Sunday, June 30, 2019

Lincoln Hills and future Corrections costs is yet another Walker mess to clean up

One thing that still will be ongoing regardless of what Tony Evers decides to do with the budget is trying to figure out what to do with the state's juvenile correctional facilities. And part of that was because the Joint Finance Committee and GOP Legislature rejected $234.8 million in Evers' budget that was to go for work on new juvenile facilities, as part of the plan to remove child offenders from the troubled Lincoln Hills and Copper Hills facilities in Northern Wisconsin.

And why? Because no one knows exactly where these new facilities will be, or when the inmates would be moved. And both the northwest side of Milwaukee and the Outagamie Town of Hortonia aren’t happy with the idea of the most serious juvenile offenders being sent to their communities
Neither community selected for the new state-run facilities is happy about the idea of having a prison nearby, but in Hortonia the opposition includes prominent Republican lawmakers who have great influence in the Legislature including the Senate President Roger Roth and Assembly Majority Leader Jim Steineke.

"We would advocate that the Administration justify their determination of the location of this facility," Roth, Steineke and five other lawmakers wrote to the Legislature's finance committee leaders in April asking them to delay approving funding to build the new state-run youth prisons.
The committee agreed and on Tuesday voted to wipe out millions in funding proposed by Evers for the Hortonia and Milwaukee facilities and instead made it available to county governments to start work on their facilities.
In addition, both the GOP-run Assembly and Senate agreed to push back the closing of Lincoln Hills as a juvy facility to July 2021 in the last two weeks, which would puts that move into the next state budget.

That's not quite what was expected when $25 million was set aside for the new facilities in 2018. At that time, the Legislature and Governor Walker rushed to side with a plan by State Rep Evan Goyke to set a January 2021 deadline to close Lincoln Hills, and have lesser offenders placed in smaller, regional facilities.

And like most things in WalkerWorld, the thought behind this sudden change in juvenile corrections policy was for short-term politics and not any kind of thought-out plan. As a result, the Milwaukee Journal-Sentinel mentioned a couple of weeks ago that the new Governor and other state officials are struggling with how to actually implement this plan, and how not to make sure the awfulness of Lincoln Hills repeats.
"It was absolutely rushed from the beginning, so we're buying more time to make sure the right things happen for young people," Sharlen Moore, director of Youth Justice Milwaukee, said. "We don't want to create one traumatic place for young people and just transplant it to another traumatic place."

Kenneth Streit, a University of Wisconsin Law School professor who specializes in juvenile justice policies and has represented juvenile offenders, said the bill passed in 2018 "budgeted an unrealistically low number -- but one that both parties could live with."

"Closing a correctional facility needs bi-partisanship. The crisis at Irma provided the critical moment that otherwise would never have come," Streit said. "I think (Walker) didn't want anything to do with it and wanted it to be 'done' so as to take it away as an election issue.”
Now the election has come and Walker has gone, but the issue on what to do with these youth offenders still exists, and more money needs to be found to pay for whatever action is chosen. So the GOP Legislature voted to move $40 million to local communities for their juvenile facilities, and took it away from other state facilities.
Last year, lawmakers approved borrowing $80 million to replace Lincoln Hills. Under that measure, $15 million was to go to expanding the Mendota Juvenile Treatment Center, $25 million was to go to new state-run facilities and $40 million was to go to new county-run facilities.

The committee on Tuesday doubled the amount the counties would get to $80 million, provided additional funding for Mendota but eliminated the funding for the new state-run facilities. It was unclear where GOP lawmakers wanted to house juvenile inmates without the new lockups, given that Lincoln Hills is to close in 2021.
We'll see if Evers goes along with that adjustment, or moves that $40 million back with his line-item veto pen. Seems like it could go a lot of ways there.

On the adult side, it's also noteworthy that $15 million that was proposed for add-ons to the men’s prison at Black River Falls and the women’s prison at Taycheedah women’s prison were both rejected by the Joint Finance Committee, but they did find $5 million to get things going with another correctional facility. So in addition to the juvenile facilities, there are going to be more costs that are needed to handle our still-large inmate population for the state. And more of that also needs to be figured out in the near future.

Maybe at some point we can try to head off the causes and punishments that lead to these spiraling expenses that lead to the need for all of these new prisons. Maybe…

In the meantime, state officials and legislators have to deal with the fallout of 8 years of negligence that happened under the last governor, and modify the previous laws and funding to deal with the reality that Scott Walker tried to avoid before the November 2018 elections. Happens a lot with that guy, doesn't it?

As Q2 ends, more evidence the economic is sliding downward

As the one-time bump from the Trump tax cuts wears off of the country's economic growth, we see more evidence that there is little strength below it to keep things going.

For example, in one report from the US Census Bureau, we have 3 bad signs from May.

May 2019 change vs April 2019
Trade deficit for goods UP $2.6 billion to $74.5 billion
Wholesale inventories UP 0.4%
Retail inventories UP 0.5%
Motor vehicle and parts inventories UP 0.8%

And those wholesale inventories are up 7.8% from May 2018, with retail inventories up 4.8%, and auto inventories up 7.9% in the same 12 months. No need to be making more products when you’re not selling the ones you already have.

But hey, at least all of those extra cars on the lot helped me replace my 12-year old Corolla (bought right before the last recession began, in summer 2007). If yesterday was any indication, there are a lot of end-of-the-model-year specials to grab, with lots of dealerships trying to clear inventory at the end of Q2,

The reality of a lack of need leading to lower business demand for bears itself out in another report from last week, which showed manufacturers have had less business in the last 2 months.
New Orders
New orders for manufactured durable goods in May decreased $3.3 billion or 1.3 percent to $243.4 billion, the U.S. Census Bureau announced today.

This decrease, down three of the last four months, followed a 2.8 percent April decrease. Excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders decreased 0.6 percent. Transportation equipment, also down three of the last four months, drove the decrease, $3.9 billion or 4.6 percent to $80.0 billion….

Unfilled Orders Unfilled orders for manufactured durable goods in May, down three of the last four months, decreased $6.4 billion or 0.5 percent to $1,171.2 billion. This followed a 0.2 percent April decrease. Transportation led the decrease, $5.8 billion or 0.7 percent to $803.6 billion.
And sales of new homes also had a significant slowdown in May.
New Home Sales Sales of new single-family houses in May 2019 were at a seasonally adjusted annual rate of 626,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.8 percent (±14.7 percent)* below the revised April rate of 679,000 and is 3.7 percent (±15.0 percent)* below the May 2018 estimate of 650,000.
That drop more than wipes out the gains of the last 2 months in new home sales. It could reflect the fact that the reality that consumers are starting to recognize the economy’s stalling out, as the impact of news of trade wars and other issues seeped into consciousness last month.
The numbers: Consumers confidence fell in June to the lowest level in almost two years as Americans grew more worried about trade tensions with China and said it was harder to find a job.

The consumer confidence index slipped to 121.5 from a revised 131.1 in May, the privately run Conference Board said Tuesday. It was the weakest result since September 2017….

Another gauge of consumers that looks out toward the next six months declined to a five-month low of 94.1 from 105.
Given that retail sales were actually strong in May, it makes you wonder how long that can hold up. A cutback by the consumer likely means recession will follow fast, as there is little else keeping the economy growing at this point.

And maybe it was very shaky to begin with, as the former Chair of President Obama's board of economic advisors noted on Thursday, when Q1 GDP had its last revision.

