funding by $1,076,300 SEG in 2013-14 and $37,576,300 SEG in 2014-15 in the southeast Wisconsin freeway megaprojects appropriation, amounts that would be reallocated within the transportation budget. Increase funding by $1,666,700 GPR and $3,717,000 SEG in 2014-15 to reflect estimated debt service payments on the bonds, based upon the Department of Administration's bond issuance assumptions for the Zoo Interchange and North-South freeway projects.
There's also about $182 million of federal money thrown in there for this budget, and the LFB adds that under this plan, Transportation Fund debt service will rise from just over 13% of costs when Walker took office, to 18.5% by the end of FY 2015.

And oh yeah, there's more debt to come. Did I mention that there's at least $1.75 BILLION left to spend on these projects over the next 4-year Governor's term if they keep these projects on schedule under Walker's current budget?
To complete the Zoo Interchange in 2018, the Department's schedule calls for $640 million in the 2015-17 biennium and, preliminarily, $306 million in the 2017-19 biennium. The North-South freeway would need an estimated $397 million in 2017-19 and $356 million in 2019-21, to keep that project on schedule for completion in 2021.
Uh oh, looks like more General Fund raiding to come, doesn't it?

The Hoan work is much of the same story - $236 million in 2013-2015, and paid for largely through borrowing $200 million of those dollars from the Transportation Fund, with $25 million of the rest coming from the feds, and only $11 million being paid up front through the Transportation Fund. The LFB estimates that once all those bonds are handed out, state taxpayers will be on the hook for $14.5 million in a year in debt service to pay the Hoan work back over several years.

Hmmm, and let's add in the fact that we already have a $55 million Transportation Fund deficit for these next 2 years, which would grow to $161 million if they move Transit back to the Transportation Fund. So what gets cut from the Scott Walker Payback Fund to the Road Builders and what stays? And will DOT funding be helped out by a raid of funds from the UW System to fill these gaps, as I predicted last month? The UW System just so happens to be placed on tomorrow's schedule earlier this week.

I know JFC can seem awfully dry at times, but this meeting could be a big one when it comes to finding out just what priorities this state decides to fund over the next 2 years. I'd recommend giving it a look-see.

Tuesday, May 21, 2013

U.S. data proves Wisconsin "surplus" a blip, not real growth

News from recent days illustrate just how fluky and unreliable Wisconsin's alleged $500 million surplus is, and why it has very little to do with any kind of economic growth or responsible budgeting under Scott Walker.

Let's go back to the revenue estimates released by the LFB earlier this month, and in particular, let me point out the key passage which shows where the better-than-expected revenues came from, leading to the surplus.
April was an especially strong month [for income tax revenues], with growth of 12.4% over April, 2012. The main area of strength has been quarterly estimated payments of taxes on non-wage income, primarily business and investment earnings. Estimated payments in April, 2013, were 35.9% above last April's amount, and the year-to-date amount is 24.4% higher. Another, much smaller component of income tax collections is withheld taxes on profits distributed to the owners of pass-through entities (partnerships, limited liability companies, and tax-option corporations). These collections were also very strong in April, with monthly growth of 49.1%. Year-to-date growth in pass-through entity withholding is 45.7%.
Well, as reports later showed, that 12.4% increase in Wisconsin isn't as impressive when you look at what happened in the rest of the nation.
Federal tax revenues hit an all-time non-inflation-adjusted monthly high of approximately $406.7 billion in April, according to newly released data from the U.S. Treasury.

Overall federal tax revenues in April 2013 were up 28 percent from April 2012, and individual-income-tax revenues specifically were up 36 percent.
As mentioned before, a lot of this was due to the looming fiscal cliff that hit at the end of the year, and it accelerated a lot of revenues into the end of 2012, as people feared higher taxes on investments, Social Security taxes, and income taxes on the rich. This is obviously a one-time deal, but it also had a major impact on revenue numbers for the year.

And these big revenue jumps also showed up in the states, with income tax increases in many of them well above Wisconsin's 12.4%, led by our neighbor to the south.
Illinois contributed to a 37 percent increase in state personal income tax collections in April from a year ago, according to a sample of U.S. states, but the improvements may not continue as a still-shaky economy, tax cuts in some states and federal budget woes could team up to depress revenue growth.

Excluding California, which had the biggest gain of the 21 states that have so far reported collections in April, the total increase was still a solid 22 percent.

The reports showed collections were up by a median 24.41 percent in April -- when taxpayers face a mid-month tax filing deadline.

In April 2012, for all the states which collect personal income taxes the nationwide increase from the year before was a more modest 7.1 percent, according to data from the Rockefeller Institute of Government, which tracks state revenue. The median change among all states stood at 8.6 percent.

"There is nothing going on in the underlying economy that could support those kinds of increases on an ongoing basis," said Don Boyd, a senior fellow at the Rockefeller Institute.
So the typical state in that survey was seeing income tax revenue increases TWICE AS HIGH AS WISCONSIN'S, illustrating the economic weakness that is the reality in Fitzwalkerstan. However, the LFB feels that the nation's growing economy will keep Wisconsin's revenues at an elevated level. Page 4 of the revenue estimate report shows that the LFB assumes a national GDP growth rate of 2.8% in 2014 and 3.2% in 2015, along with solid increases in personal incomes and profits. It also counts on the housing boom to continue, with an increase of home sales of 37% between 2012 and 2015.

Now the most recent Wisconsin Realtors report indicates some of the nationwide boom is reaching Wisconsin, with existing home sales up more than 9% and median sales prices up 7.8% year-over-year. But then you look at the job losses in March and April, and realize that sales tax revenues remain slow in the state (barely above inflation), and you wonder how long that's going to last.

Oh, and this picture came out from the Philly Fed today. Which one of these is not like the others?

Yep, we're one of two states that have been in recession the last 3 months. And if this stock market and home-buying bubble pops, look out below on the revenue stats! Especially if that stupid $300 million, $8-a-week income tax cut goes through. Sorry Scotty, but not even the wave of the Obama Recovery is going to bail you out of this fiscal hole.

No wonder this administration wants to sell assets off to campaign contributors investors. It's the only way the WisGOPs can claim that the Walker budget would remain "balanced" in November 2014. Combine that hollow claim with the major profits to be funneled to the campaign contributors, and it's a win-win all around for Scotty's 1% Club for election time.

Monday, May 20, 2013

Wisconsin for sale! Tomorrow's JFC preview

Big day on the agenda at the Legislature's Joint Finance Committee tomorrow. I want to go over probably the biggest story that'll come out in this meeting (albeit far from the only one).

Wisconsin for sale! This was the headline story in the Journal-Sentinel today, in their typical method of reporting on something that reflects bad on Walker, but waiting till the last second to do so to keep the anger down. Under current law, the State Building Commission must sign off on the DOA wanting to sell any state assets, and the Joint Finance Committee has to approve of the actions of both before something can be sold off to a private interest.

