Friday, May 31, 2019

Tariff man returns, and his actions could kill an already hurting US auto sector

Well, this wasn't good news to end May with.
The Tariff Man, as President Donald Trump has called himself, set off another wave of selling on Wall Street, with the Dow tumbling below 25,000 to four-month lows on Friday.

Trump's threat to impose escalating tariffs on Mexico, one of America's largest and most important trading partners, amplified fears about slowing economic growth.

The Dow declined 355 points, or 1.4%, capping its sixth straight losing week. That's the longest slump since June 2011. It's also the first time the Dow has closed below 25,000 since late January....

Trump said the United States will impose a 5% tariff on all Mexican imports starting on June 10 as a punishment for illegal immigrants crossing the Mexican border into the United States. The White House indicated the tariff would increase by increments of 5 percentage points each month until it reaches 25% in October.
While the potential for increased prices on avocadoes and other produce is something that you might notice every day, the biggest losers if this latest round of Trump tariffs goes through may be automakers, as described in this article from Yahoo! Finance. And it mostly has to do not with the cars that are finished in Mexico, but ones that are assembled in America.
Sixty-seven percent of U.S. imports from Mexico are intra-company, trade according to Deutsche Bank research. Torsten Slok, the chief economist and managing director at Deutsche Bank Securities, explains that means two-thirds of companies producing goods in Mexico are producing products for their own supply chain and other manufacturers.

“U.S. trade with Mexico is all about cars. [Tariffs] would cripple the auto industry,” he said. “It would bring car production to a halt pretty quickly.”

Slok cites trade data that shows 35% of U.S. auto exports, from a value added standpoint, consist of parts manufactured in Mexico. That percentage reflects the value of parts produced in Mexico and Canada and included in cars assembled in the U.S. The number has grown every year since the mid-1990s when the North American Free Trade Agreement, NAFTA, was ratified.

“The whole industry really changed when NAFTA came into play,” says [former Kelly Blue Book senior director Rebecca] Lindland. “We are one region and the biggest challenge is that we are not flexible. Vehicles have 30,000 parts and if you are missing a couple of screws you can’t build that vehicle.”
Oops. Seems like an important detail that Trump overlooked.

That being said, the points in that article also makes the argument of “the prices of cars and trucks will now go up 5%” a bit tenuous, because many of those vehicles only will subject to tariffs on some of their components, not the whole car, assuming the vehicle is finished in the US.

Another reason why we might not see car prices rise by as much as people fear is because car sales are already struggling, so manufacturers and dealers can’t get away with raising prices. Take a look at this week’s inventory and trade in goods figures from the Census Bureau, which shows the auto industry struggling even worse than the stagnating manufacturing sector is as a whole.

Retail inventories, exports of goods
Exports of goods
April 2019 vs March 2019
Overall -4.2%
Auto sector -7.2%

April 2018 – April 2019
Overall -3.6%
Auto sector -6.7%

Imports of goods
April 2019 vs March 2019
Overall -2.7%
Auto sector -3.1%

April 2018 – April 2019
Overall -0.9%
Auto sector +2.3%

Retail inventories
April 2019 vs March 2019
Overall +0.5%
Auto sector +0.6%

April 2018 – April 2019
Overall +4.5%
Auto sector +8.0%

Note that 8% increase of auto inventories combined with lower exports and higher imports in the last 12 months. That means more cars and being stuck on the lots, and not being sold, so I have a hard time believing a dealer would have a lot of pricing power. What it likely means instead is that auto manufacturers and dealers are going to get hit with lower profits, which may lead to layoffs.

Remember, the idea behind tariffs is that it’s supposed to encourage auto companies to move their production to the US, and keep and add jobs here. The problem with that is 1. There isn’t enough demand for cars in the US as it is and 2. When has the Trump Administration or other Republicans asked for worker protections and higher wages for the jobs they are allegedly saving and making available for Americans?

From what I’ve seen so far, there’s also no nuance in how Drumpf’s tariffs will be carried out - anything coming in with have 5% added, even if the final assembly of the vehicle or other product is in the US. Worse, it’s not like the auto industry is hiring in America as it is. In fact, the “motor vehicles and parts” sector has lost jobs in 4 of the last 5 months, and there are 8,100 fewer jobs in the sector now than there were last October.

And yet inventories of vehicles keep going up in America while exports go down, which sure seems like a recipe to even more cutbacks to me. both in the US and Mexico. As usual, Trump didn’t think through this very much, he just wanted to score political points with deplora-trash by being seen as punishing Mexico for having brown people want to come to our country. But it seems more likely that the tariffs would cause economic hardships in Mexico that only encourage more people to come to America.

While I don’t like what NAFTA has done to work standards and wages for manufacturing jobs in America, the time to deal with that was 25 years ago, and sudden strikes of trade sanctions aren't the way to bring those jobs back. Now that Mexico has adjusted its economy toward that direction with jobs established, it would seem pretty dumb to randomly change terms of trade to discourage Mexicans from thinking things would be better in the US.

But maybe it's this simple.

Thursday, May 30, 2019

So how might we fix all those Scottholes?

As the Wisconsin state budget debate heads toward a conclusion, the toughest choices will be in Transportation. Not just in what to fund at the DOT, whether something should be done to increase the amount of money that's available, and how you may want to do so.

Let's start with where we are. The Legislative Fiscal Bureau said earlier this month that WisDOT would have a little more money to play with under the current transportation system, as people are driving a bit more than expected.
Based on this office's review of motor vehicle fuel tax collections to date for 2018-19, and the economic forecast for fuel consumption for the two years of the 2019-21 biennium, net transportation revenues under current law are expected to be higher by $10.0 million in 2018-19, $7.9 million in 2019-20, and $4.7 million in 2020-21. These additional revenues are entirely attributable to higher projected motor vehicle fuel tax collections in 2018-19 compared to the administration's estimate. Under the administration's estimate, fuel consumption and revenues were projected to increase by 0.4% annually from the 2017-18 level ($1,059.4 million) in each of the three forecast years. Under this reestimate, fuel tax collections are projected to increase by 1.3% in 2018-19 from 2017-18 actuals, and the transportation fund is now projected to have a 2019-21 biennium-opening balance of $97.1 million. Motor vehicle fuel tax collections are then projected to grow by 0.2% 2019-20, and 0.1% in 2020-21.
That’s nice, but it’s still only an increase of $22.6 million. If you look at what Evers’ proposed budget wants to spend in state money for DOT road investments, that’s not going to be nearly enough.

Proposed state-funded DOT increases in Evers budget
State Highway Rehab +$380 million
Zoo Interchange North leg +$50 million
General Transp Aids to Local Govts +$66.2 million
Transit Aids to Local Govts (all) +$31.9 million
Harbor Assistance +$13 million
Discretionary Local Road Grants +$1.9 million

Theoretically, Evers could borrow $520 million to make up this difference, or pray for a massive infrastructure package that gives a ton of money down from DC (STOP LAUGHING!). But neither seems likely nor worthwhile to expect, and unlike the last guy in the Governor's Office, we shouldn't count on it happening to bail us out.

That’s especially true with the borrowing part, since Evers wants to reduce the amount of borrowing from past budgets. $338 million in borrowing is proposed over the 2 years of the budget (down from $402 million in the last budget), and you’d have to add the $520 million on top of that if you didn’t fund it with tax/fee increases. Given that the costs to pay off DOT debt go up by $68.1 million for the 2019-21 budget vs the current one, adding a ton more of debt isn’t a good plan.

So how would we come up with the extra money to pay for these items? Let’s look at what the Legislative Fiscal Bureau has to say about it, and get an idea of what would have to be passed to pay for these added investments.

