The Budget’s Impact on Property Taxes

The Legislative Fiscal Bureau has released an estimate of property tax levels and tax bills as affected by the budget proposed by the Governor, and as approved by the Legislature.

Under the Governor’s budget, gross statewide property tax levels were estimated to increase by 1.2% in tax year 2011and 1.3% in 2012.  Due to changes in values of homes and other properties, the actual tax bill for a median-valued home taxed at statewide average tax rates was expected to increase by 0.8% (or $23) in 2011 and 0.4% ($13) in 2012, compared to the previous year.

Comparative Budget Summary Updated to Reflect Governor's Vetoes

The Governor has signed the 2011-13 biennial budget after making some minor vetoes, and the Wisconsin Budget Project has updated – probably for the final time – our comparative budget summary in order to reflect those vetoes.

Our comparison shows how selected provisions were modified in the budget process, as well as the fiscal effect of those changes. If you’re interested in seeing how a specific budget item changed as it moved through the legislative process, the comparative budget summary is a convenient way to do so.

Gov’s Veto Keeps Strict Limits on Property Taxes

The Governor used his veto pen to prevent a slight loosening of the restrictions on levy limits for counties and municipalities.

In his executive budget, the Governor proposed extending the time frame for levy limits for counties and municipalities through 2012 (with the taxes payable in 2013). He also proposed holding municipal or county tax levies to a zero percent increase, or to take into account the value of new construction, whichever is greater. Local governments would be able to exceed the levy increase limit by going to referendum.

When the budget moved to Joint Finance, that committee made some modifications to the ability of local governments to raise revenue from the property tax. Joint Finance allowed for municipalities and counties to carry forward a small amount of their unused levy capacity, under specific circumstances. Joint Finance also made the levy limit permanent, and allowed local governments to increase their levies by at least 1.5% in 2013(14) and thereafter.

Governor Rejects Unemployment Insurance Council’s Request to Veto Changes to Jobless Benefits

The Governor signed the biennial budget bill into law on Sunday, and in the process made 50 item vetoes. Although a few of the vetoes are noteworthy, the changes he made with his veto pen strike me as less significant, or at least less interesting, than the items he decided not to veto.

One area of the budget that he chose to leave alone on Sunday concerns the state’s unemployment insurance (UI) system. The Joint Finance Committee (JFC) added a couple of UI provisions to the bill, including one that makes a newly unemployed worker ineligible for UI benefits until he or she has been out of work for a week. The other change makes people ineligible for unemployment benefits if they lose their employment as a result of refusing a drug test or if a job offer is withdrawn or not extended due to a drug test failure. The Governor signed those changes into law on Sunday, and in the process he rejected the unanimous recommendation of the state’s UI Advisory Council, which argued that enacting changes pushed through unilaterally could “potentially destroy” the Council’s consensus process.

Capital Gains Tax Cuts Cost Much, Benefit Few

Despite widespread concerns over falling revenues and significant cuts in education, health care, and other areas, the budget passed last week by the Assembly and Senate contains a number of new or expanded tax breaks, at a cost of more than $90 million over the biennium and $1.6 billion over the next 10 years.  Two of these tax breaks are targeted to benefit Wisconsin investors by reducing taxes on capital gains (i.e., the profits resulting from the sale of stock, businesses, real estate, or other assets). These tax breaks recently received attention from the Capital Times' Mike Ivey, who wrote about the tenuous connection between these tax breaks and increased economic growth in Wisconsin, as well as the regressivity of these new tax cuts.

This blog post describes the two capital gains tax breaks that were just approved by the Legislature and two other pieces of legislation that would also increase the preference given to income generated by investments, relative to income from one's own labor.  In addition, it summarizes data released by the Fiscal Bureau during the budget process, showing the distribution of the benefits for capital gains tax breaks. 

UI Council Recommends Federally-Funded Extension of Jobless Benefits

Following up on our previous post about today’s meeting of the Unemployment Insurance Advisory Council, the Council voted unanimously to support a change in state law that would allow for the drawdown of an estimated $88 million dollars in federally-funded unemployment insurance (UI) benefits. The Council, made up of half labor and half management representatives, advises the legislature and Governor on changes to unemployment policy. 