Well, Scotty wants to take out the middleman in the process, and be able to have the DOA pull the trigger whenever they want, without any interference from those meddling legislators. The LFB released a series of papers on the subject as part of their dump of info when the JFC meeting was set up last week, and I'll focus you on the passage talking about the rules (or lack thereof) that the Governor's provision would set up when it comes to selling off state assets, especially involving assets of the UW System, which has previously been off-limits by Wisconsin law.
Provide DOA and the Building Commission similar authority related to the sale or lease of state-owned real property, and the use of the proceeds from the sale or lease of such property. Specify that both DOA and the Commission could sell or lease any state-owned real property, except for specific exemptions, whether or not the property or facility is in use or the agency is required by law to operate the facility. Authorize DOA or the Commission to sell or lease of state-owned real property under the jurisdiction of the UW System Board of Regents or property held by DHS at the Northern Center.

Specify DOA could only sell property if the sale is approved by the Building Commission, but would not be required to obtain Commission approval for the lease of any state facility. Authorize the Building Commission to lease state-owned real property with or without the approval of the agency. Specify that the Building Commission could not sell or lease any property after being notified by DOA that an offer for sale or a lease agreement is pending on that property.

Beginning on January 1, 2014, require each agency to biennially submit to DOA an inventory of real property under its jurisdiction together with an estimated fair market value of each property. Require that the agency specifically identify any under-utilized assets in the inventory. Specify that no later than July 1 following the receipt of the inventories, DOA would be required to obtain appraisals of all properties in the inventories that are identified by the Department for potential sale. DOA would be required to submit to the Building Commission, an inventory containing the location, description, and fair market value of each parcel of property identified for potential sale.
And oh yeah, the DOA makes the call on this, regardless of what the actual inhabitants of the building or asset think.
[The bill would] provide DOA the authority to lease state-owned property, without the approval of the agency with jurisdiction over the property. The bill would allow DOA to sell such property without agency approval, and DOA indicates that it was the Governor's intent to extend similar authority to potential leases of state property;
This is yet another centralization of power by this Administration, cause God knows you can't have things like rules or oversight or any sort of dedication to the public interest. It also makes it a lot easier to deal direct with the campaign contributors without having others ask too many questions about just why something's getting sold.

Now what might be sold? Well, that's information on a need-to-know basis, and Walker's DOA says you don't need to know yet.
Staff from DOA indicate that the authority provided to the Secretary of DOA is intentionally broad, because at this point DOA does not have a thorough inventory of the properties the state owns. DOA has yet to identify which properties may make financial sense to sell, and of that group, which properties are marketable. As a result, the Governor did not want to limit the authority to sell or lease state-owned property to specific types of property or to property of specific agencies until an inventory of such property is compiled, and those properties that are in the best interest of the state to sell or lease are identified. Given this uncertainty, no funds associated with the sale of those properties are included in the Governor's 2013-15 budget.
Now what about what the money from any asset sales might be spent on? Well, other than paying off any debt/mortgage that the state might owe on the asset itself, they won't say what they'll do with that either. As I mentioned earlier this year, it could be used to pay off costs from Walker's proposed giveaway to his buddies from the Road Builders.
The bill would provide the DOA Secretary or the Building Commission with discretion to determine which outstanding debt to redeem using those remaining proceeds. Specifically, in determining which outstanding bonds to redeem, the DOA Secretary would only have to give consideration to whether the debt service on the property being sold or leased was paid from a segregated fund and consider redeeming other outstanding debt related to that fund. However, The DOA Secretary would not be required to use the remaining net proceeds from the sale of a state property to retire other debt on other properties held by the agency whose property was sold. While this discretionary authority on which debt could be redeemed from state property sales proceeds may be similar to current law, the DOA Secretary and the Building Commission would have significantly broader authority to sell or lease state property under the bill.

Staff from DOA indicate that one of the primary reasons for requesting the authority to sell or lease state-owned facilities is so that the proceeds from the sale of those assets can be used to retire outstanding state debt. Specifically, it is the administration's intention to use any property sale proceeds to retire state transportation-related debt in order to offset a portion of the transportation debt authorized under the budget bill ($994.2 million in total). This could include past [General Fund]-supported transportation related debt to offset some of the $200 million in GPR supported transportation debt recommended to fund a portion of the Zoo Interchange highway project. The Department of Transportation Secretary, after acknowledging concerns related to the level of transportation bonding under the bill, also indicated in testimony before the Joint Finance Committee that proceeds from the sale of state assets would be used to retire GPR supported transportation-related bonding.
And later on, the LFB paper says the sales proceeds could be used as a method of replacing General Fund revenues, reducing costs of operation of staff to run the business (and possibly increasing the rates charged by the campaign contributor buyer of the asset and increasing the costs for the state agency that has to now get the service from the contributor buyer). It could also be used to fill budget holes that may show up, much like how the Walker folks decided to use $25 million in foreclosure settlement money to beef up its surplus instead of, you know, helping people stay in their homes.

So there you go. Walker's DOA has told the JFC and people of Wisconsin the following: "We won't tell you what we're looking to sell or what could get sold, we won't tell you how much it'll bring it in, we won't tell you how we'll use it (maybe roads, maybe not). But give us the ability to do what we want, and give up your ability to say anything about it. Just trust us."

Because hey, giving agencies freedom to go out on their own with taxpayer dollars hasn't caused us problems before, right (cough- WEDC! -cough)? And after all, Scott Walker and company would NEVER go back on their word and not have an agenda going on behind the scenes would they?

P.S. As usual, Charlie Pierce has the best take on Walker's Yard Sale, and on the big picture behind this sellout of the state.

Saturday, May 18, 2013

How DWD tried to trick Wisconsin media on bad jobs numbers

Scott Walker's Department of Workforce Development may be stuck having to carry out lousy job policies, but they're sure good at spinning the awful results. Let's go back to Thursday and the timetable of the release of jobs information for the state of Wisconsin, and also let's go over the media's reaction, especially how many of them fell for this transparent ploy.

Thursday morning- the DWD comes out with a release saying "Wisconsin private sector added 62,072 jobs in 2011-2012." This basically was a recap of information the DWD recently sent for the Quarterly Census on Employment and Wages (QCEW), which is a more complete survey than the monthly jobs surveys, but also only goes through December 2012 as a result.

62,000 jobs created might sounds good on its face, but the release is intentionally deceiving, as "2011-2012" is really the two years of QCEW data from the end of 2010 through the end of 2012. It's an obvious attempt to give credit to Gov Walker for the increased jobs (as Walker took office in January 2011), and to get the number "62,000 jobs created" out into the media. In reality, this wasn't really new information, as the monthly surveys had shown Wisconsin had indeed gained around 53,000 total jobs and 56,000 private sector jobs in the same time period, so this wasn't that much different.