Annual revenue increase for various DOT options
Gas tax increase of 5 cents/gallon +$174.2 million
Diesel tax increase of 5 cents/gallon +$40.3 million
Resume gas tax indexing (w/no other increase) +$23.0 million
Increase regular registration fee by $10 +$37.3 million
Increase light truck registration fee by $10 +$10.5 million
Increase heavy truck registration fee by 10% +$13.1 million
Increase fee for vehicle titles by $5 +$8.3 million
Increase renewal of driver’s license by $20 +$12.7 million

Now let’s look at what Evers wants to do out of those choices over the next 2 years.

The reason the numbers are smaller in 2019-20 is because many of these items would take a few months after July 1, 2019 to get in place. But even with less than 2 full years of increases, this $623.8 million would cover those proposed increases in DOT funding mentioned earlier.

We also know that the DOT Fund will have another $87.7 million that Evers’ budget didn’t count on. That’s because the Wisconsin GOP voted to continue a transfer of a portion of General Fund money going over the Transportation Fund in their opening mega-motion, which is something Evers wanted to get rid of.

So the gap isn’t as large to cross, but there’s still a lot of Scottholes to patch over these upcoming years, and if you read the recent column from Steven Walters of Wisconsin Eye about what the GOP’s legislative leaders want to do to pay for the roads, both want to come up with something to add to the Transportation Fund. But the question is how that will be done.

Walters says that Senate GOP leader Scott Fitzgerald told him this month that he and his colleagues might go along with Evers’ proposals to raise the title fee and possibly the heavy truck fee. Fitzgerald also said that raising the fees for everyday Wisconsin drivers from its current $75 to $85 might be in order.

After that, Walters says that Fitzgerald also had an idea that would draw on the state’s one-time $1 billion surplus.
For the first time, Fitzgerald also floated this trial-balloon idea: Using part of an extra $753 million in general-fund taxes expected by mid-2021 to pay for one-time fixes to bridges or highways. The Legislature’s budget office recently forecast $753 million more in tax collections by July 1, 2021. Most of it is a one-time windfall resulting from how businesses paid taxes in the wake of the federal Tax Reform Act.

“There’s an important need to rebuild bridges in this state,” Fitzgerald said. ”There’s nothing that says you couldn’t use that one-time money to build bridges in Wisconsin.”
Huh, I thought the same thing when the LFB reported those extra funds a couple of weeks ago (thanks for reading, Fitz!). It also would clear a backlog of other road projects without putting taxpayers on the line for keeping us costs in later years.

?Walters adds that Assembly Speaker Robbin’ Vos wasn't keen on using that one-windfall for roads, and had different plans for coming up with DOT funds.
Vos was cool to that idea, however. “I am very, very reluctant to take money from our general fund … and have it also fund transportation,” said Vos, who prefers a “user-based fee system.” (yet Vos had no problem with JFC restoring the $87 million to transfer from the General Fund in this budget. Odd…)

Vos then floated his own controversial idea: Lay the groundwork in this budget to collect a future “mileage based” annual registration fee. It would require a vehicle’s owner to report how many miles it had been driven in the previous year, which would determine the annual registration fee.

But, Vos added, “I don’t want to have black boxes in peoples’ cars” that automatically report actual miles driven to state officials.
Other than the silly concern over “black boxes in people’s cars” (does Robbin’ want to do this on the “honor system”?), I don’t think a registration fee based on vehicle miles traveled is a bad idea at all. Given that gas mileage continues to improve, it makes the use of the gas tax less of a steady source of income, and this would “level the field” for users of smaller and/or alternate-fuel vehicles who pay the same registration fees, but pay less gas tax over the course of the year than larger, regular gasoline vehicles will (and I say this as a longtime Corolla owner).

Vos and Fitzgerald are both suggesting some big ideas on DOT funding, but they are far apart from each other, and I wouldn’t be surprised to see budget talks stall out between the two GOP-controlled houses over transportation again, like it did in 2017.

There are no Joint Finance Committee meetings scheduled for next week, and there is a lot to hash out between all three sides of this equation (counting Evers). But be prepared for the debate as it happens, because a lot of ideas are sure to come at us with speed over these next few weeks. We need to know what’s affordable, what’s absurd, and what’s partisan game-playing that has no chance of filling the increasing amount of Scottholes in the state. Because you can bet much of the overall context of available funds and what can/cannot be done will be left out of the public discussion.

Wednesday, May 29, 2019

Straight from Capitol Hill - the GOP Tax Scam has done little for workers or the economy.

This news was largely blocked out by Robert Mueller telling Nancy Pelosi to ITMFA on Wednesday, but the Congressional Research Service released its analysis of another bit of corruption that involved the GOP - the tax cuts that Trump and GOP pushed through at the end of 2017.

This analysis not only looked at who paid the taxes (and who didn't), but also what happened with the economy in the year after this Tax Scam became law. And the CRS report openly says that the GOP Tax Scam did little to change what everyday Americans did economically, because it was overwhelmingly slanted to the rich and corporate, and wasn’t needed, given that the economy was growing just fine as it was.
Consumption grew at 2.6% in 2018 in real terms, as shown in Figure 2, about the same as 2017 (which was 2.5%) and below 2014-2016 (although higher than 2013). As shown in Figure 2, there was a drop in the first quarter followed by a rise in the second quarter that was unexpected by most forecasters and may have reflected a delay in tax refunds. The initial effect of a demand side is likely to be reflected in increased consumption and the data indicate little growth in consumption in 2018. Much of the tax cut was directed at businesses and higher-income individuals who are less likely to spend. Fiscal stimulus is limited in an economy that is at or near full employment….

CRS added that the Tax Scam wasn't close to “paying for itself”, with overall revenues declining as much as was predicted before it was signed into law. But remarkably, corporate tax revenues actually went down a lot more than the Congressional Budget Office thought it would.
As noted above, data on GDP are not consistent with a large growth effect in 2018, and thus the tax cut is unlikely to provide enough growth to significantly offset revenue losses in 2018. Data from FY2018 suggest that the tax cut for corporations may have been larger than the $94 billion CBO projected in its April 2018 baseline. That baseline projected corporate revenues of $243 billion, but actual corporate revenues were $38 billion lower at $205 billion, 16% lower than projected. CBO’s January 2019 report on the budget and economic outlook indicated that these lower corporate tax revenues could not be explained by economic conditions and stated that the causes will not be apparent until information from tax returns becomes available over the next two years. CBO also expected this decline in revenues to dissipate over time. With little evidence of whether the decline will actually be temporary or permanent, CBO may have relied on the historical tendency of unexplained changes to dissipate over time. It is also possible that estimated revenue losses from the corporate tax changes were too low in their earlier estimates.

The overall revenues were close to those projected (under the pre-tax cut predictions) as the lower corporate revenues were offset by gains from other taxes: a $45 billion increase in individual income tax revenues and a $7 billion decrease in payroll taxes. These differences, particularly for payroll taxes, are much smaller as a percentage of revenue, and CBO does not indicate any need for an explanation of these changes outside of economic force.
The CRS says the benefits of the Tax Scam overwhelmingly went to corporations over everyday Americans, and that corporations basically had their taxes cut in half while actual people got a few crumbs.
Much of the tax revision was focused on corporations. Although the statutory corporate tax rate was reduced from 35% to 21%, the average effective tax rate decline (taxes divided by profits) would be smaller because of existing tax benefits (which lead to a smaller initial effective tax rate) and base-broadening effects. Such an effective tax rate can be calculated using aggregate data from the national income and products accounts, which attempt to measure economic income. The effective average tax rate for corporations was 17.2% in calendar year 2017, and fell to 8.8% in calendar year 2018.19 This estimate includes worldwide income, but not worldwide taxes. Although actual data on the division of domestic and worldwide income are not available for 2018, using the ratios projected by CBO to eliminate foreign-source income from the measure results in an average effective tax rate of 23.4% in 2017, falling to 12.1% in 2018.20 Either scenario suggests that the ratio of effective to statutory tax rate dropped following the tax revision. The statutory tax rate dropped by 40%, but the effective rate dropped by 48% (although the percentage point drop was smaller for the effective tax r/ate)….