In some rare decent economic news, Friday’s personal income and spending report reiterated that consumers hadn’t yet hit the breaking point.
Personal income increased $88.6 billion (0.5 percent) in May according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased$72.6 billion (0.5 percent) and personal consumption expenditures(PCE) increased $59.7 billion (0.4 percent).

Real DPI increased 0.3 percent in May, and real PCE increased 0.2 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
That’s solid growth, although it’s also not indicative of any kind of boom. And what’s buried inside the report is that the income growth isn’t reaching the typical American as much as the decent topline numbers would make it seem.

Income growth, May 2019
Compensation for workers – up $18.5 billion (+0.17%)
Income for owners of businesses – up $12.8 billion (+0.8%)
Income from interest and dividends – up $43.8 billion (+1.6%)
Net Income from pensions, health care, other transfers – up $11.9 billion (+0.4%)
Rental Income – up $1.8 billion (+0.2%)

Along with that tepid 0.17% growth for workers, they only got 0.26% more in April, which are the two slowest months in 2019 so far. Not panic time, but definitely seems to be softening, especially for everyday Americans over the richer ones who benefit from asset growth. The 0.4% consumer spending increase is also the lowest in 3 months, and we'll see if the drooping consumer confidence translate into fewer sales in the near future.

This week’s reports are why the Atlanta Fed just brought their GDP projections for Q2 2019 back down to 1.5%, after those projections had risen in the prior two weeks.

As has been the case in most of 2019, there’s a lot of cross-currents for both interest rates and the overall economy, and just when you think there’s a definitive direction, a couple of reports like Friday’s takes you the other way.

Saturday, June 29, 2019

Foxconn delays and double-talk mean it's time to cut the cord

I haven't spoken about the Foxconn boondoggle in a while. And after this week, it's become more apparent that whatever might end up at the Foxconn site will be far from the "eighth wonder of the world," and more like a giant warehouse project with incentives that go far beyond similar incentives to corporations.

As Bruce Murphy recently noted in Urban Milwaukee, that is not what this thing was sold as.
The planned “LCD manufacturing plant,” as Foxconn continues to call it, would have an 881,549-square-foot footprint. In addition, there are plans for some auxiliary buildings related to chemical storage and wastewater treatment. And Foxconn also built a 120,000-square-foot multi-purpose facility last year.

But all this probably won’t total much more than 1.1 million square feet — or about one-eighteenth of the 20-million-square-foot campus Foxconn originally planned to build. And yet state and local governments are spending $1.6 billion to create infrastructure and connections for a project that looks like it will create a tiny fraction of the promised $10 billion in capital investment and 13,000 jobs.
And that infrastructure is spent regardless of how many people work there. In addition, don't forget that Foxconn only needs 520 jobs created IN THE STATE (not just in Racine County) to be eligible for hundreds of millions of dollars of additional tax breaks that will come to it as checks from the state. And Foxconn will likely argue that includes anyone working at its recently purchased lobbying headquarters office building on the Capitol Square in Madison should be part of that jobs total.

Foxconn Delaying Mount Pleasant Plant?> Wisconsin Public Radio’s Corri Hess noted that the timetable for the major facility in Racine county has been pushed back again.
In March, the tech manufacturing company announced construction on the Mount Pleasant Gen 6 fabrication facility would begin in summer and would be operational by the end of 2020.

But Thursday morning, an email sent out by WEDC with the subject line: “Special Bulletin: Wisconn Valley News” updating bid opportunities said the factory was now set for completion in early 2021.

The email also stated the company had begun pouring the concrete foundations for its “first major manufacturing facility in Mount Pleasant,” which will be “the first LCD screen fabrication facility of its type in North America. It will have nearly 1 million square feet of building space.”
1 million square feet? That sure isn't the 20 million square feet that was being hyped up last year. Yet, a Foxconn statement from Thursday claimed there was nothing to worry about.
“Today marks another milestone for Foxconn in Wisconsin,” said Dr. Louis Woo. “The installation of foundations and footings comes after months of careful planning and preparation, which demonstrates Foxconn’s concrete commitment to advanced manufacturing in Wisconsin. We are incredibly proud of the significant progress that Foxconn has made in Wisconsin in just one year, and we look forward to continued progress towards Q4 2020.”
Riiight, just like how these guys were saying 1 year ago this week that things would be rolling off the line in Racine County this year…until it wasn’t.

By the way, 3 of the 4 guys in that picture aren't in those positions anymore, and the 4th may well be gone in 18 months.

The WPR article also has this interesting bit from Asian business analyst Alberto Moel, who indicates Foxconn is likely not going to grow much in the near future because of the maturing life cycle of their products.
“If you look at the example of flat panel TVs, it went from nothing because they didn’t exist to everybody having one and there’s no room for growth in flat panel TVs,” Moel said. “And that’s what is happening now with smart phones.”
I'll now throw in this report from the Verge's Josh Dzieza, who has been all over the empty promsies and lack of developments with Foxconn in recent months. Dzieza notes that the details we know about the project don't come close to matching the big talk of the company and GOP hacks.
Bob O’Brien is the president of Display Supply Chain Consultants, and he was recently brought on by Wisconsin Governor Tony Evers to advise on the LCD industry. He has been watching for orders of the photolithography equipment and other machinery an LCD fab would require. Foxconn would have to order the equipment by the end of June in order to begin operations by the end of 2020, O’Brien says, and he has yet to see any orders. Which isn’t to say that Foxconn definitely won’t build an LCD factory, O’Brien says, but he would have to give them “every possible benefit of the doubt” to see how the company would meet its schedule: maybe, for instance, Foxconn could build vibration-dampening pads around the machinery, or take the unusual move of bringing in equipment from existing factories elsewhere.

Even as Foxconn lays the foundation for its factory, it continues to expand the list of devices it might make there. First it went from televisions and monitors to “vertical solutions” for education, health care, medicine, entertainment, sports, security, and smart cities. Earlier this month, an executive said the factory might also produce servers, networking products, and automotive controls. Though the expanding product line was treated as a sign of Foxconn’s commitment, it actually creates more uncertainty around the project. Manufacturing servers is, after all, quite a different process from LCDs...

Foxconn says it will still eventually employ 13,000 people, and that this factory is only the initial phase. The company says the factory will come online in the fourth quarter of 2020, though Gou also recently told reporters that Trump would attend the start of production next May. Foxconn has said the factory will employ 1,500 people.

Yet the building plans Foxconn submitted to the village show only 570 parking spots. At the end of last year, the company employed just 156 people in the state. It’s possible Foxconn could make up the remaining thousand or so workers by filling its currently vacant innovation centers, though its current rate of hiring makes that unlikely, and it’s probably not what anyone had in mind when they envisioned the return of manufacturing jobs to Wisconsin. To put this shortfall in perspective, Foxconn’s original target was to employ 5,200 people next year.

So one year after the groundbreaking, Foxconn owns a lot of vacant office space across Wisconsin, and it’s building something, but that something has gone from the first Gen 10.5 outside of Asia, to a much smaller Gen 6, to an assembly facility, back to a Gen 6, to possibly not even that.

Lastly, we just found out that Wisconsin Economic Development Corporation (WEDC) CEO Mark Hogan is going to step down this Fall. Not coincidentally, Governor Tony Evers gets the power to appoint the CEO of WEDC on September 1, and given that WEDC oversees the Foxconn project, doesn't it seem like a good time to change course?