And while the DWD release promotes 62,000 added private sector jobs, what it leaves out is that this number lags the U.S. as a whole. In fact, if Wisconsin had kept up with the private sector job growth rate of the United States, WE WOULD HAVE GAINED OVER 100,000 JOBS, so Walker policies had cost the state nearly 40,000 jobs.

Remember, this is still in the morning, the April jobs numbers were to be released from DWD around Noon. My bullshit detectors were going off full-tilt, and I immediately knew these April numbers would suck, because there was no other reason not to release both the QCEW information and the April jobs numbers at the same time (as DWD had done in the past). The DWD was clearly hoping that the clueless Wisconsin media would run with the 62,000 number before the April numbers had to be released.

Sure enough they did, starting with the Journal-Sentinel, who threw out the 62,000 figure in their headline, and continuing with press releases within the hour from Assembly Speaker Robin Vos and Senate Majority Leader Scott Fitzgerald- almost as if they and the DWD were coordinating messages...almost.

The early release of the QCEW numbers also made the Assembly Dem leader Peter Barca and Senate Dem Leader Chris Larson feel they had to respond before the April jobs numbers hit, even though they should have been laying back for the jobs numbers, as they could have nailed a huge counterattack once they did come out, and also hammer on the Walker Administration's lack of integrity and sleaziness.

The April jobs numbers were released around Noon, and as I've noted in the past, the DWD buried the daylights out of the new data, because of the horrible numbers. Check out how they write the opening of the jobs release.
The Department of Workforce Development (DWD) today released the U.S. Bureau of Labor Statistics (BLS) revisions for March and preliminary estimates for April, covering unemployment and employment statistics for the state of Wisconsin. In brief, the estimates showed:

Place of work data: Upward revision to seasonally adjusted total job number in March by 1,500 to reflect fewer jobs lost than previously estimated. Upward revision to seasonally adjusted private sector job number in March by 1,200 to show an estimated gain of 100. (leaving out the fact that it still means there were 7,500 jobs LOST in March)

Place of residence data: A preliminary seasonally adjusted unemployment rate of 7.1 percent in April, unchanged from the previous month. The rate is up from 6.9 percent in April 2012 and below the national unemployment rate of 7.5 percent. In addition, total employment rose by 7,800 in April 2013. This is a different survey than the jobs numbers they quoted in the previous paragraph, and the mixing of numbers is very cynical.

Comparison to latest available actual job counts: The latest available actual job counts show Wisconsin’s private sector created 62,072 jobs in 2011-12 following the loss of 134,000 jobs during the previous four years, representing the best two-year gains under any Governor since at least 2001. Not only is DWD using ANOTHER job stat- the QCEW - it's also making a foolish comparison of job growth in the Obama expansion to job performance in the midst of Bush's Great Recession.

And the next 2 pages rehash the QCEW release from earlier in the day, and give other out-of-context numbers (with no comparison to the U.S. or nearby states, the figures themselves are somewhat pointless). As I'm reading this, I know the numbers are horrible, but I don't know how bad. I had to dig down into bottom of Page 3, and look into the tables to find the part that says 22,600 jobs lost in the private sector, and 24,100 overall. At which point my jaw hit the floor.

Now some of the media eventually got around to putting up the real news of the day, which was the newly announced job losses, most notably the Madison-based Capital Times, (Todd Milewski has a strong interactive chart on the Walker jobs failure). And the DPW would later show the "big picture" chart by Friday.

But the Cap Times was the exception, which illustrates the success of the DWD's and WisGOP propaganda attempts. The media didn't give the "24,000 job losses" the attention it deserved, and it hasn't tried to mention how Wisconsin is falling further and further behind. We'll see if they catch up after they've had a week to digest just how awful the situation is (and if the DPW will make them have to notice).

I understand that government agencies can have a political role, since the heads of them are given their jobs by the Guv and his staff. But the steps the DWD has taken to avoid discussing how Wisconsin continues to fall short is very concerning, as these appointees seem to have chosen to trade in their duty to inform and serve the public in favor of being another arm of the Walker Campaign. And how this Administration seems more concerned with pulling a fast one on the media over actually putting in policies that could make Wisconsin an attractive place to do business is a major problem, and a definite symptom of the "politics over policy, where results don't matter" mentality that has pervaded life in Fitzwalkerstan since 2011. And helps explain why Wisconsin is dead last in jobs today.

Friday, May 17, 2013

Weather hurt, but it didn't make Wisconsin DEAD LAST

This is a follow-up to the brutal jobs numbers from yesterday, as the Bureau of Labor Statistics always follows with the state-by-state numbers the following Friday. And they verify what I suspected would be the case.
In April 2013, nine states had statistically significant over-the-month changes in employment, seven of which were increases. The largest statistically significant job gains occurred in Texas (+33,100) and New York (+25,300). The two statistically significant job decreases occurred in Wisconsin (-24,100) and Minnesota (-11,400) .
Yep, we had the most job losses in the U.S. for April. Pathetic, but it's also noteworthy that Minnesota had the 2nd-most job losses in the country, which could indicate the awful weather played a role in some of these job losses (which really reflect lower-than-normal seasonal hiring). The cold,snowy and rainy months of March and April certainly appear to have dragged down job numbers in much of the Midwest. But Wisconsin still was much worse than all the others

Combined job change, March and April, 2013
Iowa -4,700
Mich -7,200
Ind. -8,100
Ohio -14,100
Minn -14,900
Ill. -18,500
Wis. -31,100

So while weather explains some of the job loss in Wisconsin for April, it doesn't show the whole story, and shouldn't be used as an excuse for lagging every other state in the Midwest. The state-by-state report also shows that it's not a 2-month blip, as Wisconsin is also 50th OF 50 in jobs by both measures over the last 12 months.

Bottom 5, total job change April 2012-April 2013
46. W. Va. +2,200
47. Alaska +300
48. Maine -1,500
49. Wyoming -1,500
50. Wisc. -6,800

Bottom 5, total private sector job change April 2012-April 2013
46. W. Va. +2,800
47. Alaska +1,500
48. Maine +300
49. Wyoming -1,700
50. Wisc. -4,900

Sorry, but the snow wasn't flying in most of these 12 months, and it's not the reason our numbers are so disastrous. There are no excuses to give, other than the fact that this state is being run by a college dropout whose only "economic development" strategy seems to be cutting wages for people who work, and funneling state taxpayer dollars to campaign contributors. So how's that working out for us?

April a jobs bomb in Wisconsin

Despite the Walker Administration's best efforts to distract the public, eventually they had to release April's jobs numbers yesterday afternoon. And they were an unmitigated disaster, with 24,100 jobs lost overall, and 22,600 in the private sector. I would expect that to be the biggest job losses in the country when the state-by-state numbers are released by the BLS later today, and unlike what Robin Vos promised, job creation has not taken off like a rocket. In fact, the Walker job charts now show that we have fewer jobs in Wisconsin than we did before Walker was retained in the recall election in June 2012, and the private sector Walker jobs gap is now over 70,000.