The individual income tax changes for 2018 were smaller than the corporate tax changes in absolute size and substantially smaller as a percentage of income. The effective individual tax rate for federal income taxes as a percentage of personal income is estimated at 9.6% in 2017 and 9.2% in 2018, based on data in the National Income and Product Accounts. This change constitutes a reduction in effective tax rate of 4%. The Treasury Department’s Office of Tax Analysis estimates a larger reduction in effective tax rate as a percentage of adjusted family cash income, with the rate falling from 10.1% in 2017 to 8.9% in 2019, although this estimate is based on projected rather than actual data. Both of these declines are smaller than the corporate tax rate decline. As noted earlier, the increase in the standard deduction and child and dependent credit was roughly offset by the elimination of the personal exemption. Statutory rate reductions for individuals were relatively small compared with the corporate rate reduction (the top rate of 39.6% was reduced by 2.6 percentage points, compared with 14 percentage points for the corporate rate), and the benefits of rate reductions were offset by restrictions on itemized deductions. Business income was in some cases eligible for a 20% reduction, which was more significant (an additional 20% deduction at the 37% rate is 7.4 percentage points), but not all business income qualified.
OK, I guess we’re not surprised that corporations got most of the benefits, but it’s remarkable that individuals got very little out of it, and much less than what Trump’s Treasury Department claimed they would.

Not only did the tax rates not go down much for typical Americans, but wage growth wasn’t much different either. That’s an especially large failure given that we should have been seeing higher wage growth given our place in the economic cycle, and it proves that few of these windfall profits for corporations trickled down to regular folk.
In the absence of the tax cuts, wages should grow with the economy and wage rates should grow as the capital stock grows. In addition, tight labor markets resulting from the approach to full employment should have put upward pressure on wage rates in any case. Evidence from 2018 indicated that labor compensation, adjusted to real values by the price indices for personal consumption expenditures, grew slower than output in general, at a 2.3% rate compared with a 2.9% growth rate overall. If adjusted by the GDP deflator, labor compensation grew by 2.0%. With labor representing 53% of GDP, that implies that the other components grew at 3.8%. Thus, pretax profits and economic depreciation (the price of capital) grew faster than wages.

Figure 4 shows the growth rate of real wages compared with the growth rate of real GDP for 2013-2018, indicating that wage growth has sometimes been faster than GDP growth and sometimes slower. There is no indication of a surge in wages in 2018 either compared to history or relative to GDP growth. This finding is consistent with the CBO projection of a modest effect.

The Department of Labor reports that average weekly wages of production and nonsupervisory workers were $742 in 2017 and $766 in 2018.35 Wages, assuming full-time work, increased by $1,248 annually. But this number must account for inflation and growth that would otherwise have occurred regardless of the tax change. The nominal growth rate in wages was 3.2%, but adjusting for the GDP price deflator, real wages increased by 1.2%. This growth is smaller than overall growth in labor compensation and indicates that ordinary workers had very little growth in wage rates.
The CRS report also says that the Tax Scam was successful in bringing foreign assets and profits back to the US to be “repatriated”. But most of those assets were distributed in the form of dividends (which were basically made tax-free to corporations under the Tax Scam), while less money was reinvested back into the business than in the previous year.
A significant amount of repatriations occurred in 2018, as compared both to history and 2017. Dividends in the previous three years ranged from $144 billion to $158 billion, as shown in Figure 5, whereas $664 billion was repatriated in 2018. Simultaneously, reinvested earnings declined sharply before returning to more normal levels in the 4th quarter of 2018.

The last passage I’ll include goes over all of those bonuses that companies were publicly giving to their employees, and crediting the Tax Scam for doing so. No surprise, but it was all PR BS, and the CRS also says that doing so at the end of 2017 allowed corporations to get a bigger write-off in that year.
During the passage of the tax revision and in the immediate aftermath, some argued that firms would use these funds to pay worker bonuses (as discussed in the previous section on wages). Subsequently, a number of firms announced bonuses, which in some cases they attributed to the tax cut. One organization that tracks these bonuses has reported a total of $4.4 billion. With US employment of 157 million, this amount is $28 per worker. This amount is 2% to 3% of the corporate tax cut, and a smaller share of repatriated funds. It is consistent with what most economists would expect that a small percentage of increased corporate profits or repatriated funds (if any) would be used to compensate workers, as economic theory indicates that firms would pay workers their marginal product, a result of fundamental supply and demand forces. The bonus announcements could have reflected a desire to pay bonuses when they would be deducted at 35% rather than 21% (in late 2017 for firms with calendar tax years but in 2018 for firms with different tax years). Worker bonuses could also be a result of a tight labor market and attributed to the tax cut as a public relations move.

Much of these funds, the data indicate, has been used for a record-breaking amount of stock buybacks, with $1 trillion announced by the end of 2018. A similar share of repurchases happened in 2004, when a tax holiday allowed firms to voluntarily bring back earnings at a lower rate.
So in a number of different ways, corporations made out like bandits due to the GOP Tax Scam in 2018, while the average person got at best a minor tax cut with a bump in wages that likely would have happened anyway. In addition, many of us with real jobs had to write surprise checks to the IRS a few months ago after it became worthless to take certain deductions.

Now as the corporate profit Bubble pops with no real driver of the economy going forward, you can bet that workers will pay first as growth slows and we head toward recession in the coming months (an inverted yield curve doesn’t tend to lie). The CRS report shows the Tax Scam is an even bigger failure than we said it was going to be, but hey, GOP politicians got their donations from oligarchs and lobbying spots lined up, so why do they care?

Tuesday, May 28, 2019

Even without Gov Dropout, WisGOP will keep trying to mess up the UW

I'd be lying if I said I was surprised about today's decisions on the University of Wisconsin System by the GOP-run Joint Finance Committee. But it's still something that makes me roll my eyes.
The Republican-controlled budget writing committee approved a tuition freeze for undergraduate residents attending University of Wisconsin campuses over the next two academic years.

But the Joint Finance Committee again declined to "fund the freeze" and provide the UW System with state money to offset what campuses lose in inflationary tuition raises.

Overall, the GOP motion — approved 12-4 along party lines — would provide $69.7 million less in state aid that the $126.6 million the guv had proposed. Republicans also want to require the university to come back to the committee with a plan on how it would spend the bulk of the money Republicans want to allocate to UW before it would be released.
So basically, the GOP voted to continue to starve the UW of resources some more, which continues the cycle of cuts and deterioration that started with the 8 year Reign of Error of college dropout Scott Walker.

In addition to not funding the tuition freeze, the GOPs on Joint Finance also turned down budget provisions by Evers that were intended to close the salary and talent gaps that have widened in Wisconsin, both on and off campus.
Along with rejection the guv’s call to increase aid to offset the tuition freeze, the GOP motion would reject $45 million for student success and attainment — including expenses such as advising to help students graduate quicker — and $10 million to increase the number of nurse educators to help address the nursing shortage in Wisconsin.