We already know Foxconn has changed what they claimed the project would be when it this boondoggle was passed into law 2 years ago, and they still refuse to be up-front about their plans and what they will (or won't) do in Racine County today. Meanwhile, we have thrown hundreds of millions of dollars of infrastructure down the drain, changed environmental laws for this company, and cleared many residents off of their land.

ENOUGH! There's $211 million being set aside in the 2019-21 budget for a project that won't be happening in any manner that resembles what it was claimed to be. I'd love to see Gov Evers write down that amount with his veto pen in the next week, and signal that he will cut the cord on Foxconn. Give that rent-seeking corporation a small check to have them go away, and stop the bleeding before they take a lot more from Wisconsinites in future years.

Friday, June 28, 2019

GOPs are weak cheaters, but play it smart

Been a lot of things going on in my real life (mostly fun, but definitely busy). But wanted to get in a few quick thoughts on this Friday morning.

1. I'd strongly encourage Tony Evers not to veto the whole budget that is on his desk, but instead to surgically use the line-item veto to get rid of some idiocy that the GOP threw in. This includes the kickback to State Senator Chris Kapenga on Tesla dealerships (Evers should tell them to do this as a separate bill), and Evers can adjust some of the new registration and title fees for vehicles, while cutting the one-sided giveaways to small-town roads at the expense of cities and villages. There are plenty of other spots to veto, but those were the first I thought of.

To me, it's a tell that GOPs are pleading with Evers not to reject the whole budget, as they know they are losing the policy arguments on many of these issues. And the GOPs gave Evers some concessions with more spending for K-12, some more spending for roads, and increased rates for Medicaid caregivers and hospitals. It's nowhere near to what we need, especially with the rejection of Medicaid expansion, but it also allows for the bleeding to stop, and Evers can get more in his next budget while holding Medicaid expansion and other GOP decisions over their heads in 2020.

2. I'm disgusted but also unsurprised by the Supreme Court's decision on gerrymandering, which essentially kills any chance of Republicans facing any consequences for their 2011 map-rigging and the secretive way they did it. And Evers wisely connected this to why GOPs continue to hold back the will of the majority of Wisconsinites on the budget and other issues.

If every Dem running in the next 2 years isn't saying "OUTLAW GERRYMANDERING" at every level, they're doing it wrong. This is a political winner, especially now that it makes people think about how much right-wingers have rigged our political system, and makes Republicans try to defend this garbage to the public (and they won't be able to).

And yes, it makes it tougher for Dems to win at the legislative level now that "packing and cracking" is considered OK by SCOTUS. But it also presents opportunities, and there's always a point where gerrymanders backfire if the people are angry enough at the party that set up the rigging.

Repay, do not forget. More to follow over the weekend if I find the time.

Tuesday, June 25, 2019

You thought GOPs were done changing the budget? Nope.

Today, the full Assembly is getting its chance to amend and vote on the state budget. And they had to do quite a few tweaks to try to get the document to Governor Evers' desk.

Here's a link to the 31 changes that the Assembly Republicans put in to the budget today. The first one I want to discuss has to do with the method chosen to reduce property taxes to a level below Governor Evers' original budget.

And while I predicted it would be done by limiting school revenues, but instead it was through putting in even more tax dollars into the Wisconsin Lottery.
6. Increase GPR Funding for the Wisconsin Lottery. Modify the provisions of the substitute amendment to provide an additional $1,500,000 GPR in 2019-20 and $4,683,400 GPR in 2020-21 to the Division of Lottery's general program operations GPR appropriation and modify the appropriation to support administrative expenses, excluding costs associated with salaries and product information (advertising). This would result in a total increase in GPR for lottery administration of $31,700,000 in 2019-20 and $33,083,400 in 2020-21. Reduce the SEG appropriation for general program operations by $1,500,000 SEG in 2019-20 and $4,683,400 SEG in 2020-21 and provide an additional $1,500,000 SEG in 2019-20 and $4,683,400 SEG in 2020-21 for the lottery and gaming credit. As a result of the amendment, GPR funding for the lottery would total $71,700,000 in 2019-20 and $73,083,400 in 2020-21. The amendment would support an estimated average lottery and gaming credit of $177 in 2019-20 and $178 in 2020-21.
So how much would that extra $6.2 million in tax dollars save the typical Wisconsin homeowner? $1 this year and $4 next year. Don't spend it all in one place, folks! And all to have some kind of lame talking point of "Our budget has lower property taxes than Gov Evers' does."

Well aren't you clever?

There was also some nice pork doled out for GOP legislators to encourage them to go along. For State Sen. Andre Jacque, Vos and company reversed the course of the Joint Finance Committee, added back some prosecutor positions, and allowed them to get paid more.
11. District Attorney Pay Progression. Increase the amount provided in the substitute amendment by $1,246,600 GPR in 2019-20 and $2,231,300 GPR in 2020-21 to provide a one-step pay progression increase to eligible district attorneys on July 1, 2019, and 2020.

12. Additional Assistant District Attorneys. Increase the amount provided in the bill by $1,430,000 GPR in 2019-20 and $2,162,000 GPR in 2020-21 and 34.95 GPR positions annually, to provide additional prosecutors to District Attorney Offices across the state as indicated in the table below. New GPR positions would have an anticipated start date of October 1, 2019.
Naturally, 34.8 of those new 34.95 tax-funded positions are outside of Milwaukee and Dane Counties, with Jacque's home of Brown County getting 3 additional prosecutors with state backing.

There's also more money for rural roads through this provision.
4. Supplemental Transportation Aid to Towns. Modify the substitute amendment to provide $2,500,000 SEG annually from an annual, sum certain transportation fund appropriation to fund annual, supplemental mileage aid payments to towns that are currently limited by the 85% of three-year average cost limitation under the general transportation aid program. Require that each year any town subject to the 85% of three-year average cost limitation under the general transportation aid program would be eligible to receive a supplemental mileage aid payment under a separate appropriation. Specify that any supplemental aid payment, when combined with a town's general transportation aid payment, could not exceed 100% of that town's three-year average costs submitted under the general transportation aid program.
Towns being areas outside of city and village limits, this means that $5 million in extra payments are overwhelmingly going to go to rural areas represented by Republicans. I'm good with helping local communities get their roads fixed, but this is transparently one-sided toward one type of community over another.

There's also this bit of sketch, as reported by the Milwaukee Journal-Sentinel.
A last-minute budget provision to make it easier to sell cars made by Tesla is aimed at winning the crucial vote of Sen. Chris Kapenga, who has pushed for the measure in the past and owns a business that sells Tesla parts and salvaged electric vehicles....

The budget measure would allow Tesla to sell its electric vehicles directly to consumers rather than having to go through dealers.

Kapenga, a Republican from Delafield who works as an accountant, owns Integrity Motorsports of Eagle, which sells Tesla parts and rebuilds and sells salvaged Teslas, according to the company website. A 2019 Tesla Model X sells at prices ranging from $83,000 to $139,000, according to Kelley Blue Book.
I don't mind the idea of allowing Tesla to sell their vehicles direct in Wisconsin, as long as they have to follow the same consumer protection rules as other auto dealers. But this is such an obvious bit of self-dealing to get Delafield Dumbass Kapenga to not hold up the budget in the Senate, that Evers should veto it on general principle.

Integrity Morotsports, eh?