I'll have more on this at a later time, especially on this Administration's cynical and disgusting attempts to hide this report and promote out-of-context numbers that badly lag the rest of the country (sorry, had to take advantage of the perfect weather yesterday), and I'll also discuss how our paid-off media fell for some of it. And yes, some of this is related to the horrible April weather, which shows up in lower-than-normal seasonal hiring being listed as job "losses" (especially the 3,900 lost in Construction and 3,600 lost in Leisure and Hospitality. I'd expect a nice "gain" in these same positions for May as a result).

But don't be fooled, it is not working, it never will work, and every month that these people are allowed to be in office is another month that Wisconsin slips further and further into the hole. Walker really is Dubya-2 on a Wisconsin level.

Tuesday, May 14, 2013

Walker: IRS looks at tax cheats= bad, Wisconsin looks at tax cheats= good?

Hilarious to see Gov Walker and fellow screwup Gov Bobby Jindal shoot their mouths off today about right-wing non-profit groups being targeted for further investigation by the IRS. The paranoia and hypocrisy in this letter addressed to President Obama is strong enough on its face.
We write to you today disturbed after learning that the Internal Revenue Service (IRS) has been unfairly targeting and applying added scrutiny to applicants for tax-exempt status based on their conservative beliefs. To be blunt, this is Big Brother come to life and a witch hunt to prevent Americans from exercising their First Amendment rights.

The First Amendment gives Americans the ability to freely express their opinions regardless of their political beliefs. The actions of the IRS are an attempt to gag the voices of Americans who may disagree with the policies and left-leaning ideology of your administration. Quite frankly, this is un-American.

This is a subversion of American liberty and a secret but direct attack against the U.S. Constitution. Immediate action must be taken to ensure this never happens again. Here are two steps that should be taken:
1.Fire any and all employees responsible for this situation.
2.Appoint a Special Prosecutor now to find out if laws were broken and if anyone committed crimes.
"A witch hunt to prevent Americans from exercising their First Amendment rights." Well Scotty, I think a few Solidarity Singers might know what's it's like when an executive tries to punish political opponents. Your buddies at the MacIver news service also know how to do this, as they wasted $140,000 in taxpayer dollars in an attempt to smear public sector workers by demanding State Sen. Jon Erpenbach hand over the names of those who contacted him during the 2011 Uprising.

And unlike Walker's attempts to squelch voices of dissent, the IRS had a damn good reason to investigate some of these groups- because they had sprung up (like Astroturf) as newly-created 501(c)4 organizations in the wake of the Citizens United decision. These organizations are allowed tax-exempt status as long as they don't spend 50% of their activities on politics, and they're allowed to conceal who donates to them. Now, if the IRS was ONLY looking at groups that were Tea Party-allied and not similar organizations on the left, that's unacceptable and there should be severe repercussions. But let's be real - the only reason Scott Walker and the Republican Governors Association care about this subject is because it's THEIR GUYS that were investigated, and not because they think singling out a group for political reasons is wrong (left, right, or otherwise).

The fact remains this incident sprung from the IRS rightfully looking into whether these groups were complying with the law, or whether they should have to pay taxes. I call that due diligence. And you know who else believes in heavier government oversight to make sure people follow tax law? Scott Walker

Here is why Walker's statement is so transparent and hypocritical

If you look at Governor Walker's budget, he wants to spend another $7 million in taxpayer dollars over the next 2 years to hire more auditors and IT workers for the Wisconsin Department of Revenue. And what'll they do? Go after the low-income working poor in Wisconsin who allegedly overclaim on the Earned Income Tax Credit (EITC) and Homestead Tax Credit (HTC)
In 2012, DOR created a cross-functional project team to review the Department's tax enforcement practices for identifying and preventing fraud. The team developed a plan to address fraudulent tax refunds, and EITC and HTC claims. The plan included reallocating resources for 2012 returns and tax credit claims filed in 2013. DOR cross-trained and reassigned more auditors to review HTC and EITC claims. Auditors were reassigned to assist investigators in identifying potential fraud in returns of first-time filers, and in refund deposits into certain online banks. The cross-functional team report also includes confidential compliance information and identifies enforcement activities that require information technology, and fraud detection services and databases that would increase the Department's anti-fraud workload. In order to implement the plan, DOR requests additional funding and audit positions in 2013-14 and 2014-15.

In general, the plan includes the following actions: (a) enacting legislation that would allow more data sharing with other state agencies, particularly the Departments of Workforce development (DWD), Transportation (DOT), Children and Families (DCF), and Corrections (DOC); (b) acquiring IRS data on incarcerated persons and incorporating it into the data warehouse; (c) acquiring a nationwide death index file, and incorporating it into the data warehouse; (d) conducting more pre-processing reviews of the income tax returns of first-time filers; (e) developing predictive modeling capabilities to detect anomalies in filing and to prevent identity theft; (f) modifying business rules for pre-processing review, and reviewing a higher percentage of HTC and EITC claims; (g) reviewing all returns filed that have refund deposits into online banks where fraudulent filing schemes have been discovered; (h) reviewing filing patterns from Internet provider addresses to identify suspicious filing activity; (i) acquiring and implementing technology (hardware and software) to enable qualified staff to systematically analyze the data, develop business rules, do queries, and conduct investigations; (j) acquiring additional staff to build analytical systems and conduct analyses and investigations; and (k) considering procuring fraud detection services with prepackaged analytics of nationwide data elements.
Hmmm, sounds like a whole lotta targeting and flagging of certain types of returns...not unlike what the IRS was doing with fly-by-night 501(c)4's that started showing up in time for the 2010 elections.

And that's not the only money that the Walker boys want to shell out to go after possible tax cheats. The Governor's budget includes nearly $2 million extra to try to collect from tax delinquents, and changing rules on which debt should be collected and/or held back to pay off other tax liens. On the face, I approve of many of these measures, although I'm skeptical of the large returns this administration is promising when it comes to getting back several times more taxes than it costs to add staff.

But the fact that it's EITC and Homestead credits that are the main focus speaks volumes. Wisconsinites that are on EITC and needing Homestead Credits are working poor, often female, and often of color, and Walker chooses those people to go after to try to squeeze more money out of. Those who are on the Homestead Credit will be especially susceptible to mistakes in their taxes, as the amount of the Homestead Credit was cut starting in 2012, which can go unnoticed by someone who's done their taxes the same way for years. I know, the law's the law, but this seems especially cruel and without regard for those people's situations.

At the same time that the Governor wants to jack up the amount of DOR auditors that have oversight of poor people's taxes, he's gone out of his way to relax regulations on the groups who need controls- businesses. Heck, he had state agencies take down notes from business owners and come up with a 53 page report to figure out how to make things easier on the beleaguered "job creators." The double-standard is obvious and sickening.