JFC Republicans also rejected Evers’ call for an additional $5 million for UW Colleges to cover student support services such as advising and $3.5 million over the biennium to add 20 county-based agriculture positions at UW Extension schools. As of this month, there were 57.4 full-time equivalent agricultural educators working in 65 of the state’s 72 counties, according to LFB.
There is one small consolation in today's budget action, in that the Legislative Fiscal Bureau announced that the UW System would have more money to play with in another way - via higher tuition revenues that have been gathered from out of state students and other specialized programs since 2016.

Added tuition revenues, each year UW 2019-21
Increased nonresident and graduate tuition +$40.74 million
Enrollment Changes +$39.24 million
Self-supporting Programs $14.23 million
Differential tuition changes -$0.71 million

This supplements a recent report by the Legislative Audit Bureau which illustrated the UW's increasing reliance on out-of-state enrollees.
From academic year 2008-09 to academic year 2017-18, UW institutions experienced increases in nonresident enrollment. UW-Madison had the largest total increase in nonresident students with an additional 3,304 students over the 10-year period. Five institutions—UW-Milwaukee, UW-Eau Claire, UW-Green Bay, UW-Oshkosh, and UW-Whitewater—more than doubled their nonresident enrollments. For example, UW-Milwaukee nonresident enrollment increased from 1,991 nonresident students in academic year 2008-09 to 4,090 nonresident students in academic year 2017-18, or by 105.4 percent.
Remarkably, in-state tuition revenue has dropped across the UW System while the freeze has been in effect. And even with the added out-of-staters, it is only due to the added tuition funds at UW-Madison that this extra tuition money exists for the rest of the System, because most other UW schools have been losing tuition money.

It could be argued that the System can use those extra tuition dollars to replace the money not funded by taxpayers due to the GOP's decisions today. But that's a dangerous game to rely on for the future, and it reiterates my thought that UW-Madison should be given independence from the rest of the System due its unique offerings and ability to raise its own money.

Back at the Capitol today, UW System President Ray Cross was surprised and dismayed by the GOP's decision not to give the UW most of the money it requested, and vented to reporters.

You're shocked by this, Ray? ARE YOU KIDDING ME? You've dealt with these idiots in the GOP Legislature for more than 5 years, while they all voted to cut UW funding, starved it of resources, and micromanaged it into dysfunction. You seriously thought this Koched-up crew would change their tune because we showed Gov Dropout the door and replaced him with a former teacher?

If Ray Cross honestly thought that, he needs to get the hell out of Bascom Hill and take his 6-figure, taxpayer-funded salary with him. These GOP jerkoffs will never act in good faith toward something like the UW that encourages critical thinking and independent analysis. Those skills and products are threats to their survival in their phoney-baloney jobs at the Capitol.

I can't say this enough - WisGOPs don't want this state to get better under Evers over the next 4 years, and certainly don't want to have their rich and corporate donors pay toward things that might help someone outside of their Club. Improving the UW and attracting more talent to this state would do these things, so it explains why the WisGOPs on JFC wouldn't fund the UW, and also refused to make investments to improve water quality and bring back science to the DNR today.

As Ray Cross found out, the only way things will get better for the special things in Wisconsin is to remove the WisGOP legislators that are intent on messing them up. Playing nice and trying to explain the value of gems like the UW and the state's natural beauty won't work on the ALEC Crew.

Foxconn fraud - both with Pruitt's EPA, and in its scale. PULL THE PLUG

In a story that absolutely did not shock me, it came out over the weekend that Scott Pruitt, the crooked and disgraced former administrator of the Environmental Protection Administration, decided to change its findings on Wisconsin’s Foxconn project in Racine County, overruling EPA staff members that had done an honest analysis .
Under President Donald Trump, the Environmental Protection Agency initially had recommended labeling Racine County as violating federal air quality standards for ozone in 2017 — a designation that could have required Taiwan-based Foxconn to install expensive state-of-the-art pollution controls at its flat-screen manufacturing plant.

But after appeals by GOP Gov. Scott Walker and at the apparent direction of then-EPA Administrator Scott Pruitt, the EPA reversed course in 2018, ruling Racine was in compliance with the ground-level smog standard. The decision followed weeks of objections from EPA career staff, who said they saw no technical basis to justify it, according to correspondence released under a public records request.

“I am still in disbelief,” one wrote, after citing new directions from Pruitt that clashed with the EPA’s earlier plan to label the region in “nonattainment.” “I do not see a sound technical basis for the area we are being directed to finalize in Wisconsin,” Jenny Liljegren, a scientist in EPA’s Air and Radiation Division, wrote in an April 11, 2018, e-mail.

The documents, obtained by the Sierra Club and Clean Wisconsin under the Freedom of Information Act, show technical experts repeatedly questioned Wisconsin officials’ assertions that the areas should be classified as satisfying federal ozone standards.
And after this information has been revealed as part of a federal lawsuit, the Trump Administration is saying “Our bad.”
Administration officials aren’t admitting they did anything wrong, the lawyers contend. But they can see EPA data showing the region’s smog problems are getting worse, not better, and that polluters in four counties singled out by Pruitt for special treatment are contributing to chronically dirty air breathed by millions of people.

The court shouldn’t rule against the Trump administration, the lawyers pleaded. Rather, they said, it “could benefit from additional explanations” and the EPA could end up revising its designations.

“These federal attorneys looked at the record, relied on their professional judgment and realized there isn’t any evidence to justify Pruitt’s last-minute switcheroo,” said Howard Learner, executive director of the Environmental Law and Policy Center, one of the nonprofit groups that sued to overturn the EPA’s smog designations in Illinois, Indiana and Wisconsin.
Gee, why would Pruitt have wanted to clear the way for Foxconn in 2018? It couldn’t have had to do with wanting this picture ahead of that November’s elections to try to trick unsuspecting voters on this scam, could it?

It isn’t just the Foxconn-sin region that was allowed to dirty the air around Lake Michigan under Pruitt. A Chicago Tribune story from today tells us that counties in Northern Illinois and Northwest Indiana were also given exemptions from air pollution standards after the DC version of crooked Scotty decided he knew better than the experts.

The corruption randomness of Pruitt’s decisions has led to a major record of the EPA losing in court since Trump took office in 2017.
“Our final (metropolitan) area designation for Chicago is not the result of an analysis with any technical support,” Eric Svingen, an engineer in the EPA’s Chicago office, wrote in an April 24, 2018, email to colleagues who were attempting to draft a report that reflected Pruitt’s wishes.

It remains to be seen if the federal appeals court will give Trump administration officials another chance to revise the Chicago-area smog designations. During President Donald Trump’s first two years in office, his administration prevailed only 6 percent of the time when its anti-regulatory decisions were challenged in the courts, according to a Brookings Institution study.
In another form of Foxconn self-dealing and BS reasoning, the Capital Times’ Dave Zweifel sums up the findings of a recent Wall Street Journal article which shows that the 2017 analysis that WisGOPs used to justify the Fox-con was at best exaggerated if not outright BS.

Zweifel notes that the jobs and investment promised from the Foxconn project had a lot more to do with Foxconn trying to get the best deal, and little to do with reality.
In several respects, the story is troubling because it shows how consultants like Ernst and Young work both sides of the street in helping clients like Foxconn get the best deal. Not only was E&Y working for Foxconn; the Walker administration drew heavily from the same firm to justify the $4 billion in state and local tax subsidies for the plant, which is still in a state of flux.