Prior to the meeting, it was unclear whether the Council could reach consensus on drawing down the federal extended benefits. James Buchen, leader of the management side of the Council, previously indicated that he and other management representatives might not support an extension of benefits. Buchen recently told the New York Times that employers in Wisconsin perceived that the unemployed have not been taking available jobs, choosing instead to stay on unemployment.  At today's meeting, however, Buchen struck a more conciliatory tone, saying that the current weakness in the economy warrants an infusion of federally-funded extended benefits.

A short Wisconsin Budget Project paper released this morning describes the importance of restoring the extended benefits program (which ran out in WI in April), and it counters the argument that jobless benefits cause a significant increase in the length of unemployment. The paper notes that unemployment benefits provide a number of advantages to workers (and the economy), providing them with support as they search for another job and boosting the economy with $1.61 in economic activity for every $1 in benefits spent.

Unemployment Insurance Council Unanimously Urges Veto of UI Changes in Budget Bill

Labor and Management Agree to Negotiate – Reports Indicate the Sky Hasn’t Fallen

The state’s Unemployment Insurance Advisory Council met today to consider a number of issues, including provisions relating to unemployment insurance (UI) benefits that were added into the state budget bill by the Joint Finance Committee. As the Wisconsin Budget Project wrote in a June 14 blog post, this move was a departure from the usual process of changing the state’s UI system. Under the usual process, the Unemployment Insurance Advisory Council, made up of half labor and half management representatives, comes to a consensus on issues and makes recommendations to the Governor and Legislature for any changes to Wisconsin’s jobless benefits or UI financing.

The Council voted unanimously today for a letter drafted by James Buchen and Phil Neuenfeldt, leaders of the management and labor sides of the Council respectively, urging Governor Walker to veto the changes to the UI system contained in the budget, and to allow the Council to negotiate these issues.

The Budget's Effects on Workers in the Public Sector

Changes in the state budget and budget repair legislation will make it harder for low-income workers in the public sector to make ends meet, according to a new analysis by the Wisconsin Council on Children and Families.

A two-page brief released today examines these changes and their impact on the families of people employed in public sector jobs. Beginning teachers, janitors, workers in school, and other working-class public employees could lose thousands of dollars per year, the equivalent of as much as six months of grocery costs.

 

The new WCCF analysis found that:

• Workers earning the least will take the biggest hits to their budget – as much as 15% in lost income and increased costs.
• The impact on low-income public sector workers, in terms of monetary impact, will be far greater than that on workers in the private sector.
• Working-class families with children will be hit especially hard, as the state rolls back tax credits for working families with children and support for child care.

For more, check out the brief on WCCF's website.

Wisconsin’s “$306 Million Surplus”: Is It real? When Could We Use It?

The Legislative Fiscal Bureau issued a memo last week that has generated some confusion about the state’s fiscal situation. The June 13 memo concluded that the recently approved 2011-13 budget bill puts Wisconsin in a position to have a surplus of $306 million in the 2013-15 biennium.

This post will explain that the preliminary LFB calculation (which may need to be adjusted slightly to reflect an amendment adopted last week) is not a surplus that will accrue in 2011-13 budget. The LFB projection that the state is in a position to be in the black in 2013-15 is good news, but there are a number of reasons why I think the $306 million figure creates an overly positive impression of the state’s fiscal condition. At the top of the list is that the LFB analysis assumes that the state estate tax would be restored in 2013 and will generate $219 million in 2013-15. That assumption is based on current federal law, but it’s a law that is virtually certain to be changed, and there is almost no chance the state will see that $219 million.

Updated Budget Project Summary of the Wisconsin Budget Bill

Now that the Legislature has completed its work on the 2011-13 budget, the Wisconsin Budget Project has updated our comprehensive (44 page) summary of the budget bill, showing how it evolved over the course of the budget process. Each section also includes links to the Fiscal Bureau documents and to other relevant material.

If you’re looking for a much more condensed summary of what the final budget bill means for Wisconsin families, there are a couple of other documents on our website that will help. Although we didn’t update these two documents this week, they are still current (alas) because these parts of the bill weren’t changed by the Assembly or Senate floor action.

WI Job Growth Still Anemic

The new figures for May employment are out, and they show that Wisconsin is still struggling economically. Just 900 jobs were added statewide in May, down from 3,000 in April, which was also a lackluster showing. Let’s hope that this spring’s very slow pace of job growth is just a temporary pause from the somewhat better performance over the first quarter of the year (+24,000 WI jobs), rather than an indication that the ongoing housing bust, the not-so-gradual end of federal stimulus spending, and cuts in other federal spending are beginning to take all the wind out of the modest economic recovery.