Lastly, let's go to the real reason GOP politicians like Scott Walker are unhappy that these new 501(c)4's were targeted. Because those groups allowed rich oligarchs to give corporate puppets like Walker a whole lot of money these last 2 1/2 years, and they don't dare want to have to pay taxes (you know, like the rest of us do). And they sure don't want to have us look behind the curtain of these "grassroots" organizations to find out just which millionaires and billionaires they're fronting for (you know, like how One Wisconsin Now has exposed the ways Michael Grebe's Bradley Foundation props up many pro-Walker and school voucher groups).

This is the "tell" behind all of the chirping of Republicans like Scott Walker on this subject- they don't want the IRS's heat to reach these tax-dodging groups that have grabbed far too much of the political pie since Citizens United came down in 2010. They know they can't win on their policies, and they'd have a very hard time surviving if their benefactors were exposed to the public, with the money faucet being shut off. So when I read Walker and Jindal's statement today, I immediately thought "Scotty doth protesth too much," and their strong reaction indicates to me that the IRS is doing the right thing to look into these sketchy right-wing front groups.

If Dems had any brains or guts at all, they'd turn this story into an example of the disaster that Citizens United has caused to our political system, and ask why these groups are allowed to pollute our airwaves with ads every two years, but don't have to reveal who's donating to put the ads on the air. And then the Dems could pummel the GOPs as they try to explain why Karl Rove's American Crossroads shouldn't have to pay taxes, but a Wisconsin single mom making $12 an hour should be investigated and audited to the full extent of the law.

Monday, May 13, 2013

Unemployment claims falling, 'cept for here

The national unemployment claims numbers keep falling, down to a 5-year low at a seasonally-adjusted 323,000 new claims last week. These numbers are also an improvement over what we were seeing this time last year - down more than 40,000 claims vs the same time in 2012 for seasonally-adjusted and unadjusted totals, as well as the 4-week moving average.

Some of this drop of lower jobless claims translated into job growth earlier at the end of 2012 and start of 2013, but March and April has seen the rate of job growth slow a bit (averaging just over 150,000 jobs when the previous 4 months were averaging around 235,000). If the fall in jobless claims numbers are followed with the same rate of hiring that we've seen in months past, we could be on track for a very good May jobs report.

But Wisconsin hasn't been part of this "falling claims party." In fact, in 3 of the last 5 weeks measured, Wisconsin had an INCREASE in jobless claims vs. the same week in 2012 while the U.S. was seeing its rate of claims fall by more than 10% year-over-year. This is a marked contrast to the last two years (which have been pretty lame for job growth as it is), as most of 2011 and 2012 had year-over-year drops of around 5-15% for new jobless claims in Wisconsin.

Year-over-year change in jobless claims, Wisconsin

Wisconsin's trend in jobless claims vs. the rest of the nation has also reversed. This graphic will show that in the year before Act 10 was passed in March 2011, Wisconsin was reducing jobless claims at a much faster rate than the rest of the nation. But as 2 years since Act 10 was signed have taken hold, that advantage of reduced unemployment claims in Wisconsin has steadily diminished, and we were basically matching the rest of the U.S. for much of last year. Now that we're heading into the 3rd year post-Act 10, Wisconsin is falling behind the U.S. in reducing claims, as the higher numbers in purple show.

Y-o-y change in unemployment claims, Wis. vs. U.S.

In fact, Wisconsin's bad jobs numbers gave them special notice in the last jobless claims report.
Wisconsin will resume a payable period in Tier 3 of EUC08 beginning May 12, 2013.

With the week ending May 11, 2013, Wisconsin has served a full 13 week "off" period in Tier 3 of EUC08. Given that the trigger rate for this state is currently at or above the 7.0 percent trigger rate threshold, and no unemployment rates will be released before May 17, 2013, Wisconsin meets the criteria to resume a payable period in Tier 3 of EUC08. The week beginning May 12, 2013, is the first week in which EUC08 claimants in Wisconsin who have exhausted Tier 2, and are otherwise eligible, can establish Tier 3 eligibility.
That's right, Wisconsin's the only state in the nation where people can now get unemployment benefits for LONGER because our unemployment rate has been going up (by comparison, the U.S. unemployment rate fell 0.3% in the same time period, and fell by another 0.1% in April).

This makes you wonder where the numbers end up for April's Wisconsin jobs report, which gets released on Thursday. The lousy April weather probably delayed a number of seasonal hirings that usually happen for Spring (heck, our lawn just got mowed for the first time Saturday), so that would be listed as a job "loss" in the next report, even without the jobless claims info. Then you combine the fact that you have some weeks in that time period with increases in jobless claims compared to April 2012 (a month where Wisconsin LOST 1,700 private sector jobs on a seasonally-adjusted basis), and it indicates that the Wisconsin numbers might not be good at all.

Of course, I could be wrong, as unemployment claims and bad weather aren't the only factors that go into job growth. And March's bad jobs numbers in Wisconsin could already have some of the "bad weather effect" taken into account, meaning it won't be as negative for April. But I have a hard time believing that April 2013 will be the month that the Wisconsin economy "turns the corner" in the Age of Fitzwalkerstan, especially in comparison to the big drops in jobless claims for the rest of the nation.

Saturday, May 11, 2013

Credit Obama and Wall Street for high revenues, not Walker

This is a follow-up to Thursday's story on the LFB revenue estimates, as another report came out yesterday that put those numbers in context. The U.S. government ran a $113 billion SURPLUS in April, largest since the economy was starting to blow up in 2008.

To be fair, April is when the government usually collects its highest amount of taxes, as people who owe will wait until the last minute to file and send in their checks. But the Reuters article goes inside those numbers, and it shows how tax law changes and a booming stock market had a big-time effect on revenues.
The government has received $1.6 trillion in taxes so far this year, a record high for this time period and 16 percent above last year's level for April, due to an expiration of payroll tax cuts, higher taxes on richer Americans, and an improving economy.

Tax receipts for last month, at $407 billion, were 28 percent higher than receipts in April 2012.

Because of the higher revenues, the U.S. government has said it expects to pay down debt this quarter for the first time in six years.
Note that 28% increase for April 2013 vs. April 2012. Now go back to the revenue figures for Wisconsin, and see the same stat.
As of the end of April, year-to-date income tax collections are running 7.0% above last year's amount. April was an especially strong month, with growth of 12.4% over April, 2012.
So to review, U.S. revenue growth for both the [fiscal?] year and the month of April is TWICE AS MUCH AS WISCONSIN'S. So of course, we should be having good revenue numbers, and like a lot of other stats, we trail behind the rest of the country.

Same story goes when you compare us to other states. The Rockefeller Institute's update on state tax revenues got some notice here in Wisconsin, as it included a reporting error in Census Bureau data that made it look like Wisconsin's revenue numbers had dropped, and were in contrast with the official DOR numbers.