That's quite a bit of extra spending that GOPs are throwing into the budget. So it's gotta be offset by something. Oh, here we go.
Medical Care Insurance Deduction for Self-Employed Persons. Delete the provision in the substitute amendment that would have modified the limitation on the deduction under the individual income tax that self-employed persons may claim for medical insurance for themselves, their spouse, and their dependents, beginning in tax year 2020. Instead, retain the current law provision that limits the deduction for all persons to the self-employed person's aggregate net earnings from a trade or business that are subject to Wisconsin tax. The modification would have sunset the current limitation and, instead, limited the deduction to the person's aggregate wages, salary, tips, unearned income and net earnings from a trade or business that are subject to Wisconsin tax. In addition, delete the provision that would have modified the proration of the deduction for nonresidents and part-year residents and the provision that would have repealed obsolete provisions regarding medical care insurance deductions that were sunset in prior years. Increase individual income tax collections by an estimated $9,500,000 in 2020-21.
This was a tax cut Evers put into the budget, and it went through JFC. But apparently this is too much to ask for from the fuill gerrymandered Legislature. So much for helping entrepreneurs. Yeesh.

Assuming it passes the gerrymandered Assembly (and with 63 GOPs with only 50 votes needed, why wouldn't it pass?), it is slated to go to the Senate tomorrow. Let's see if there are 17 people in that body that'll go for it, after the extra goodies that were handed out today.

Monday, June 24, 2019

Sorry Chuck, the Trump economy isn't so great in much of America

I didn't watch a minute of Chuck Todd's absurd interview with President Trump yesterday, but I did see the follow-up on social media. And I took extra notice of this comment, which came right after Todd (rightfully) noted that the country's low unemployment rate is just a continuation of a 9-year trend that took up most of Barack Obama's time in office.

Yeah, you might want to look a little deeper Chuck. In fact, the US economy is slowing to mediocrity these days, and it's less than that in much of America.

Job growth in the US has slowed from the bubbly levels of 2018, with an average of 127,000 new jobs a month since January- the lowest 4-month average since August 2012. While some of that should be expected in a time of 3.6% unemployment (hard to add people when everyone that wants to work is already working), it’s an obvious slowdown in employment gains that won’t help sustain the 10-year economic expansion.

And the lower 1.58% rate of job growth doesn't tell the full story. What’s being missed by the affluent, connected Coastal media is that the allegedly strong “Trump economy” is sputtering out in much of America.

US job growth May 2018-May 2019
US total rate of growth +1.58%
15 states are above 1.58%
35 states are below 1.58%

Even more amazing, exactly ONE of those 15 states that were above the US rate of growth is located North of the Mason-Dixon line and east of the Rockies (South Dakota, and they’ve only gained 8,400 jobs in that time). (You can click here for a good bar chart that compares each state for total job growth over the last 12 months).

And worse for Trump, the Rust Belt states that gave him the win in 2016 are the ones that are falling farther behind under his presidency. In fact, the 5 states that voted twice for Barack Obama then flipped to Trump in 2016 all are short of 1% job growth over the last 12 months, let alone the 1.6% for the country.

“Rust Belt” Obama states that voted for Trump
Penn +0.9%
Ohio +0.8%
Mich +0.53%
Wis. +0.51%
Iowa +0.4%

"But Jake, isn't the stock market still booming under Trump? Aren't people's 401k's doing great?" Again, depends what you're talking about. Sure, if you look at the DOW Jones average of 30 large companies, things seem OK. But if you dig deeper into the stock market as a whole, not so much.

I'll go from the date Trump signed the GOP Tax Scam into law, on December 22, 2017, and look at the record over the 18 months that have occurred since then.

Stock market performance last 18 months
DOW Jones +8.0%
S&P 500 +9.8%
Russell 2000 (smaller-caps) -0.8%

As you can see, while the DOW and S&P by a relatively small amount, the Russell 2000 is lower today than the day Trump signed the Tax Scam, into law. It's down 12% from its peak last August 31, and after a sizable decline today, is down 5% in the last 3 weeks, and went below its (already-declining) 200 day moving average today.

A common theme with the Trump economy is that a few big gainers at the top make the overall numbers look good. But the typical American state and person is barely any better off, and they will be the ones most likely to be the first to feel the pain when the inevitable recession hits sooner than later.

It's something that's in plain sight for much of the country, but the connected, corporatist media members in the Acela Corrioor don't have a clue about it. Which is why Trump's re-election prospects may be even tougher than those Coastal media types think, as the states he can't afford to lose are falling farther behind economically.

Sunday, June 23, 2019

So what might be changed out of the budget this week?

The state budget is expected to be voted on by the full (gerrymandered) Legislature this week. But what gets voted on in the Legislature is likely to be different than what passed out of the Joint Finance Committee last week. Patrick Marley and Molly Beck had a good preview in the Milwaukee Journal-Sentinel late last week.
Assembly Speaker Robin Vos of Rochester said Republicans planned to tack an amendment onto the budget that would further limit property tax increases and require the full Legislature — not just a committee — to increase vehicle fees.

Vos and others said Republicans were also considering a provision that would change how Tesla Motors' electric cars are sold.

Vos and the others didn't say what other provisions the budget amendment might contain or say say how much of an effect the property tax provision would have on typical homeowners.
ABS - Always Be Scheming

So what might those property tax limitations look like? Given that the Joint Finance Committee already nixed Evers' proposal to allow more local governments a little more leeway to raise property taxes (and instead kept them under the same limits they've struggled with for the last 8 years), that doesn't seem likely to be the place that GOPs would try to limit property taxes even more.

But Evers' proposal to allow a 2% increase in revenue limits for K-12 public schools stayed in, and that, combined with a severe reduction in Evers' proposed bump to General School Aids, was a reason that property taxes were slated to go up under the Joint Finance Budget. At least until the GOPs on JFC decided to throw another $58 million to the state's lottery to get the property tax number down to what was in Evers' original budget.

My guess is the K-12 move will be similar to an idea Vos had 3 years ago that would have further damaged public schools on top of the money funneled away to voucher schools.
Assembly Speaker Robin Vos is not backing off a proposal to reduce the amount of property taxes school districts can raise to offset the cost of vouchers.

The Assembly on Tuesday is scheduled to take up his proposal, attached as an amendment to a bill making technical changes to the state’s new voucher program for students with disabilities.
That plan was eventually defeated. At this point, I'll step back and remind you that today, most public school districts that have a student living in their district that use a voucher to go to a private school lose the same amount of money that the voucher school gets (which makes the net cost $0).

Those public schools are currently able to make up the difference in lost state aid by raising property taxes, under the state's revenue limit. My guess is that might get changed, and given that many of the GOPs in the State Legislature got put in their seats with an assist from Betsy DeVos' pro-voucher contributions, they could allow it to happen, even if it screws their local public school.

Another possibility is that those 2% increases in revenue limits for schools would go away. That move would have risks associated with them, as it would continue the elevated amount of referenda that many have complained about in recent years. But the cosmetics of the claim of "we reduced property taxes" might be enough for Vos and the other GOPs to try.

Beck and Marley also said there will likely be a change to a provision inserted by the GOPs on Joint Finance that was allegedly to start a study on tolling and other revenue enhancers for the Wisconsin Department of Transportation. As people dug into what was written, they found that it could have set up a situation where new fees could have been put in place without approval from either Governor Evers or the full Legislature.
Under the budget provision, the state would spend up to $2.5 million on a study into setting new fees based on how many miles vehicles travel. Miileage-based systems could include traditional tolling or having drivers install devices in their vehicles that would tabulate how much they travel.

Once the study was completed, the Department of Transportation would recommend whether to impose new fees. The finance committee — which consists of 16 of the state's 132 legislators — could sign off on that plan or write one of its own.