Fortunately, the latest data point doesn’t necessarily signify a sustained trend – because if it did, a growth rate of 900 jobs a month would yield a timeline of about 23 years to reach the 250,000 new jobs pledged by Governor Walker. (See our blog post in early May for a more thorough review of the rather mixed news about job growth over the first quarter of the year.)

In related news -- the Legislature is wrapping up work today on a budget bill that will impose a one-week waiting period for unemployment insurance (UI) benefits, and thus far has not allowed the state to take $89 million of federal money for extended jobless benefits. (See our June 14th blog post for more about those UI issues.)

Tamarine Cornelius and Jon Peacock

A Budget Surprise: Departing from the Usual Consensus Procedure in Unemployment Insurance Policymaking

After observing Wisconsin politics and budgets for 30 years, I’m rarely surprised by the legislature’s actions. This session has been an exception, and one of the biggest surprises during the biennial budget process came in late May when the Finance Committee approved an amendment making a change to unemployment insurance (UI) benefits.

The committee voted 9-5 for an amendment that requires the newly unemployed to be out of work for a week before they become eligible for UI benefits, which will cut spending from the UI trust fund by somewhere between $41 and $56 million per year (depending on the unemployment rate). The same motion would also suspend UI benefits for a year for individuals who either fail a drug test or refuse to take one as a condition of employment. (A June 6 Journal Sentinel article reported that this part of the amendment appears to violate federal law.)

The substance of the amendment wasn’t the surprising aspect. What was highly unusual was the endorsement of changes in the UI system that hadn’t been reviewed and approved by the UI Advisory Council.  In addition, the committee only included half of a two-pronged UI proposal the Governor recommended to the Advisory Council in mid-May (see the May 18 Journal Sentinel article). His recommendation coupled the one-week waiting period with a change that would make long-time unemployed workers eligible for an estimated $89 million in federal money for extended benefits.

Budget Bill Exacerbates Problems with Transfer of Responsibility for Medicaid Policy-Making

The Joint Finance Committee's version of the budget bill delegates sweeping power to the Department of Health Services (DHS) to make changes relating to Medicaid and BadgerCare eligibility, services, cost-sharing, and enrollment procedures. Until January 2015, those policy choices, formerly the responsibility of state legislators and the Governor, would be handed over to an unelected official, the DHS Secretary.

These provisions, which have now been removed from the budget repair bill (Act 10) and folded into the biennial budget, raise constitutional concerns regarding the separation of powers between the legisaltive and executive branches.  Like Act 10, the proposal strips from Wisconsin citizens our right to hold state legislators accountable for the policy changes that could affect hundreds of thousands of Wisconsinites.

A new WCCF blog post provides a link to a June 5th Legislative Reference Bureau drafter's note, which raises questions about the constitutionality of the power shift.  In addition, the blog post explains how the JFC version exacerbates the problem of excluding the public because it allows the sweeping grant of authority to be exercised by the DHS Secretary without using rulemaking or holding so much as a single public hearing.

Read more in the new WCCF blog post: "From Bad to Worse: New JFC Version of Medicaid Power Shift Compounds the Problems."

A Fair Share?

It’s now been 10 years since President Bush signed into law tax cuts that have cost federal taxpayers well over $1 trillion. The Bush tax cuts are currently set to be in place through 2012, though some in Congress would like to extend them for years to come. A recent Budget Project Blog post highlighted the tremendous impact of these tax cuts on the federal deficit.

Citizens for Tax Justice produced a report last week projecting the Wisconsin impact of extending the Bush changes through 2013.  Just as we see nationally, the largest share of the Bush tax cuts in Wisconsin would go to the wealthiest. The top 1% of income earners in the state alone would receive 28% of all the Bush tax cut dollars in Wisconsin, almost twice the combined tax savings of the lowest three-fifths of income earners (whose share of the Wisconsin total is just 15%).

The Budget's Effect on Wisconsin's Low-Income Families

How will the state budget impact low-income families? Wisconsin Council on Children and Families (WCCF) has updated two analyses to show how the budget -- as amended by the Joint Finance Committee -- will affect low-income families:

• Effects of the Biennial Budget and Budget Repair Bills for Working Families: This is a summary of the ways the proposed 2011-13 budget bill and the 2011 budget repair bill will affect working families, particularly low-wage workers. It examines the cuts to the Earned Income Tax Credit and Homestead Tax Credit, likely effects on health care programs, potential cuts to child care subsidies, diminished opportunities for education and training, and cuts to transit programs.
• The Budget's Real-Life Impact on Working Families: It's clear that this state budget hits the state's most vulnerable families the hardest. This analysis shows how the budget would affect working-class families. You can also view the related WCCF press release.