The LFB report and other data indicate that Wisconsin revenues weren't dropping, but when you go into the Rockefeller Institute report, it shows that most states were doing better in late 2012.
Thirty-four states reported growth in withholding for the third quarter of 2012, while six states showed declines. Among individual states, Michigan and Nebraska reported the strongest growth in the third quarter of 2012, at 9.9 and 9.7 percent, respectively. The Rocky Mountain and Plains regions reported the largest growth in withholding at 6.1 and 5.2 percent, respectively, while the Mid-Atlantic region was the only region reporting declines at 0.2 percent. The decline in the Mid-Atlantic region is partially attributable to New York, where lawmakers restructured the personal income tax brackets.
So what was Wisconsin's increase in withholding? Only 2.5% between July and April, and it was only 0.9% for the first 4 months of the year. WAY BEHIND. But at least Michigan will be down with us soon enough, since they passed right-to-work-for-less after the 3rd quarter of 2012, so that'll put a nice clamp on any wage increases.

The Rockefeller Institute also notes that the fiscal cliff deal caused people with Wall Street investments to cash in their gains at the end of 2012, which will cause revenues to be higher than they otherwise would be. practice, most behavioral shifts require advance planning, such as scheduling assets sales or action by a board to increase dividends. In short, taxpayers needed to decide what to do before knowing what the federal law would be. So the shifts could occur even if the federal law did not change. Furthermore, the shifts would affect state tax revenue even if state laws do not change — if taxpayers pay a higher federal tax rate on capital gains, and they accelerate gains into 2012, states that tax capital gains [including Wisconsin] will have higher tax revenue in 2012 even if their tax rates do not go up.

Did taxpayers shift income? Some states clearly think so, and external evidence suggests so as well. The California Legislative Analyst’s Office assumes that 20 percent of capital gains that otherwise would be realized in 2013 will instead be accelerated into 2012, leading to a total increase in gains of 69 percent in 2012 followed by a drop of 27 percent in 2013. In its recently released budget, New York said that “the Budget Division estimate[s] another year of strong capital gains realizations with growth of 40.7 percent in 2012 followed by an expected decline of 12.0 percent in 2013, as taxpayers shifted some of their gains realizations from 2013 to 2012.” Other states have remarked on this as well.
And this certainly seems to have happened in Wisconsin, as the LFB points out.
The main area of strength has been quarterly estimated payments of taxes on non-wage income, primarily business and investment earnings. Estimated payments in April, 2013, were 35.9% above last April's amount, and the year-to-date amount is 24.4% higher. Another, much smaller component of income tax collections is withheld taxes on profits distributed to the owners of pass-through entities (partnerships, limited liability companies, and tax-option corporations). These collections were also very strong in April, with monthly growth of 49.1%.
So despite the nice top-line numbers in Wisconsin, a bigger-picture look at the economy shows that it's the overall U.S. economy and policies passed by Congress and President Obama that are pulling Wisconsin's revenues up. In fact, it is much easier to argue that Wisconsin's revenues and economy are being HELD DOWN by Scott Walker and the WisGOP Legislature, as proven by low growth in wage revenues, and an increase in sales taxes that is barely above the rate of inflation.

And if this bubblicious stock and real estate market deflates any time soon, watch Wisconsin's revenue numbers crater, because their "strength" is not built on a strong foundation on wages or commerce. Better stock up on that rainy day fund, WisGOP. You're probably going to need it.

Thursday, May 9, 2013

It's a surplus, but it ain't working for most of us

   I'm sure the righties are all pointing their fingers and claiming vindication with the Legislative Fiscal Bureau's release of revenue estimates that add another $575 million in revenue by the end of FY2015, resulting in a projected surplus of $524 million that can now be played with. Well, since revenues are up, it must mean that Walker policies are "working" after all, and that this state's going in the right direction economically, despite the bad jobs stats.

Umm, not exactly. Let's check out HOW we got that revenue upside surprise.
At the time the January estimates were prepared, income tax collections through December, 2012, (after adjusting for timing impacts) were running 4.3% above collections for the same period in the previous year. However, this growth rate was a significant improvement over the preceding months. In November, 2012, year-to-date collections were only 2.8% higher than in the previous year, and in October, they were 1.9% higher. The January estimates assumed that the 4.3% growth rate would not be sustained, because of a relatively large indexing adjustment for tax year 2012 and tax reductions that were taking effect or being phased in in 2012.

To-date, the expected deceleration in collections has not occurred. As of the end of April, year-to-date income tax collections are running 7.0% above last year's amount. April was an especially strong month, with growth of 12.4% over April, 2012. The main area of strength has been quarterly estimated payments of taxes on non-wage income, primarily business and investment earnings. Estimated payments in April, 2013, were 35.9% above last April's amount, and the year-to-date amount is 24.4% higher. Another, much smaller component of income tax collections is withheld taxes on profits distributed to the owners of pass-through entities (partnerships, limited liability companies, and tax-option corporations). These collections were also very strong in April, with monthly growth of 49.1%. Year-to-date growth in pass-through entity withholding is 45.7%. Income tax refunds (net of payments with returns) are almost identical to last year.
And this is also reflected in increases in corporate taxes as well.
Compared to the previous estimates, the revised estimates represent increased corporate income and franchise tax revenues of $55 million in both 2012-13 and 2013-14, and $80 million in 2014-15. The new estimates reflect year-to-date corporate income and franchise tax collections, particularly corporate pass-through entity collections, which are over 40% higher than last year. In addition, corporate profits are forecast to increase over 4% in 2014.
Looks like the profits and stock gains and those types of business and investment revenues are going gangbusters (kind of like the stock market is right now). Looks like we should be booming. So why aren't we doing so? Here's why.
In contrast to the strength in estimated payments and pass-through entity withholding, revenues from withheld taxes on wage income have shown weakness. Since the previous estimates were prepared, withholding taxes have increased by 0.9% compared to the same four-month period last year. The year-to-date rate of growth in withholding collections has fallen from 3.8% at the end of December to 2.5% at the end of April. Withholding taxes are the largest component of individual income tax collections, and will likely account for more than 90% of the income tax revenues that will be collected over the remainder of 2012-13.
OOOPS! Wages are basically flat for the start of 2013 vs. 2012 in Wisconsin, and the rate of wage growth is slowing down. MAJOR problem. In addition, sales taxes weren't revised at all, and are projected to barely grow above 2% during fiscal 2013. And that number is NOT adjusted for inflation, meaning total sales also are basically flat over the last 12 months. Not that I needed any reminding, but this shows NONE OF THESE PROFITS HAVE TRICKLED DOWN, and real Wisconsinites are falling rurther and further behind, even as the aggregate numbers on the surface look good.

And those revenue numbers don't take into account the needed increases in spending for the last two months for Logisticare, or the increased monthly costs that'll go to new provider MTM (who will start on August 1, as was announced this week). Also, it doesn't account for the tens of millions of dollars that will be needed to make up funding for the sequester cuts, since it seems unlikely that it will be repealed. And oh yeah, there's still a sizable deficit in the Transportation Fund lurking, and still needs to be fixed.