Vos said supporters of the plan never intended to cut the majority of lawmakers out of having a say on the matter. The amendment would address that issue so the full Legislature would have to vote on any new vehicle fees, he said.
Riiiight Robbin', I'm sure the 12 members of the Joint Finance Committee just threw this in there on their own, with specific language to go around state law. Like these guys do ANYTHING without having Vos and Senate GOP Leader Fitzgerald signing off on it. Give me a freaking break.

Just like with the open records fiasco from 4 years ago, there was no mistake here. It was just that the GOP leadership got caught by the state's media.

Anyone with a brain can bet that these GOPs will try some last-minute BS to sneak in to try to goad Evers into signing off on a regressive, bad budget, or throwing the whole thing out and leading to months of delays. But given that Evers can strike out most changes to current law while keeping increased investments in a number of areas, my guess is that whatever might get out of the Legislature this week will eventually be signed with Evers, albeit with a lot of line-item vetoes included.

Stay tuned.

Wisconsin jobs and Census reports shows aging state needs new direction

We got a new Wisconsin’s May jobs report on Thursday, and it was decent. But as you'll notice, it's the same “yeah, but” that we’ve seen before.
Place of Residence Data: Wisconsin's preliminary, seasonally adjusted unemployment rate in May remained at 2.8 percent, down from 3.1 percent in May 2018. Wisconsin's labor force participation rate was 67.3 percent in May 2019, down from 68.1 percent in May 2018. The national unemployment rate and labor force participation rate in May were 3.6 percent and 62.8 percent respectively.
Note that “labor force participation” stat. It continues a trend of Wisconsin’s labor force and total number of people “employed” continuing to decline, with the labor force down 5,500 in May, and number employed down 6,000. In fact, Wisconsin’s labor force of 3.122 million is the lowest we’ve had in more than 3 years (March 2016).

Which is why I keep pointing out that our low unemployment rate is misleading, because it doesn’t reflect any kind of significant job growth. If you impute the participation rates from May 2018 and May 2019 to get an “adult population” figure, it shows that Wisconsin has 29,000 more people of adult working age. At the same time, more than 10,000 fewer of those people identify as “employed”. That sounds like a place that is in decline, not one that’s “booming.”

On the payrolls side, we finally did get some growth, albeit not much.
Place of Work Data: Wisconsin added 19,600 private-sector jobs from May 2018 to May 2019, and 15,000 total non-farm jobs over the same time period. From April 2019 to May 2019, Wisconsin added 1,800 private-sector jobs and 1,700 total non-farm jobs.
I guess it beats having fewer jobs in May, and April’s total was revised up by 2,600 (meaning we only lost 500 jobs that month) but Wisconsin is still down 2,500 jobs for all of 2019 (200 in the private sector). And job growth of 0.5% over the last 12 months when the country has added jobs at a rate more than 3 times faster (1.6%) isn’t good at all.

Part of the slow growth issues in Wisconsin was further illustrated by this week's report from the US Census Bureau which looked at ages and demographics of all US states and counties. And while parts of the country are growing younger (including a Census Bureau definition of "Midwest" that seems to be more like the Great Plains), Wisconsin is growing older, particularly up North.

The Wisconsin State Journal went deeper into these numbers, and the divide among different parts of the state was even more noticeable.
Wisconsin is now the 13th oldest state in the nation, which has an overall median age of 38.2, up 1 year from 2010.
According to the Census, four out of five U.S. counties were older on average in 2018 than in 2010.

In this decade, the median age has increased in all but two Wisconsin counties — Grant and Menominee, which is the youngest at 31.1 years. Iron County remains the oldest, with a median age of 55.2 years....

There are now a dozen Wisconsin counties where half the population is over 50.

Many of those counties have seen an influx of retirees at a time when younger people are moving to urban areas.

“It’s kind of a triple-whammy,” [Dan] Veroff [of the UW-Madison Applied Population Laboratory] said.
And this is the real reason for the low unemployment that Wisconsin Republicans keep trying to prop up - aging Boomers drop out of the work force, and are not replaced by younger people staying in the state, so the unemployment rate "drops" without any growth under it.

We've had 8 years of trickle-down in Fitzwalkerstan that hasn't helped anyone except for a connected few, and it's led many people with talent to either leave Wisconsin, or not come here. As shown by last week's stats from both the Wisconsin jobs report and the Census Bureau, we need to have policies that encourage workers and others to come to the state, to reverse the lower job growth and declining labor force in recent years.

To do that, it requires higher wages and stronger community investments that increase the availabilities of services and stability. In other words, exactly the opposite of what we've seen with the regressive, cronyist WisGOP agenda that has been in place since 2010.

Saturday, June 22, 2019

Much of rural Wisconsin has fallen further behind 2010s, but keeps voting for failed GOP policies

Earlier this month, we had a release by the "gold standard" Quarterly Census on Employment and Wages (QCEW) that gave a complete picture of what looking at the biggest gainers over the 8 years that Walker and WisGOP controlled all facets of state policy, the state had cumulative private sector job growth of 233,101 (+10.26%).

But not all areas in Wisconsin did so well, including many of the places that are supporting Scott Walker and other Republicans in strong and increasing numbers. Remarkably, despite 8 years of US economic expansion, 11 of Wisconsin's 72 counties had fewer private sector jobs at the end of the Walker era than when they started, and 2 more had fewer than 100 jobs gained between December 2010 and December 2018.

Out of those 11 counties that lost jobs during Walker’s tenure in office, most had job growth bottom out during Walker’s first term, and slightly recovered over the last 4 years. But a handful were unfortunate enough to lose jobs in BOTH 4-year terms.

Wisconsin counties losing private sector jobs 2010-2014 and 2014-2018
Crawford Co.
Green Lake Co.
Price County
Iron County

Despite that reality, I’ve noticed Congressman Sean Duffy (R-Real World) giving this line a lot in recent months.

Odd that he says that, and not just because his Northern and Central Wisconsin district has taken on a lot of the record closings of dairy farms for the state. 26 of Wisconsin’s counties are part of Duffy’s district, and based on the most recent QCEW, many of those areas are losing jobs under Donald Trump's presidency.

Counties in Sean Duffy’s district that lost jobs
Lost private jobs in 2018
Ashland Co.
Clark County
Iron County
Jackson Co.
Juneau Co.
Langlade Co.
Lincoln Co.
Oneida Co.
Polk County
Price County
Washburn Co.
11 of 26 counties

Lost private jobs in 2017
Bayfield Co.
Chippewa Co.
Florence Co.
Forest County
Oneida Co.
Price Co.
Sawyer Co.
Taylor Co.
8 of 26 counties

Fewer private jobs in Dec 2018 vs Dec 2016
Forest Co.
Florence Co.
Oneida Co.
Price County
Washburn Co.
5 of 26 counties

There are also several additional counties in Duffy’s district that added less than 100 jobs in those years, which isn’t exactly “booming” growth. But then again, Duffy’s pretty much stopped being a rep of Wisconsin’s 7th District and is clearly trying to grift himself into a Trump-related job.

In addition, there are 5 Wisconsin counties that had decent growth from 2010-2014, but then lost jobs in Walker’s second term. All of these are ended up in the bottom 30% of job growth out of all Wisconsin counties for the last 8 years.

Job loss 2014-2018
Washburn Co -0.55%
Oneida Co. -1.84%
Waupaca Co. -2.38%
Marinette Co. -3.60%
Trempealeau Co. -5.81%

Remarkably, Trempealeau County swung from voting 56% for Barack Obama in 2012 to 54% for Donald Trump in 2016. Scott Walker also went from 52% support in that county in 2014 to 54% in 2018, despite losing 4% of support in the state overall, and the Assembly district that represents the county has flipped from Democrat to Republican at the time.