Ten-year Tax Cut Tally Tops Two Billion

A short Legislative Fiscal Bureau memo prepared for Senator Mark Miller tallies the fiscal impact of the tax cuts contained in the biennial budget bill and in other bills already enacted this year. According to the June 9th LFB memo, the total cost of the tax cuts in the Joint Finance Committee’s version of the biennial budget bill will be $93.4 million in the 2011-13 biennium, but will gradually become much larger – growing to about $270 million per year in fiscal year 2020-21.

The combined cost of the tax cuts in the budget bill and in other bills already enacted this year will be $212 million in 2011-13, and the cumulative tally over the next ten years is projected to be $2.3 billion. Because many of the tax cuts are delayed or phased in, their annual price tag will grow steadily and will add to the state’s structural deficit. That impact (calculated by measuring the future fiscal impact relative to the effect in 2012-13) will be a $109 million boost to the structural deficit in the 2013-15 biennium and $238 million in the following biennium.

Icing on the Cake for Corporations, Crumbs for Working Families

As the Joint Finance Committee wrapped up its work on the biennial budget bill late last Friday night, June 3, one of the final motions that was offered was a brand new proposal for a large corporate tax break. At about 11:00 pm Friday, the committee voted 12-4 (along party lines) for that motion to create a new tax credit for corporations that produce goods in the state – gradually reducing their state income tax by as much as 95 percent, once the $129 million per year tax break is fully phased in.

Kathleen Gallagher of the Milwaukee Journal Sentinel wrote a good article on the subject earlier this week. As she reported, James Buchen, vice president of government relations for Wisconsin Manufacturers and Commerce, called the amendment “the icing on the cake for us be able to go out and sell Wisconsin as manufacturing heaven."

Buchen may be right that this new tax break is “icing on the cake” for large manufacturers, but that doesn’t make it a sensible choice from the menu of policy items for possible inclusion in the state budget, especially  an austere budget that asks the vast majority of Wisconsinites to go on an extremely restrictive diet. Viewed more carefully in the light of day, this amendment obviously has appeal to the sweet tooth of some businesses owners, but it provides little nutritional value for the state's economy. This post provides a top ten list of reasons why lawmakers should reject the amendment during the days ahead, when the budget bill moves to the floor of both houses:

Wisconsin's New Millionaires

A couple of industry-backed studies that have come out over the two months cast Wisconsin in a positive light – as a place to do business and make money. As we discussed in a blog post on April 27, a study by Ernst and Young, in conjunction with the Council on State Taxation, ranked Wisconsin as having the 4th lowest state and local taxes on investments made in a new facility or for upgrading an existing facility.

A more recent study contains data estimating the percentage increase in millionaires over the next decade in each state, and it projects that growth to be 12th highest in Wisconsin. According to the industry-sponsored analysis, Wisconsin’s increase is supposed to be 131%, well above the national average of 110%.

What's Driving the Federal Deficit? Not the Recovery Act

Federal policymakers are arguing about how to best tackle the growing deficit. Most of these discussions have centered on the concept of cutting spending, and to a lesser extent increasing revenue. The actual factors causing the federal deficit haven’t come up much in these conversations, but a recent analysis by the Center on Policy and Budget Priorities (CBPP) shows that the Recovery Act is not among the deficit’s major contributors in the long term.

Comparative Budget Summary Updated to Include All JFC Actions

The Wisconsin Budget Project has updated our comparative budget summary, which shows how selected provisions in the budget have been modified in the budget process. Today’s update includes all actions taken by the Joint Finance Committee. If you’re interested in tracking a specific provision through the legislative process, the comparative budget summary is a convenient way to do so.

The budget now moves to the Assembly. We’ll be continuing to add to the budget summary as changes are made, so watch this blog (or sign up to follow us on Twitter or Facebook) for more updates.

Adding to the Deficit – Through Subtraction

Throughout the debate on the budget repair bill and most of the debate on the biennial budget, we have heard lawmakers argue for the importance of sacrifices that will eliminate Wisconsin’s structural deficit and get the state’s fiscal house in order. Until last week the Joint Finance Committee (JFC) seemed genuinely committed to eliminating the structural deficit, at least while the committee was deliberating on spending issues. But that commitment was no longer in evidence last week when the topic turned to taxes.