So while the GOPs may brag on the numbers, the reality on the ground is that those numbers further illustrate the increase in inequality and wage stagnation that have been a hallmark of Fitzwalkerstani policy. And that's a trend that isn't going to change any time soon.

Wednesday, May 8, 2013

WEDC budget bunko

Lot of events to look at for tomorrow's Joint Finance meeting, with the main headline being the discussion of the WEDC budget, despite the protestations of Democrats who want the hearing delayed till after tomorrow's Audit Committee meeting comes up with discussions and recommendations of actions to fix WEDC's many problems. And I'd say there's a point to be made about that, because having a number of hearings at once is a typical way to sweep things under the rug (which there is no doubt WisGOP wants to do with the dog known as WEDC).

So let's dive into what Governor Walker had planned for WEDC, and see how this thing is funded.

First off, WEDC gets a sizable amount of cash from both general taxpayers and businesses. The plan is to use $73.6 million of GPR (General Purpose Revenue) for the next two years, an average of $36.8 million, which is $4 million a year more than the $32.8 million a year they're getting right now. And the reason is because the Walker Administration wants to pump up WEDC's PR abilities.
Governor: Provide $3,750,000 GPR in 2013-14 and $7,150,000 GPR in 2014-15 primarily for increased marketing activities....

WEDC marketing activities include starting the "In Wisconsin" branding campaign, paid media and Internet advertising, website development, videos, and related materials that promote the benefits of starting, expanding, or locating a business in Wisconsin. The WEDC marketing budget is $2 million in 2012-13.
So they're going to throw an extra $11 million in the next 2 years onto WEDC's marketing, because apparently THAT'S what this state needs to break out of its "44th in the nation" job status. Of course, it might be a bit hard to do some of these outreach activities when one of its top spokesmen just had to quit after it was discovered he owed tens of thousands of dollars in back taxes and got nearly $8,000 in improper unemployment benefits. I got a better idea, guys. Maybe instead of throwing $11 million more into marketing, try hiring better people. It won't change the "corrupt unaccountability" part of the WEDC fail, but at least you won't have law-breaking fuckups working there.

The other way WEDC gets funding is through what used to be the state's Recycling Fund (because these guys aren't so keen on that hippie recycling things these days) and the LFB describes this fee on businesses. It's slated to collect around $27 million a year for each of the next two years, and funds many WEDC tax credits and loan programs.
The primary source of SEG funding is the economic development surcharge, which was formerly the recycling surcharge that was deposited in the recycling fund. Under provisions of Act 32, the recycling fund was renamed the economic development fund, and the recycling surcharge was renamed the economic development surcharge, and deposited in the fund...As noted, $23.2 million annually is appropriated. In addition, the Department of Revenue (DOR) is appropriated $210,800 SEG annually, and is provided 1.0 SEG position to administer the surcharge.

The economic development surcharge is imposed on farm and nonfarm businesses that have more than $4 million in "gross receipts from all activities" The surcharge equals 3% of gross tax liability for corporations (including insurance companies and limited liability companies [LLCs] taxed as corporations), or 0.2% of net business income for sole proprietorships, partnerships, LLCs taxed as partnerships, and tax-option (S) corporations...In general "gross receipts from all activities" means gross receipts, gross sales, gross dividends, gross interest income, gross rents, gross royalties, the gross sales price from the disposition of capital assets and business assets, gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin income/ franchise tax purposes.
So at least some of the WEDC money handed out to corporations is money they originally paid to the state in the form of this Economic Development Surcharge (yes, that is some serious gallows humor).

So Walker's budget plans to spend another $6 million of this Economic Development Fund revenue over the next two years, with most of it targeted on start-up businesses and "training, mentoring, and financial assistance to entrepreneurs" in certain fields. Not a bad idea on its face, God knows Wisconsin does horribly on developing new businesses and ideas (which famously led a WEDC official to say "We suck, we're bad" after Wisconsin was listed as 47th in the U.S. for entrepreneurship), so it's not a bad idea to encourage new businesses over the established oligarchs who have been failing to get the job done in the Age of Fitzwalkerstan.

Of course, the fact that the program's good doesn't mean that the money will be handed out fairly or tracked well. This type of failure is why WEDC's "Federal money" line goes from $20 million this year to $0 in Walker's 2013-15 budget. As LFB explains
Delete $20,000,000 FED annually to reflect establishing administrative responsibility for the federal small cities community development block grant (CDBG) with the Department of Administration (DOA).

Prior to 2011 Wisconsin Act 32 [the state budget] , the Department of Commerce was the state's designated recipient of federal funding for the small cities Community Development Block Grant (CDBG) program. Under Act 32, Commerce was eliminated, and expenditure authority for CDBG funds was provided to the Corporation. However, the federal Department of Housing and Urban Development (HUD) designated the Department of Administration (DOA) as the state's designated recipient of CDBG funds with authority to administer the program. This provision zeroes-out the WEDC continuing expenditure authority estimate for federal funds to reflect establishment of program authority for the CDBG program with DOA.
If this sounds familiar, it should, because WEDC's sketchiness with CDBG money was the subject of a huge expose by Scott Wittkopf last year. The CDBG funds had to be pulled from WEDC after the U.S. Department of Housing and Urban Development had to remind Walker's DOA that WEDC was never officially allowed to be the group that could handle this federal money, and therefore
WEDC had no legal authority to award or administer CDBG funds.

As of April 12, 2012 WEDC must immediately cease the award and administration of all CDBG funds.
Remember that? How the Walker boys just allowed WEDC (with little to no oversight from anyone, remember) hand out CDBG funds as it damn well pleased? Oh, but I'm sure Reed Hall and the folks at WEDC will tell us it's all different now, and that they can be trusted with $73 million in general tax revenue for the next 2 years, and another $55 million from what used to be the Recycling Fund, and that there are now procedures in place that'll allow for funds to be tracked and criteria developed to fairly distribute funds.

Why don't I believe this? Oh, that's right, because there's nearly a 2 year track record of WEDC corruption and failure, and the LAB's humiliation of WEDC gave little indication that any of this had been cleaned up over the several months they spent studying WEDC's method of doing business. I got a better idea for the $73 million in GPR that's slated for WEDC- send it to K-12 schools to give them some needed help, or to local communities that are dealing with shared revenue freezes.

Given that school and local communities have fought through cuts from the state while WEDC has wasted tens of millions of dollars and made the state look like a corrupt Banana Republic, it's the least that can be done to level the field in the Age of Fitzwalkerstan. And unlike WEDC, helping local communities and schools might actually improve service, make it easier for something to be created in Wisconsin other than corporate welfare and (gasp!), help the chances for job creation.

Monday, May 6, 2013

WEDC + Skyward + Infinite Campus = We all lose

Late last week, we had the next step in the continuing fiasco involving Wisconsin's state K-12 school information systems. It's been a brutal sequence of screw-ups, corruption from the failing WEDC, a bad model of service, and potentially the loss of hundreds of Wisconsin jobs.