"In the spring of 2017, Ernst and Young sent Wisconsin and other states a request for proposals for an investment opportunity it identified only as 'Project Flying Eagle.'" the story related. "The document included an explicit request that governments 'provide offsets to all taxes levied at the state and local level' and 'propose potential administrative and/or legislative changes' if they are 'unable to close the cost differential' with the company's existing manufacturing facilities in Asia."

In Wisconsin's case, these last words undoubtedly convinced state officials to include an easing of environmental regulations and water diversion rules to help secure the deal.
Put these two factors together, and you can see how Trump’s EPA and WisGOP were on the same page in giving Foxconn special treatment to give off an image that this boondoggle wasn’t the low-return giveaway many of us said it was.

Zweifel notes that the WSJ article also talks to an economist who mentions that Ernst and Young conveniently left out details that are now central to the Fox-con. Those details are the ones that have resulted in the largest taxpayer costs sunk into it at this time, and are the parts of the Fox-con most at risk as this project flounders.
The Wall Street Journal story quotes economist Timothy Bartik claiming that the E&Y study made wrong assumptions about the plant's impact on southeastern Wisconsin and failed to include the huge local government costs for school and roads to serve an influx of people.

"I think a true fiscal analysis would show that this project will never break even fiscally," Bartik told the paper.
I don’t ever want to hear any GOP trying to sell “13,000 jobs” ever again without the words “HE/SHE’S LYING” immediately after it.

It’s well past time to get out from under the Foxconn albatross and go to court to break the state’s contract with these lowlifes. This contract was constructed and agreed to in bad faith, and it is more clear than ever that the political motivations of desperate GOPs overruled honest consideration of what really might happen with the Foxconn project.

We know better now, and you can bet that Foxconn and the Trumpkins don’t want more information to be discovered in a court case, so they might be fine with getting a one-time check and going away. The sooner the state of Wisconsin can cut the cord on all of these bad-faith actors (both in business and in politics), the better.

Monday, May 27, 2019

Wisconsin looking at paying tens of millions more due to court costs, lawyer shortages

Another topic in Tuesday's Joint Finance Committee meeting will deal with the increasing costs and shortages that are happening in the state's criminal courts, and they're happening on both the prosecution and the defense.

For the prosecutors, the state pays for salaries of assistant prosecutors at the Department of Justice, and also gives counties funds for local district attorney positions to try cases. Pay for these positions often hasn't kept up with more lucrative jobs in the private sector, and turnover has climbed in recent years as a result.

To deal with that issue, the Evers budget plans to give these prosecutors a pay raise that mirrors the increase proposed (and approved of last week by JFC) for other state employees.
Given the benefits of reducing attorney turnover, the Committee could provide funding to both the DAs, SPD, and DOJ to support salary adjustments under the pay progression plan. Funding could be provided in the manner recommended by the budget bill [Alternative 1]. This alternative is intended to provide a 2% increase in 2019-20 and another 2% increase in 2020-21. This would result in DA pay progression funding totaling $307,300 GPR in 2019-20 and $918,000 GPR in 2020-21, SPD pay progression funding totaling $320,600 GPR in 2019-20 and $956,900 GPR in 2020-21, and AAG pay progression funding totaling $70,100 GPR, $15,600 PR, and $3,500 FED in 2019-20 and $141,500 GPR, $31,600 PR, and $6,200 FED in 2020-21. Funding for pay progression would be provided on a one-time basis.
In addition to the pay raise, Evers wants another $5.5 million in the next two years to add some more prosecutors to several counties. This is intended to relieve understaffing in several places around the state, and the LFB notes a survey by the Wisconsin District Attorneys Association that says many DA offices are short by 40% or more, and that problem is particularly acute in rural areas.
New State Prosecutor Positions. Provide $1,069,500 GPR in 2019-20, $1,466,900 GPR in 2020-21, and 19.6 GPR-funded positions annually, to provide an additional ADA with an anticipated start date of October 1, 2019 to the following 20 offices: Barron, Bayfield (0.6), Brown, Dunn, Eau Claire, Forest, Jackson, La Crosse, Langlade, Lincoln, Manitowoc, Monroe, Outagamie, Ozaukee, Polk, Portage, Racine, Sawyer, Washington, and Wood.

Convert PR-Funded ADA Positions. Provide $608,200 GPR, and -$608,200 PR in 2019-20, and $632,500 GPR and -$632,500 PR in 2020-21, and 7.5 GPR positions and -7.5 PR positions annually, to convert funding for certain prosecutor positions from program revenue to general purpose revenue. The 7.5 GPR positions would include 1.0 ADA position in Fond du Lac County, 2.5 ADA positions in Marathon County, and 4.0 ADA positions in Milwaukee County. The administration indicates that funding currently supporting the positions is not available for the 2019-21 biennium.

Increase Existing Part-Time ADA Positions. Provide $820,700 GPR in 2019-20, $887,000 GPR in 2020-21, and 6.9 GPR positions annually, to increase part-time prosecutor positions in the following 14 counties: Adams (0.80), Buffalo (0.20), Burnett (0.75), Columbia (0.25), Douglas (0.50), Green Lake (0.50) Iowa (0.25), Juneau (0.50), Marinette (0.40), Pierce (0.50), Rusk (0.50), Sheboygan (0.50), Washburn (0.75), and Waupaca (0.50). Note that Buffalo has a 0.5 elected DA and a 0.5 ADA. The recommended 0.2 position in Buffalo County would be used to increase two 0.5 positions to 0.6 positions. Note that one 0.5 ADA splits time between Burnett and Washburn Counties. Under the bill, both Burnett and Washburn Counties would have a full-time ADA.
For the defense, there have been chronic shortages resulting from Wisconsin paying its public defenders an embarrassingly low amount. The $40 per hour the state pays for public defenders is the lowest in the nation, below the rate that would encourage lawyers to take these jobs, and was the subject of a petition brought to the State Supreme Court last year demanding it be significantly raised. And because counties can't hire public defenders at that rate, Public Defender's office is often forced to turn to private attorneys to take some cases. Those private attorneys get paid $70 an hour, but even that doesn't seem to be enough.
On the surface, Wisconsin seems to have a decent system, compared to some states. The State Public Defender represents indigent criminal defendants from its 35 offices. But it also pays private lawyers more than $2 million a month to handle conflicts and overflow — about 40% of all eligible defendants.

The number of private lawyers who took cases shrank from about 1,100 in 2012 to about 920 last year, according to Kelli Thompson, director of the State Public Defender program. There are currently 935 lawyers certified to take assignments.

The impact is sharply accentuated in rural areas. Thompson reports the SPD often has to call dozens, and in a few cases, hundreds of lawyers to find one who'll take a case, and it might be one whose office is several counties away.
This situation led the Wisconsin Supreme Court to require that the rate for private attorneys be raised from $70 to $100 an hour, with the SCOWIS adding "[the argument that] Wisconsin's compensation rate for SPD appointed attorneys is abysmally low is not in dispute." It has grown so desperate in rural areas that six defendants in Ashland and Bayfield Counties filed a federal lawsuit in January claiming that their rights were being violated because they could not get a lawyer appointed for them for weeks.

The low pay for court-appointed defendants also causes a strain on county budgets, as they often have to make up the difference between what the state will pay for these lawyers, and what these lawyers demand for compensation. With these issues and cost crunches in mind, the Evers budget asks for an increase in what the state will pick up for cases that a private attorney is asked to take on.
In the budget in brief, the administration stated that "at $40 per hour, Wisconsin has the lowest reimbursement rate for private bar attorneys that represent indigent criminal defendants. Under our system of due process, everyone has a constitutional right to legal representation yet the low reimbursement rate has caused major concerns as to whether all Wisconsinites are being properly represented." The bill recommends providing $8,668,900 in 2019-20 and $16,612,700 in 2020-21 to fund a private bar rate increase from $40 to $70 per hour beginning January 1, 2020. January 1, 2020, is the same day the court appointed counsel rate (discussed above) as set by Supreme Court rule will increase from $70 to $100 per hour.
And that extra $25.3 million doesn't even account for the $362,600 that we all already falling short on for these costs at the paltry $40 an hour rate. This is something the Evers budget is accounting for, while Walker and WisGOP never did so other than shifting around money from other sources.