The biggest surprise came late on Friday night as the committee was finishing up its work. On a 12-4 party line vote, the JFC approved a motion that adds substantially to the structural deficit by nearly eliminating the income tax for many corporations that produce goods in the state. (See the June 7th Journal Sentinel article by Kathleen Gallagher.)  It will have the effect of slashing the tax rate for manufacturers from 7.9 percent down to just 0.4 percent – phasing in a 95 percent reduction in their income taxes over a four-year period. Though the cost is minimal in the current biennium, the price tag will grow to $129 million per year – requiring deeper spending cuts in future years or a shift in taxes to other taxpayers. 

Questions to Ask Before Privatizing Government Functions: A "Good Government" Checklist

Governor Walker has proposed a number of initiatives to privatize government functions or to make it easier to do so. One of those proposals, privatization of much of the “income maintenance” system for handling BadgerCare and Food Share applications and renewals, has suffered a couple of significant setbacks in recent weeks -- most recently in the June 2nd Audit Bureau report.  However, those obstacles may only be small speed bumps in the Walker Administration’s efforts to downsize government by turning over more government functions to the private sector.

Since privatization is likely to be an ongoing topic of debate in Wisconsin in the next year or two, we thought it would be useful to share a list of 10 basic questions developed by In the Public Interest (ITPI) to help policymakers, the public and the media debate privatization proposals.

Alternatives to Increasing Taxes on the Working Poor

The Joint Finance Committee (JFC) voted Tuesday evening for a package of state policy changes that cut taxes for multistate corporations and the wealthy, while raising taxes on working poor families with two or more children. As Jason Stein reported in the Milwaukee Journal Sentinel, Rep. Tamara Grigsby (D-Milwaukee) called the committee's combination of actions "Robin Hood in reverse.”

The changes to the Earned Income Tax Credit (EITC) endorsed by the JFC will reduce the state credits in the coming biennium by a total of $56.2 million (relative to the cost to maintain current law). The Finance Committee’s actions not only increased that cut, but also changed how working families will be affected. Their version will reduce the maximum cut for families with two children to $154 (compared to $307 in the Governor’s plan), while increasing the annual cut to families with three or more kids to as much as $518 (versus $154 in the Governor’s bill).

Republican members of the committee argued that the cut to the state EITC is necessary to help close the $3 billion state deficit. However, the Legislature has a number of viable alternatives for balancing the budget while preserving the credits. The most obvious option is using some of the $636 million increase in revenue recently identified by the Legislative Fiscal Bureau. Other relatively easy alternatives include: 1) not creating new tax breaks for wealthy Wisconsinites and large corporations, 2) using federal TANF dollars to fund the EITC, rather than to supplant state funding for the EITC, or 3) making the cuts to the EITC end when changes in federal law reduce the cost of the state credits.

New Updates to Comparative Budget Summary

The Wisconsin Budget Project has updated our comparative budget summary, which shows how selected provisions in the budget have been modified in the budget process. Today’s update includes the recent decisions made by the Joint Finance Committee through May 31st. We’ll be continuing to add to the budget summary as changes are made, so watch this blog (or sign up to follow us on Twitter, @WiBudgetProject) for more updates.

Tamarine Cornelius

Budget Adjustment Bill Gives a Short-Term Disincentive for Unions to Make Concessions

Legislators passed the budget adjustment bill with the intent of severely curtailing collective bargaining rights of public employees at the state and local level. Ironically, their actions may have the unintended short-term effect of making it more difficult for unions to make financial concessions.

The budget repair bill, part of which is currently tied up in court as Act 10, was justified in part as a way to make it easier for local governments to impose significant compensation cuts on local employees without having to bargain with the unions. Removing the ability for public employees to bargain on benefits and limiting their ability to bargain on wages would (in theory) make up for the steep cuts in local aid in the Governor’s 2011-13 budget. Local governments have pointed that the governor’s cuts exceed the amount that can be recouped in compensation cuts to local employees by a significant amount. We explored this topic in an April 13th blog post.

Republicans in the Legislature have indicated that if Act 10 is not upheld by the courts, they may pass it again. One way or another, these provisions look likely to become law. Once Act 10 is upheld or re-passed, the provisions limiting collective bargaining will go into effect when union contracts expire or – and this is the part that makes it difficult for unions to offer concessions – when the contract is modified.