Now, Trempealeau is an unusual circumstance, as they relied heavily on frack mining as part of their strategy for job growth (how’d that work out for ya?) But Walker also grew his support in 3 of the other 4 counties that lost jobs during his second term (and only lost 1.2% in Waupaca vs 4% for the state). So what’s the cause and effect here? Is the talent leaving these rural places for higher wages and better opportunities, and what’s left behind more likely to be Republican voters these days?

I can somewhat understand if people in these areas wanted to take a chance on Trump (even if I don’t forgive it), but why stick with Walker when things got noticeably worse over his second term in office?

Likewise, it’s noteworthy that the strong growth in anti-Walker Dane County allowed the state's job market to be merely subpar instead of disastrous during Scotty's Reign of Error. Maybe rural Wisconsin needs more leaders and politicians that think like Madisonians do, and less like what ex-reality show characters like Sean Duffy and Donald Trump do.

Friday, June 21, 2019

The Wisconsin budget, by the numbers so far

Before the gerrymandered GOP Legislature gets to vote on the budget, the Legislative Fiscal Bureau released their summary of what the budget looks like now, after it has passed the Joint Finance Committee.

What we have isn’t all that much different than what we had when the budget began, except that more money is projected to be carried over (due to the one-time effects of moving money around due to the GOP Tax Scam) and some proposed spending has been cut and/or transferred. In fact, the deficit built into year 2 isn’t much different at all.

2019-21 budget
2019 carryover $691.5 million
2019-20 Ending balance $937.9 million
2020-21 Ending balance $105.3 million

JFC budget
2019 carryover $947.7 million
2019-20 Ending balance $829.5 million
2020-21 Ending balance $122.6 million

The structural picture is a similar story – slightly better than where we were. But not by much.

Evers Budget
2021 carryover $105 million
2021-22 Structural balance -$847 million
2022-23 Structural balance -$1,113 million

JFC budget
2021 carryover $123 million
2021-22 Structural balance -$670 million
2022-23 Structural balance -$737 million

The JFC did cut a decent amount of overall spending in their deliberations, but a lot of that was giving back what the Feds would have covered woth Medicaid expansion. General Purpose Revenue (State tax dollars) didn't end up going down by much at all, especially once you account for a $900 million reduction in state aid to K-12 public education.

Evers Budget
$83.76 billion total
$38.39 billion General Purpose Revenue

JFC budget
$81.67 billion total
$37.70 billion General Purpose Revenue

And in the Transportation Fund, the amounts aren't that different, although how you get there is (Evers wanted to increase the gas tax, GOPs on JFC chose to significantly increase title fees and some registration fees instead).

Evers Budget
2019 carryover $87.06 million
2019-20 State Revenues $2.033 billion
2019-20 State Expenses $2.004 billion

2020-21 State Revenues $2.131 billion
2020-21 State Expenses $2.217 billion

2019-21 Borrowing $338.25 million
2021 Ending Balance $30.64 million

JFC budget
2019 carryover $97.06 million
2019-20 State Revenues $1.994 billion
2019-20 State Expenses $2.035 billion

2020-21 State Revenues $2.059 billion
2020-21 State Expenses $2.062 billion

2019-21 Borrowing $326.25 million
2021 Ending Balance $53.04 million

However, Robbin' Vos is making noise about changing some of these items in the final package when the Assembly votes on the full budget next week, so stay tuned. But those are the numbers as they stand today.

Wednesday, June 19, 2019

Fed won't cut yet, but Wall Street's counting on it down the road

Despite some hope from coked-up traders for a rate cut, the Federal Reserve kept interest rates the same on Wednesday. However, the Fed did mention that recent developments allowed it a bit more flexibility, ad they opened the door for stepping in if the economy gets worse.
The Federal Reserve on Wednesday left a key interest rate unchanged and signaled it’s unlikely to cut borrowing costs in 2019, but the central bank also left itself wiggle room by saying it would “closely monitor” the economy in light of waning inflation and growing “uncertainties.”

After a two-day meeting, the Fed held its benchmark fed funds rate steady between 2.25% and 2.5%. The Fed said the labor market “remains strong” and the economy continues to expand at a “moderate” pace….

Still, the Fed also acknowledged “uncertainties” have increased in the past month and a half, alluding to a widening rift between the U.S. and China on trade that’s hurt American manufacturers, farmers and exporters. Hiring in the U.S. also slowed sharply in May.

At the same time, inflation has tapered off and is running below the 2% level the Fed considers healthy for the economy. The central bank cuts its forecast for inflation in 2019 using its preferred gauge to 1.5% from 1.8% — well below its 2% target.
It’s worth noting that the Fed also said it “will act as appropriate to sustain the expansion,” which may be a way to get President Trump to back off of his criticism, as Trump wants lower rates and a more Bubblicious economy for the next 16 months.

The Fed still projected real GDP growth of 2.1% for 2019, but lower inflation would likely make things feel more stagnant, especially since much of the lower inflation would likely come from declining food and gasoline prices that will lead to more layoffs in those industries.
Meanwhile, the everyday economy still seems to be slowing down in the 2nd Quarter of 2019. An example is the recent housing numbers from the Census Bureau, which didn’t seem like much to me.
Building Permits
Privately owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,294,000. This is 0.3 percent (±1.3 percent)* above the revised April rate of 1,290,000, but is 0.5 percent (±1.4 percent)* below the May 2018 rate of 1,301,000. Single-family authorizations in May were at a rate of 815,000; this is 3.7 percent (±1.2 percent) above the revised April figure of 786,000. Authorizations of units in buildings with five units or more were at a rate of 442,000 in May.

Housing Starts
Privately-owned housing starts in May were at a seasonally adjusted rate of 1,269,000. This is 0.9 percent (±12.9 percent)* below the revised April estimate of 1,281,000 and is 4.7 percent (±8.9 percent)* below the May 2018 rate of 1,332,000. Single-family housing starts in May were at a rate of 820,000; this is 6.4 percent (±9.5 percent)* below the revised April figure of 876,000. The May rate for units in buildings with five units or more was 436,000.

Housing Completions
Privately-owned housing completions in May were at a seasonally adjusted annual rate of 1,213,000. This is 9.5 percent (±13.7 percent)* below the revised April estimate of 1,340,000 and is 2.8 percent (±9.1 percent)* below the May 2018 rate of 1,248,000. Single‐family housing completions in May were at a rate of 890,000; this is 5.0 percent (±12.7 percent)* below the revised April rate of 937,000. The May rate for units in buildings with five units or more was 319,000.
And yet I was reading things about how “great” this report was. Really? Compared to where we were 4 months ago, home building is still worse off, and not by a little.

Seasonally-adjusted change from January 2019-May 2019
New building permits
Jan 2019 1,317,000
May 2019 1,294,000 (-1.7%)

New housing starts
Jan 2019 1,291,000
May 2019 1,269,000 (-1.7%)

Housing Completions
Jan 2019 1,261,000
May 2019 1,213,000 (-3.8%)

And as you see above, those housing completions tanked in May after having a rate of more than 1.33 million for the 3 months before it.

The bond market sure seemed to think things were slowing, as interest rates dropped across the board, and the benchmark 10-year note fell another 3 basis points to end up below 2.03%. It also keeps us well into rate inversion, which as mentioned before, has meant recession within 12-18 months over the last 30 years.