Of course, there's one other option out there that might help to deal with these shortages in Wisconsin's court system. TRYING TO HAVE FEWER PEOPLE IN COURT IN THE FIRST PLACE, through decriminalizing certain offenses (like marijuana possession) and better policies that work to prevent the cycle of poverty and criminality that seems especially true in Wisconsin.

But since we have a Wisconsin GOP that is predicated on outdated "lock em up" policies and economic apartheid, don't count on that to be discussed much. So instead we have these shortages and needs to pay more tax dollars to deal with these costs after the crimes happen.

Sunday, May 26, 2019

How we pay for DNR environmental management, and how Evers wants to do more

The Joint Finance Committee will get back to work right after the holiday weekend, with a meeting on Tuesday to go over more items in Governor Evers' budget. One of the top items will involve various environmental programs with the Department of Natural Resources, and let's start our discussion by going into the Legislative Fiscal Bureau's summary of the main two accounts that fund most of the programs that deal with water and waste management.
The segregated (SEG) environmental fund consists of the environmental management account and the nonpoint account. The two accounts are statutorily designated as one fund but are tracked separately for budgetary purposes. Both accounts rely heavily on revenues from several state solid waste tipping fees. Wisconsin landfills pay state solid waste tipping fees for each ton of solid waste disposed of in the landfill. State solid waste tipping fees total $12.997 per ton for most solid waste disposed of at Wisconsin landfills, including municipal solid waste and non-highvolume industrial waste. Of this total, $12.84 per ton is deposited in the environmental fund, including $9.64 per ton in the environmental management account and $3.20 per ton in the nonpoint account. The nonpoint account is also funded with an annual general purpose revenue (GPR) transfer of $7,991,100. The environmental fund supports programs primarily at the Department of Natural Resources (DNR) and the Department of Agriculture, Trade and Consumer Protection (DATCP), including financial assistance programs for local governments and collaborating partners.
That GPR transfer (aka, general tax dollars) was reduced from $11.1 million to just under $8 million in the last Walker/WisGOP budget. And to make up for that, as you can see in this chart, the environmental management account sent $3.625 million to the nonpoint account in each year of the 2018-19 budget is projected. But barring other transfers or other changes in law, the nonpoint account is projected to have a deficit of $15.7 million in it as Governor Evers' budget stands today, with a budget hole of more than $10 million that has to be filled in.

If you look at how these two accounts get their funding, you'll see that the Environmental Fund gets a much higher proportion of tipping fees, while the Nonpoint account is the only one that relies on General Tax money.

Those charts would indicate that moving $7.7 million from the environmental fund to the nonpoint account in both years would make both accounts balanced with small cushions for the 2019-21 biennium. But the Evers budget largely left it up to the Legislature to decide how that would be done, so the LFB mentions two methods that could level these two balances off without having to change the overall amount taxpayers or local communities have to pay.
As discussed previously, 2017 Act 59 reduced the GPR transfer to the nonpoint account by $3,152,500 each year on an ongoing basis to $7,991,100. The transfer was offset by an equivalent transfer of environmental management account funding on a one-time basis during the biennium. At the time, the administration provided the environmental management transfer on a one-time basis because it was not clear environmental management revenues would continue to have a surplus in future years. Considering the anticipated surplus of base revenues relative to base expenditures in the environmental management account of $8.9 million in 2020-21, it is expected that surplus revenues will continue in the 2021-23 biennium. While funding could be provided on a one-time basis, both the environmental management account and nonpoint account conditions are due to ongoing factors, thus any imbalance would continue in future years. The Committee could consider providing funding as an ongoing transfer from the environmental management account.

20. Another way of providing an ongoing transfer of revenue from the environmental management to the nonpoint account would be to increase the nonpoint tipping fee for municipal and non-high-volume industrial waste and decrease the environmental repair tipping fee deposited in the environmental management account by the same amount. This would not change the total amount per ton paid on solid waste disposed of in the state and deposited into the environmental fund, but would change the statutory amount of the fee deposited in each of the two accounts. While a transfer of the environmental management account balance and a rebalancing of tipping fees have the same effect, a reallocation of statutory fees would provide more transparency to fee payers about the final use of their contributions. The Committee could consider rebalancing the deposit of tipping fees into each account.
There also could be a usage of our one-time surplus to allow the non-point account to carry over a large amount of money for this year, which would allow any long-term structural change to be put off until at least the next budget.

But the other part of the equation involves costs, and the Evers Administration included more funds in this budget for grants to reverse the backsliding that happened in environmental upkeep and enforcement that happened during the Age of Fitzwalkerstan. Among those moves include:

1. Creating a Bureau of Natural Resources Science at the DNR, include 5 new scientist jobs in that area, and move 14 other positions in fish and wildlife management from another part of the DNR to this new bureau. This would cost the Environmental Management Fund another $718,500.

2. An additional $25 million in borrowing authority to remove sediment and other contaminants from Lake Michigan, Lake Superior, and their inland tributaries.

3. Increase lake and river protection grants by $1.49 million a year, which seems timely given this headline from today.

4. Another $1.5 million a year to soil and water management programs, and borrowing another $10 million (to be paid off over time) to increase a program that helps share the cost of improvements intended to reduce runoff at the source. Evers also wants to set aside $800,000 in cash for nonpoint source water abatement grants, as opposed to the $200,000 that is currently in the budget (from the Nonpoint Account), and an additional $230,000 a year for "providing research, education, and outreach related to nonpoint source water pollution abatement programs.".

5. Another $1.4 million a year to help counties hire workers for land and water conservation (tax dollars would pay for $476,000 of this, the Nonpoint account would cover the other $924,000).

Let's see how much the Koched-up WisGOPs allow out of these provisions, and whether they remove them either out of ideology/corruption, or if the deficit in the Nonpoint account as an excuse. But there's little doubt that Evers is asking for a significant change in direction from the last 8 years, and given the increasing news of runoff problems and deteriorating water quality, it's definitely needed in Wisconsin these days.

Saturday, May 25, 2019

Dems, media need to call out, narrow the GOP "hack gap". Or else GOPs will keep lying

This is a tremendous segment by Carlos Maza at Vox talking about the "hack gap" in most political news these days. This is where Fox News and other GOPperganda throw out garbage into the atmosphere and then "work the refs" at other, more legitimate media to make them cover and repeat BS that isn't that newsworthy or worse, deceptive if not outright false.

It is a GOP strategy to stir up fauxtrage and try to intimidate other media into following them, because so much of our media is trapped into not wanting to seem "biased" by whiny righties. So they'll give a more legitimate voice to these (non)stories by saying "People are asking questions", and by "both sidesing" discussions when one side is clearly dishonest and/or wrong.

For example, look at this guest list for the alleged benchmark Sunday morning political talk show.

2 members of the House of Representatives (who would actually vote on impeachment proceedings) who are likely expected to explain themselves and a PAID LIAR in Shuckabee-Sanders who probably has her questions pre-arranged and won't be challenged when she says something verifiably false.