1. The state originally set up its plans for the bid for the state system over a year ago, and seemed to have been planning for a relatively smooth bid process. But then WEDC interceded, and promised tax credits to Skyward before the bid even closed. Then-WEDC CEO Paul Jadin said he couldn't understand how this type of promise could be considered uncouth, especially since WEDC officials felt state government rules didn't apply to them.
Wisconsin Economic Development Corp. leader Paul Jadin told The Associated Press his legal team advised him that the offer to Skyward Inc. was allowed because the year-old agency isn’t bound by procurement laws that forbid bid-rigging.

“It was indicated that we could make a contingency offer,” Jadin said in his first public remarks on the controversy since it came to a head earlier this month. “We’re satisfied that we could make the offer.”
We still don't know who contacted who first, but we definitely do know that WEDC found this type of sketchiness not to be a problem when they tried to steer the original bid to Skyward. You know who did have a problem with it? the then-CEO of Minnesota-based Infinite Campus, Eric Creighton. Creighton sent a letter complaining about the procedure to the Walker DOA, while not blaming Walker himself (despite Walker being the Chariman of the Board of the same organization Creighton accused of the sketchiness).

2. Once this potential bid-rigging hit the public (naturally, right after the recall elections on June 5), Gov. Walker's office all of a sudden saw a potential conflict, and DOA pulled the bid on June 18, saying the negotiations got in the way of having a fair and competitive bid. So the state decided to re-bid the school informations system contract, and instead of allowing the possibility of multiple bidders getting pieces of the contract the state decided to use the "one-provider-for-the-entire-state" model that has been a total failure with Logisticare for Non-Emergency Medical Transport. But then again, having only one provider means there's only one set of potential donators to look after, so it might be easier to do business from that point of view.

3. So the bid was redone, and this time Infinite Campus wins the estimated $15 million contract, after which Skyward complained that the contract was incorrectly awarded, and charged that the DOA changed scoring criteria and overall scores to favor Infinite Campus over Skyward. As a follow-up, Fox 6 in Milwaukee ran a thorough report on the Student Info Systems bid, and I find the following passage quite intriguing.

Through open records requests, FOX6 News discovered the RFP was initially scored in Skyward’s favor, but (and it is unclear why), the same proposals were rejudged and the scored were essentially flipped.

“Skyward actually won the scoring by about 300 or 400 points. After the rescore happened, Skyward lost by over 1,400 points, so there was a swing of 1,700-1,800 points on a scale of 10,000 where the vendors actually changed positions,” Weber said.

“Other things we noticed in the proposal is 73 times the selected vendor was scored higher than the maximum points allowed — 73 times. 139 times Skyward was not given the minimum amount of points they deserved based on the rubrics associated to their evaluation process,” [Skyward founder Jim] King said.
Skyward officials also mention that the loss of this bid also means they will lose the business from the 200+ school systems they serve, which could result in a major loss to the Stevens Point area.
According to an economic report commissioned by the council, the Wood, Portage and Marathon County region could lose about $20 million in earnings if the company leaves the state.

Skyward leaders said they're happy in Stevens Point and want to expand, but after losing out on a statewide education contract, they said there's no point staying.

"It's pretty significant because I think it was a grand total of 825 jobs is what we estimated," said Skyward CEO Cliff King.

The Portage County Business Council commissioned the report two years ago when Skyward started the bidding process.
Needless to say, I don't think Infinite Campus is adding 825 jobs back, and certainly not all in Stevens Point. Ruh roh.

4. And we had another development last week, when the DPI denied Skyward's appeal on the bid last week, saying the bid was properly scored. Skyward founder Jim King held a news conference soon after, appearing with Point-area legislators, and is now requesting an intervention from DOA to stop the contract, or at least to modify it, and is also asking for the state to ditch the "one-size-fits-all" model for service.

The Fox 6 report also quotes King and ISCorp president and CEO Mike Weber (who does a lot of work with Skyward) as claiming the one-size-fits-all contract was a setup from the beginning, with the idea of getting the contract to Infinite Campus.
"Certainly, Kurt Kiefer had an agenda. He had a preferred vendor. When he didn’t get his result the first time around, they rescored,” Weber said.

Before Kiefer became the Assistant State Superintendent, he was the superintendent of the Madison School District, where he had done business with Infinite Campus — even appearing on the company’s website, endorsing the product.

“In my opinion, Kurt Kiefer was still promoting the Infinite Campus product while he was Assistant Superintendent to the state of Wisconsin and while he was writing, constructing and editing his white papers for why Wisconsin should go to a single vendor. Again, the DPI basically chose because they controlled the RFP process,” Weber said.

Evers is Kiefer’s boss, and Evers defends Kiefer’s actions.

“That was when he worked for the Madison School District. When he worked for us he wasn’t advocating for any of it, and he wasn’t part of the decision-making with the Dept. of Administration, so no. I don’t think he influenced it at all,” Evers said.

Kiefer argued passionately for the single vendor system before the Joint Finance Committee.

“It definitely to me looks like collusion. Certainly the person who has written all the white papers being Kurt Kiefer who is the Assistant Superintendent of the Department of Instruction — he’s the one who wrote all the facts of why it should go single vendor,” Weber said.
Yeah, I don't think we've heard the end of this one yet. It's got all the ingredients of Fitzwalkerstani failure. WEDC acting improperly and believing it was above the law. Seemingly arbitrary decisions by state officials, complete with a "revolving-door" scenario where one former business partner encourages the state to install a system that ends up giving business to a favored client (and you thought this only happened with Michael, Best and Friedrich?). And Wisconsin-based companies getting the short end of the stick, resulting in more job losses for the state.

By the way, I don't necessarily mind if Infinite Campus would have won this bid on a fair basis- as taxpayers, we should demand the best quality and cost-effectiveness there is. But the whole way this bid was approached, the way the contract was designed to be a one-vendor-fits-all process, and the more you peel back the onion of this bid and look at how the state and WEDC has dealt with both Skyward and Infinite Campus, the sketchier this deal appears.

Beer- where REAL job-creators exist

Just in time for Madison Craft beer week, I was given a heads-up on this interesting story, which illustrates the number of different breweries that have been in existence in America since 1890. Check out the trajectory of this chart.

Look at how the chart takes off, especially in the last 15 years, to the point that we now have more breweries in the U.S. than we had 125 years ago, when the costs and ability to transport was a lot less nationalized. You want to talk about entrepreneurship, innovation and job-creation, THIS is where it's being done.

And it looks like I'll be getting a chance to sample the creations of many of these true entrepreneurs this Summer, as for the 7 straight year, I'm going to be IN for the Great Taste of the Midwest in Madison in August.

Good times for all, and with the overdue outbreak of SPring for the first part of this week, even better (got the burnt neck from Capital Brewery to prove it!)