I think the Fed recognized that because we aren’t plunging below 1% growth, they did not need to panic people about the overall economy (which an immediate rate cut would signal). But the Wall Streeters seemed to like the admission that later rate-cut action may well be taken, so they pumped up stocks more this week. As a result, the disconnect between a stagnant Main Street and a higher Wall Street is likely to grow even wider, if that’s possible.

GOP couldn't end up raising property taxes, so more of your tax dollars will prop up the Lottery

After weeks of debate and maneuvering, it turns out the GOP's changes to the Wisconsin state budget didn’t change anything when it came to property taxes.
In Senate Substitute Amendment 1 (SSA 1) to SB 59 and Assembly Substitute Amendment 1 (ASA 1) to AB 56, the Joint Finance Committee modified a number of the Governor's provisions affecting property tax levels. For counties, municipalities, and technical college districts, modifications included deleting the Governor's recommended changes to county and municipal levy limits and technical college revenue limits. The Committee modified the current law levy limit Page 2 adjustment for fees for covered services by deleting storm water management from the list of covered services. However, the effect of this modification would not have a measurable effect on county and municipal levies. Also, the Committee increased funding for the lottery and gaming property tax credit by transferring $30.2 million GPR in 2019-20 and $28.4 million GPR in 2020-21 to partially fund non-personnel lottery costs. As a result, an additional $58.6 million is available for property tax relief through the lottery and gaming credit. For school districts, several changes would be made under Joint Finance that would affect statewide school levies, including: (a) providing a revenue limit adjustment of $175 per pupil in 2019-20 and $179 per pupil in 2020-21; (b) setting the low revenue adjustment amount at $9,700 per pupil in 2019-20 and $10,000 per pupil in 2020-21; and (c) providing a base funding increase for general school aids of $83.2 million in 2019-20 and $246.7 million in 2020-21.

As a result of the preceding changes, gross property tax levies are estimated to increase on a statewide basis by 2.7% in 2019(20) and by 2.5% in 2020(21), and net tax levies would increase by an estimated 2.9% in 2019(20) and by 2.8% in 2020(21). These tax changes would result in tax bills for a median-valued home estimated at $2,927 in 2019(20) and $2,975 in 2020(21). These represent increases of $56 (2.0%) in 2019(20) and $48 (1.6%) in 2020(21), which would match the tax bill estimates under AB 56/SB 59.
As it was, property taxes were slated to go up on their own over the next 2 years because of higher property values and more building in the state.
Increases in statewide property values have occurred each year since 2013, including increases of 3.2% in 2017, and 4.0% in 2018 for a median-valued home. The median home value is projected to continue to increase by 4.0% in 2019 and 2.9% in 2020. Comparatively, total statewide equalized values are projected to increase 4.8% in 2019 and 4.1% in 2020.

Since total values are expected to increase faster than the median home value, the estimated property tax change on a median-valued home is less than the estimated rate of change of statewide tax levies. Under the preceding assumptions, statewide net levies are estimated to increase by 2.4% in 2019(20) and by 2.1% in 2020(21) under AB 56/SB 59. In comparison, the estimated net tax bill on a median-valued home is estimated to increase by 2.0% for 2019(20) and by 1.6% in 2020(21) under the bill. Tax bills are estimated at $2,927 for 2019(20) and $2,975 for 2020(21) under AB 56/SB 59.
And those increases may be underestimated, as the most recent home sales report from the Wisconsin Realtors Association shows prices are going up even more than that.
The median price of homes sold in Wisconsin was $203,000 in May — believed to be the first time it has topped the $200,000 milestone for the entire state.

A report Monday by the Wisconsin Realtors Association shows the state median hit that level with a big assist from a 13.1% rise in the median price of houses sold in southeast Wisconsin, where real estate agents say good suburban Milwaukee listings are in short supply.
Nonetheless, a general rise in home prices has been underway in Wisconsin since 2012, and that upward trajectory finally pushed the monthly state median past the $200,000 mark….

The median price of Wisconsin homes sold in May jumped 9.1%, to $203,000 from $186,000.
Somehow, I don’t think people in Wisconsin are getting 9.1% raises, so this may not necessarily be great news in the long run. It certainly is likely that situation will drive up assessed values and property taxes this year as a result.

The property tax increase under both the Evers budget and the JFC's changes is less than what we would have had under the situation Governor Walker left us in. The big reason why Evers’ budget reduced property taxes is because he wanted to put a lot more state money into K-12 public education, which counteracted some of the effect of the projected increase in property values.
Compared to current law estimates of $2,943 for 2019(20) and $2,988 for 2020(21), the estimated tax bill on a median-valued home would be $16 less (-0.5%) for 2020(21) and $13 less (-0.4%) for 2020(21) under the bill. The most significant factor leading to the overall change in the estimated tax bill for the median-valued home varies by year. The Governor's proposal to related to schools would have the greatest effect on the tax bill in the biennium. These provisions would result in estimated reductions to the school tax on the median-valued home of $25 in 2019(20) and $32 in 2020(21), after factoring in the current law credits in that year.
But given that Republicans in Joint Finance took out $900 million of Evers’ proposed increase to K-12 General School Aids, there was a potential for significant property tax increases without any other moves.

In addition, this other shell game will continues to grow under the GOP budget, which often ends up raising property taxes for the nearby public school district.

So the GOPs were now having to face having to be responsible for higher property taxes as the budget stood last week. So that explains this back policy choice on the last day of deliberations in the JFC, which was the final piece of a 22-part motion on taxes.
22. Increase GPR Funding for the Wisconsin Lottery. Provide $30,200,000 GPR in 2019-20 and $28,400,000 GPR in 2020-21 to support the Division of Lottery, for the purpose of increasing total GPR funding for the lottery to $70,200,000 in 2019-20 and $68,400,000 in 2020-21. Create two new annual GPR appropriations under the Division of Lottery for: (a) vendor fees ($17,826,000 annually); and (b) general program operations, excluding personnel and advertising expenses ($4,393,300 in 2019-20 and $2,593,300 in 2020-21). Provide an additional $7,980,700 GPR annually in the existing retailer compensation appropriation. Reduce SEG appropriations for vendor fees, general program operations, and retailer compensation by these amounts and make a corresponding increase in the SEG lottery credit appropriation to reflect the higher amount available for property tax relief.

So because they didn't want to be seen as having higher property taxes, the GOPs threw $58.6 million in tax dollars into the lottery at the last minute.

What a petty reason for bad policy! If they wanted to keep property taxes down, why didn’t they add that $58.6 million to schools or localities without raising their revenue limits by that amount? The same effect of “no additional property tax increase” would have happened, and we wouldn’t be adding to the Lottery shell game either.

I'd almost say Evers should veto this move out of general principle. But because he can't veto the expansion of the voucher program (the GOPs have basically made it an entitlement), property taxes WOULD then go up, and shameless GOPs would then blame the Gov for allowing taxes to go up. Pathetic stuff, really.

Tuesday, June 18, 2019

Both in the US and the UW, less college aid = more out-of-staters, less middle-class opportunity

I wanted to draw your attention to a couple of recent reports which tell the same story - cuts in state funding to public universities changes outcomes and leads to less opportunities for in-state students.