There is no legitimate value in having Sarah Sanders or Kellyanne Conjob on TV, as they are not playing by the same rules of fairness and honesty that the rest of us are. But if they're not offered access because of their history of lying, they complain about "bias" and so they get airtime to poison the atmosphere with BS, which media then megaphones into the public discourse with "Well, Kellyanne/Slanders said (line of bullshit). Isn't there something to that?"

With this game in mind, is it any wonder that Wisconsin Assembly Speaker Robbin' Vos tried this line on Thursday?

Who was "one of the troops" that made this claim? Robbin' didn't say, but it was probably somebody who called into Icki McKenna or some of the other hate radio shows on AM 1130 (if it was anyone at all). And it was clearly Robbin's hope that Wisconsin media would run with this meme and try to land a hit on Governor Evers.

However, Patrick Marley of the Milwaukee Journal-Sentinel performed a rare act of journalistic judgment, and he and the Journal-Sentinel editors actually called out Vos's statement, in an article titled "GOP leader Robin Vos falsely claims Gov. Tony Evers made troops wait for greeting."
Assembly Speaker Robin Vos kicked off the Memorial Day weekend by falsely accusing Gov. Tony Evers of forcing troops to wait hours to greet him.

The allegation is not true, according to the Wisconsin National Guard and those who attended the event at the 128th Air Refueling Wing at Milwaukee Mitchell International Airport.

The Republican leader on Friday acknowledged he had his facts wrong but didn't delete a tweet making the false accusation...

"Everything went well and on schedule," said Rep. Ken Skowronski, a Republican from Franklin who attended the event. "Everything was great."
Skowronski said Friday he was not aware of Vos' tweet and didn't know what he meant by it.

"They weren't waiting around," Skowronski said.
Lieutenant Governor Mandela Barnes noted that Vos's attempted smear was par for the course with that guy.

But was Robbin' Vos really being any different than most Republicans, where they and their spokespeople on Faux News TV and AM radio amplify non-issues to distract from legitimate ones? It's what GOPs do to allow the distortion/lie to get halfway around the world before the typical person can figure out what really is going on. And it amazes me that more media and more Dems still don't seem to have caught on to the fact that these lowlifes aren't going to follow the rules of debate and fair play that decent people would.

Instead of answering the questions "others are asking", just call it out when GOPs act in bad faith to poison the discussion. Turn the spotlight back on the GOPs, saying "They're making up this garbage because Republicans lie and don't want to talk about real issues." It has the added benefit of being true.

New Census numbers show Madison, Dane Co keep gaining, while MKE keeps losing

The US Census Bureau came out with its annual update of population for all cities, villages and towns in America. And in Wisconsin, the story was a familiar one for the last several years.
Dane County was home to three of the four fastest-growing cities in Wisconsin last year, while the three with the largest population losses were in Milwaukee County, according to numbers from the U.S. Census Bureau.

Madison topped the list, adding about 2,580 residents between 2017 and 2018, according to population estimates released Thursday.

Sun Prairie was No. 2, adding 1,055 people, and Fitchburg No. 4 with 663.

The city of Milwaukee saw the largest drop in population, losing about 1,880 residents, followed by West Allis (down 380) and Franklin (down 268), although the suburban cities of Brookfield and Greenfield were among the five fastest-growing cities.
In fact, Madison, Sun Prairie and Fitchburg alone accounted for nearly 1/5 of Wisconsin’s population growth last year. But Milwaukee continues to bleed people, down over 8,600 since 2015. Very hard for a state to have a great economy when its largest city does that.

A similar pattern repeats for the decade of the 2010s, which is soon to take on extra relevance given that next year’s Census will change the allocation of resources and legislative districts in the state.
Since 2010, Madison, Fitchburg and Sun Prairie have been the three fastest-growing places in Wisconsin. Together they’ve gained more than 34,000 residents — more than the next 18 municipalities on the list, which includes the Dane County communities of Verona, Middleton, Waunakee, DeForest and Oregon.
Madison has added by far the most people out of any community in Wisconsin, as its population has jumped by nearly 25,000 in the 2010s, and now has more than 258,000 people calling it home. As you’ll see here, 5 of the 8 largest gainers in the state are in Dane County, and the rest of the top 10 has 2 suburbs each from Milwaukee and Green Bay, and another blue-voting city with a UW campus.

Meanwhile, Milwaukee’s recent population losses has more than reversed a gain of nearly 6,000 in the first half of this decade, and several mid-size, post-industrial cities join MKE in the list of the largest losers of people the 2010s.

These figures again make me ask “Why doesn’t the rest of the state try to learn what makes Madison and Dane County so attractive to people, and apply it to their communities?” The corollary is also important “Why are we continuing to have our economic policy dictated by Republicans who constantly beat up and handcuff Milwaukee, and how is more of the same going to make this lagging region and state get better?”

This question is especially pointed at the Metropolitan Milwaukee Association of Commerce, which cheered every economically regressive and anti-Milwaukee GOP policy that went through the Legislature during the Age of Fitzwalkerstan. Less corporate rent-seeking, less trickle-down and more community investments seem to be a much better option.

After all, that’s generally how we do it in the growing Mad City, and in the 2010s, people seem to like what the town has to offer. Which is why more of them call it home every year.

You know that "Trump boom" in manufacturing? It's over, especially in the Midwest.

One theme that Donald Trump is going to try to promote for his 2020 campaign is that "our economy is great and I brought factory jobs back for the forgotten [white] man." And for the 2017 and 2018, he might have had a point, as tax cuts and low unemployment assisted in a deficit-fueled bump in GDP growth, as well as in manufacturing employment. 190,000 more manufacturing jobs were added in 2017 and 264,000 more in 2018, which made last year the best for job growth in the sector since 1997.

But that Bubblicious uptick in manufacturing appears to be ending. For example, IHS Markit said yesterday that new orders were at their worst levels since the economic expansion began in 2009, and that we declining toward the flatline of 50 in the monthly Purchasing Managers’ Index.
At 50.9 in May, down from 53.0 in April, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index indicated the slowest expansion in overall business activity since May 2016. The composite index is based on original survey data from IHS Markit’s PMI surveys of both services and manufacturing.

The muted rise in output was attributed to softer demand conditions and subdued growth of new orders. The rise in new business in May was the softest recorded since the series began in October 2009.

Consequently, firms put the brakes on hiring. The latest increase in employment was only marginal and the smallest for just over two years. Companies also noted little strain on capacity due to weak demand, and reported the first decline in backlogs of work since June 2017.

Input price inflation eased for the third month running in May, despite continued comments from panellists regarding the ongoing impact of tariffs. The slower increase in costs and greater competitive pressures underpinned a renewed fall in output charges, the first such decline since February 2016.
As you can see, there's a decent correlation between the fates of the PMI index and the US economy as a whole.

And IHS added in the same report that the services side of the economy wasn’t much better.
The seasonally adjusted IHS Markit Flash U.S. Services PMI™ Business Activity Index posted 50.9 in May, down from 53.0 in April, to indicate a notable slowdown in service sector business activity. The upturn was only marginal overall and the slowest since the current sequence of expansion began in March 2016.
Those slowdowns mirror a report from the Census Bureau on Friday that said manufacturers saw business drop across the board to start the 2nd Quarter of 2019.
New orders for manufactured durable goods in April decreased $5.4 billion or 2.1 percent to $248.4 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 1.7 percent March increase. Excluding transportation, new orders were virtually unchanged. Excluding defense, new orders decreased 2.5 percent. Transportation equipment, also down two of the last three months, drove the decrease, $5.4 billion or 5.9 percent to $85.4 billion.