The first report I'll talk about is from the National Bureau of Economic Research, which mentions that national research universities like UW-Madison (a member of the Association of American Universities (AAU), as is all but 1 other Big Ten school) don’t suffer as much when state aids are cut, because of its research and donor base. But “non-research universities (which is pretty much any other UW campus outside of Milwaukee) get hurt quite a bit.
At the AAU universities, there is essentially no link between appropriations and instructional expenditures, of which the number of faculty and their salaries is the largest expense, suggesting that there are few adjustments in class size or faculty hiring in response to changes in appropriations. At the other extreme of non-research universities, there is a significant and positive elasticity for instructional expenditures: a 10% decrease in state support ties to a 2.93% decrease in instructional expenditures, implying that the quantity and quality of instruction offered to students varies directly with state appropriations.
One intriguing part of the report has to do with how these public research colleges react to funding cuts at the state level. The NBER says that there is a clear correlation between those cuts and an increasing reliance on foreign and out-of-state students that pay higher tuition.
In addition to tuition price changes, public universities can adjust total tuition revenues by changing the quantity and composition of students. Note that to increase revenue, an institution must add (or substitute) a student for whom the net revenue will exceed marginal cost, leading to an emphasis on recruiting out-of-state domestic and foreign students. The ease (or difficulty) of drawing revenue generating students depends in large part on institutional quality and the overall supply pool. Expansion in demand from abroad, particularly the increased capacity of families in China to pay for a college education, and growth in the college-age population in states where in-state options are limited (Bound, Hershbein, and Long 2009 and Bound, Braga, Khanna, and Turner 2018), generates a potential pool from which universities can expand on the extensive margin….

These changes in tuition revenue are— by construction—the combination of price changes and changes in relative quantities. Focusing on the undergraduate level, the relative importance of price and quantity changes differs for in-state and out-of-state students. For in-state students, price effects dominate, with in-state charges responding markedly to changes in appropriations. As shown in Table A2, the elasticity of in-state price response is -0.265 for the AAU institutions, -0.164 for research universities, and -0.187 for non-research universities. This result is consistent with much of the literature that indicates that appropriation changes have a significant impact on tuition decisions (Baum et al. 2018). Not only is the elasticity somewhat larger at the AAU universities, but the greater baseline levels of in-state tuition for the research-oriented places produce greater changes in the absolute level of in-state tuition at the research universities. A 10% decrease in state appropriations is associated with an $840 increase in tuition at an AAU research university, relative to an increase of about $340 at a broad-access non-research institution. Note that these differences in price responses may well reflect differences in the price elasticity of demand in the respective student markets, as the research universities draw more affluent students who are likely to be less price elastic than students at the broad-access non-research institutions.

Yet, even as in-state charges adjust markedly, out-of-state charges do not move to a significant degree in response to changes in tuition. We interpret this as consistent with a greater price elasticity of demand of out-of-state students who typically have choices which include other out-of-state options of similar quality (both public and private), along with a discounted home-state university option. For public research universities, we also see some adjustments in the composition of students. In the most recent decade, there has been a strong shift to foreign students, particularly among those institutions that are nationally strong but not ranked among the most competitive, while a small number of nationally ranked universities are able to attract domestic out-of-state students. Indeed, this is the focus of Bound, Braga, Khanna, and Turner (2018), who show that public research universities that were disproportionately hurt by state funding declines were more likely to turn to full-fee paying students from abroad. Leveraging variation in state budgetary cycles, the paper examines the sharp rise in undergraduate enrollment, mostly from China, over the period between 1996 and 2012. Instrumental variable estimates highlight that a 10% decrease in state funding was associated with a 16% rise in foreign enrollment at public research universities, with little change in the enrollment mix outside the research sector.
With this as a backdrop, let’s look at how this has worked out in Wisconsin. We’ve had state aid cuts to the UW System since 2011, but we've also had a freeze on in-state undergraduate tuition since 2013. So what has happened to the money available to our System’s schools since then, and has it changed the student body at all?

As you can see from this chart in the Legislative Audit Bureau’s recent report on the University of Wisconsin System, out-of-state tuition revenues have nearly doubled over the last 6 years, which matches the findings from the NBER paper. while tuition paid by Wisconsinites has declined since the tuition freeze was put into effect after 2013.

The LAB noted that the tuition freeze and declining demographics have caused some campuses to change its strategies in enrollment and fincancial management. Because most non-Madison UW schools don’t have a lot of out-of-state students to depend on, that drop in in-state tuition translates into a drop in available tuition revenue on many campuses.
Although tuition revenue increased in 9 of the last 10 years for UW System as a whole, increases did not occur at all UW institutions. As shown in Table 4, since the tuition freeze in FY 2013-14, 9 of 14 UW institutions experienced a decrease in tuition revenue.

Declining tuition revenues have affected UW institutions differently. Some institutions increased nonresident and graduate tuition rates to make up for declining resident enrollment. As noted, in April 2015, UW-Madison phased in a $10,000 increase in the nonresident undergraduate tuition rates over a four-year period. However, some institutions continued to rely primarily on resident undergraduate enrollment to fund operations. Some institutions took measures to improve financial stability, including managing costs and setting aside program revenue balances in anticipation of revenue decreasing. For example, UW-Milwaukee doubled its reserve balance from $4.5 million as of June 30, 2017, to $9.0 million as of June 30, 2018, in order to manage enrollment declines.
Now combine those lower tuition revenues with lower state funding across the UW System, and you can see why lower-enrollment campuses like Superior, Stevens Point, and Milwaukee have had so many problems staying afloat. Those numbers also don’t take into account the struggles that the 2-year Colleges have had in Wisconsin this year, after a ham-handed initiative to merge the Colleges with nearby 4-year schools starting in 2018-19.

In fact, the NBER says that while lower-income students have been able to get enough financial aid to cover their need, that’s not the case for working and middle-class students. And those are the ones that tend to end up in financial distress both in getting to college, and in the years after they graduate.
The overall increase in in-state tuition levels and the increased stratification in pricing structures among public colleges and universities has increased unmet need—that is, cost of attendance not covered by grants or expected family resources—markedly among moderate-income students as well as lowincome students. Comparing students entering public four-year colleges and universities between 2004 and 2016, data from the National Postsecondary Student Aid Study (NPSAS) show that unmet need increased by about $6,800 for dependent students from families in the $48,000–$75,000 income range, with increases of about $5,000 for those with lower incomes. The net effect in the short run is increased borrowing, while recent evidence from Chakrabarti, Gorton, and Lovenheim (2018) suggests that declines in state appropriations have longer-term effects on student debt, car ownership, and homeownership.
The NBER and LAB both show that the anti-UW policies at the state level aren’t doing as much to us crazy hippie liberals in Madison (sorry, outstate WisGOPs), but it is putting a big hurt on the regionalized, smaller UW schools that have more students from in-state, and have more students staying around after they graduate. And the Starve the Beast mentality is putting college further out of reach for working and middle-class students, while not changing then futures of richer students.

In other words, the whole “politics of resentment” strategy that WisGOP has had against the UW for the 2010s is causing more damage to their own constituents instead of the “elites” that they claim they’re trying to injure with these policies.

Which leads me to offer a simple solution - Allow UW-Madison to operate with few strings attached as the special case that it is, and reduce state aids to them while raising it to the other schools. Also, allow Madison to raise its undergraduate tuition, so it doesn’t have to rely so much on Coasties and foreign students paying “full-price”, and boost financial aid for all in-state students that attend UW schools.

If you want to make higher education affordable and to not financially hamstring Wisconsinites after they graduate, this seems like a good way to do it. Which means WisGOP will never go for it, because a high-level UW System that offers more opportunity at a more efrficient cost really isn't in their long-term interests.