Shipments of manufactured durable goods in April, down three of the last four months, decreased $4.0 billion or 1.6 percent to $253.3 billion. This followed a 0.5 percent March decrease. Transportation equipment, down four consecutive months, led the decrease, $3.7 billion or 4.1 percent to $85.8 billion.

Unfilled Orders Unfilled orders for manufactured durable goods in April, down two of the last three months, decreased $0.7 billion or 0.1 percent to $1,179.1 billion. This followed a 0.1 percent March increase. Transportation equipment, also down two of the last three months, led the decrease, $0.4 billion or 0.1 percent to $810.6 billion.

Inventories of manufactured durable goods in April, up nine of the last ten months, increased $1.8 billion or 0.4 percent to $422.6 billion. This followed a 0.3 percent March increase. Transportation equipment, also up nine of the last ten months, led the increase, $1.5 billion or 1.1 percent to $136.1 billion.
University of Wisconsin economist Menzie Chinn noted recently in Econbrowser that manufacturing output has declined for much of this year and employment had leveled off in the sector in 2019, with the Midwest starting to see job losses.

None of this is a good sign going forward, and that calls to mind where we were in much of 2016, when manufacturing output and employment was showing some job losses (including 51,000 between January and May of that year), and ended up being the only year that the US has lost manufacturing jobs in the 2010s. That manufacturing slowdown likely played a role in convince some blue-collars in the Heartland take a chance on Donald Trump to turn around their flagging fortunes.

Now we flash forward 3 years, and the 2016-type slowdowns in manufacturing and the Midwestern economy as a whole are starting all over again. Except now we have a higher US budget deficit, with less room for upside as unemployment is likely as low as it can get, and more trade restrictions and adjustments are coming in the near future. Ruh roh.

Friday, May 24, 2019

GOP K-12 moves give Evers a little, but takes a lot. And keeps the voucher scam going

I wanted to review the big changes to the budget bill in K-12 education, so let’s go into the 32-part omnibus that the GOPs on Joint Finance approved of on Thursday. And let’s start with the largest of the aid increases to public schools.
1. General School Aid Base Funding Increase (Paper #550). Provide [an increase of] $83,200,000 GPR in 2019-20 and $246,742,000 GPR in 2020-21 for general school aids…

4. Per Pupil Aid (Paper #550). Provide [increase of] $17,459,200 GPR in 2019-20 and $36,277,600 GPR in 2020-21 and set the per pupil aid payment at $679 per pupil in 2019-20 and $704 per pupil in 2020-21 and in each year thereafter. This would be an annual increase of $25 per pupil in each year of the biennium

5. Special Education Aid (Paper #570). Provide[increase of] $15,533,200 GPR in 2019-20 and $81,337,100 GPR in 2020-21 for special education categorical aid. Base level funding is $368,939,100, which DPI estimates will reimburse 25.3% of eligible costs in 2018-19. It is estimated that the additional aid would allow for reimbursement of 26% of special education costs in 2019-20 and 30% of costs in 2020-21.
The flip side is that it is the first increase in special education aids to public schools in 10 years, with much of it coming in the second year, raising the base amount for the future to more than $450 million. It’s probably not as much as the schools need, (and there’s an important disparity here that I’ll discuss shortly), but it’s a start and GOPs were clearly feeling the pressure from the public as they nearly doubled this increase from the $50 million WisGOP had in their original K-12 plans.

The special education increase of $97 million was significantly less than the $606 million Governor Evers wanted, which Democrats education organizations denounced, and led to tweets like this.

I found it interesting that around $330 million of the increase is in General Aids, while very little of the increase is from Per-Pupil Aid. That’s a direct contrast to the last budget, where Scott Walker and other Republicans put almost all of the aid increases in the form of Per-Pupil aids. That seems like a win for poorer districts in cities and rural areas, as the General Aids try to make up for disparities in property value and other resources.

It also makes for confusing statements from Republicans and media reporters about a “$200/$204 per pupil increase in both years”, as that is clearly NOT the case, at least not in that form . What is being confused is the aid increases with the revenue limits for schools. Those are being upped beyond the aid increases that are coming from the state,
2. Revenue Limit Per Pupil Adjustment (Paper #550). Set the per pupil adjustment under revenue limits at $175 in 2019-20 and $179 in 2020-21 and specify that there would be no per pupil adjustment beginning in 2021-22 and in each year thereafter.
Add in the $25 per-pupil aid (which does not count toward revenue limits) and there you have your increase. There is also an extra boost in the limits for certain low-revenue districts, which enables them to have raise more property taxes to get back toward the levels of other districts if they choose to.

The revenue limits and low-revenue district provisions come close to what Governor Evers wanted in his budget. But as Kids Forward tells us, the GOP severely reduced the 2 largest increases for K-12 public schools that Evers had.

What that graph doesn't mention is that the GOP did add money to “K-12 education” in another way. It's just not a program they want you to know about.

GOP change to base K-12 budget
Vouchers and Charters UP $113.5 million
Aid CUTS to public K-12 $78.5 million

Some of that extra voucher money is in the form of “special needs scholarships”, which reimburse at least 90% of the special ed costs of voucher schools, while public schools are barely going to get 30% of their special ed costs covered, even with the increases approved yesterday. And the money for this special ed aid to vouchers is entirely paid for by cutting aid to the PUBLIC school district the child lives in.

So if you account for the voucher-related cuts to public schools, the net increase over the 2 years in the 3 main aid forms to public schools are as follows.

General K-12 school aids $251.5 million
Per-pupil aid $53.7 million
Special Education Aid $96.8 million

The GOP did add $5.3 million for a new type of aid that was not in Evers’ budget.
Specify that a district would be eligible for this aid if the district's net per pupil payment from the general school aids appropriation is less than the difference between $1,000 and the per pupil categorical aid payment amount for that year ($679 per pupil in 2019-20 and $704 per pupil in 2020-21 under the motion). Specify that the payment for an eligible district would be equal to the difference between $1,000 and the per pupil categorical aid payment amount for that year multiplied by the enrollment used to calculate the district's per pupil aid in that year. Specify that if aid entitlements exceed the amount appropriated, DPI would prorate the payments.
This seems targeted to certain school districts in Northern Wisconsin and other places that have high property values but small student populations. I’d like a final list of that, but I bet it’s related to the list of schools I mentioned earlier this week that were likely to lose out with the GOP’s opening move to keep $1.09 billion in property tax credits as opposed to moving it into General Aids (Attachment 3 of this document gives you an idea of who those districts would be. Hayward was specifically named on Thursday). Those districts stood to significantly lose funding, as they wouldn’t get much from either General Aids or Per-Pupil aids.

But other rural districts took a hit with the GOP’s budget motion, as the JFC members chose to take out an Evers provision worth about $9.8 million a year that would have expanded the sparsity aid program to mid-size and larger districts that have lots of land area. The JFC also turned down Evers’ plans that would have directed $43.5 million to bilingual education, $5.7 million for to increase what schools get for providing breakfasts to students, as well as a number of other smaller proposals. In all, nearly $978 million was reduced from Evers’ proposed K-12 budget with JFC’s action, although at least most of the K-12 increases that remained went into General Aid and not Per-Pupil this time.

That $978 mil fills the budget holes caused by the GOP’s moves earlier this month to continue tax cuts for the rich and corporate and turn down Medicaid expansion. That seems like some messed-up priorities, and the WisGOPs decisions leaves flawed and failing school funding situation largely in effect, with the only positive change in direction being the likelihood of fewer referenda due to the higher revenue limits.

So even with these minor increases, there’s still a long way to go before we dig ourselves out of the hole dug during the previous 8 years, both in K-12 public school funding, and in most notable economic statistics.