Wisconsin Budget Project: July 2011

Thursday, July 28, 2011

Wealth Gap Between Races Now Widest in 25 Years

Black and Hispanic households were disproportionately affected by the recession, a new report by The Pew Research Center shows. The median white household now holds 20 times the wealth of the median black household, and 18 times the wealth of the median Hispanic household. This represents the widest gap in wealth among racial groups since the federal government started collecting the figures 25 years ago.

Black and Hispanic households lost a much bigger share of their household wealth during the recession than did white households. From 2005 to 2009, household wealth for Hispanics fell by 66 percent (when adjusted for inflation), and by 53 percent for black households. In comparison, median wealth for white households fell by just 16 percent. Roughly a quarter of all Hispanic (24%) and black (24%) households in 2009 had no assets other than a vehicle, compared with 6% of white households. The chart below shows changes in median household wealth in dollar amounts by race, pre- and post-recession.

Recovery Act Still Lifting Employment Levels

The Recovery Act seems like a long time ago. For many of us, our attention has turned to other federal issues, such as the negotiations to extend the federal debt ceiling. But even though the Recovery Act is no longer making headlines, the stimulus is still creating jobs and increasing the nation’s Gross Domestic Product (GDP), according to a recent report by the Council of Economic Advisors.

Senate to Meet on August 1 on Bill to Extend Jobless Benefits

Senate Majority Leader Scott Fitzgerald said yesterday that the state Senate will reconvene on August 1 to finish up work on Senate Bill 147, which would extend unemployment insurance (UI) benefits for 13 weeks for the long-term unemployed. The bill makes a minor change needed to qualify Wisconsin for about $88 million for the federally-funded extended benefits.

Senator Fitzgerald’s press release said the Senate would concur with the Assembly amendment to SB 147 restoring a provision in the budget bill that created a one-week waiting period before newly unemployed workers are eligible for jobless benefits. As we indicated in a recent blog post, the Senate voted to eliminate the waiting period, which would have allowed the issue to be considered by the UI Advisory Council as part of a broader effort to close a $1.3 billion deficit in the state’s UI Trust Fund. However, it appears that the Senate will back away from that position and accept the waiting period.

A press release from Senate Minority Leader Mark Miller expresses his strong disappointment at the GOP decision to accept the one-week wait before people who are laid off become eligible for benefits. However, the Democrats probably have no way to get the Assembly to back down, and a continued stalemate would jeopardize passage of the bill (SB 147) to make jobless workers eligible for the federally-funded extended benefits.

For additional information about the arguments for and against the one-week waiting period, see today's blog post in WCCF’s “31 Ways in 31 Days” series about the biennial budget bill.

Jon Peacock

Monday, July 25, 2011

What would a federal default hold for Wisconsin?

With recent reports indicating that policymakers are still disappointingly far away from striking a deal to extend the federal debt ceiling, the possibility of default is looming larger. At the Governor’s request, Wisconsin has already taken some initial steps to identify the potential impacts of the situation on state operations, if federal lawmakers cannot come to agreement.

If the debt ceiling is not extended, the federal government will be nearly powerless to borrow money. Here’s how a recent blog post by the Center for Budget and Policy Priorities described the situation:

“Congress’ failure to raise the debt limit in a timely manner would leave the Treasury powerless to borrow money except to refinance maturing securities. With the power to spend only what it collects in revenues, the government would have to cut spending abruptly by over one-third, putting an enormous drag on economic growth at a time when the economy is struggling to recover from the Great Recession. It also would harm millions of businesses, employees, and beneficiaries who rely on timely federal contract, reimbursement, benefit, or other payments.”

Keep in mind that raising the debt ceiling is a separate issue than the federal debt, or it should be. To rein in federal debt, Congress can increase revenues and limit spending, but by the time the debt limit comes up for debate, the decisions that prompt the need to borrow have already been made elsewhere.

31 Ways the Budget Affects Children and Families

Every day in July, the Wisconsin Council on Children and Families (WCCF) has been highlighting a different way the state budget affects children and families. The result is 31 Ways in 31 Days, a series of posts on the WCCF blog. The series paints a picture of how children and families will be impacted by the budget, in bite-sized amounts of information that are easy to understand.

You can see all the posts to date here, or read the individual topics covered so far in July:

Legislative Impasse Puts Extended Unemployment Benefits in Jeopardy

On Tuesday, the State Senate passed legislation authorizing Wisconsin to draw down an additional 13 weeks of federally-funded unemployment benefits for those who have exhausted their jobless benefits (currently capped at 73 weeks). In a surprising move, there was biparitsan support in the Senate for an amendment to that bill removing the new one-week delay for those initially obtaining benefits. The one-week delay had been added to the recently passed two-year budget bill. On a vote of 30-3, the Senate passed the extened benefits bill, as amended, and sent it to the Assembly for their consideration.

On Wednesday, the Assembly took up the amended unemployment benefits bill. Assembly Republicans moved to strip out the Senate amendment that would repeal the one-week waiting period, and the motion passed on a party line vote. The full Assembly subsequently passed the legislation without the deletion of the one week waiting period, contradicting the Senate action.

State Redistricting Changes Cost Local Government

The Wisconsin State Senate Tuesday passed a legislative redistricting plan, a new map of legislative districts in Wisconsin that must be completed following each decennial federal census. Like many votes on legislative redistricting, the plan was passed on party-line votes and in many ways strengthens the political position of the majority party while weakening that of the minority party. However, in addition to changing the current political boundaries, the plan also makes changes to the long-standing redistricting process, costing municipalities across the state as they are forced to re-do portions of their own redistricting plans.

Who Does Not Pay Taxes?

Who does not pay taxes? Some large and profitable state banks, for starters.

Associated Bank, the biggest and most profitable bank based in Wisconsin, made $2.6 billion in pre-tax profits from 2001 through 2008. Yet the bank paid no state income tax during that period. Likewise, M&I Bank paid less than one percent of its pretax profit in income tax, and that amount will likely go down to zero based on changes made in the2011-13 biennial budget.

This information and more comes from a new newsletter from the Institute for Wisconsin’s Future (IWF), a non-profit, non-partisan statewide organization dedicated to tax policy research, community organizing and education policy. This is the first issue in a series of monthly newsletters by IWF that identify companies that pay little or nothing in taxes.

State Senate Votes for Extended Unemployment Benefits, and Drops One-week Waiting Period

The State Senate today passed legislation by a vote of 30-3 that would allow for an additional 13 weeks of federally-funded extended unemployment insurance (UI) benefits in Wisconsin. However, the bill’s path took an unexpected turn when many Senate Republicans joined Democrats in voting to repeal a one-week waiting period for UI benefits that had been added by the Joint Finance Committee to the biennial budget bill.

Wisconsin is one of just a small handful of states (9 by our last count) that is eligible for the additional federally funded UI extension but has not made the minor change needed to implement it. The pending bill, SB 147, seemed to be on the verge of correcting that. However, as a very good Journal Sentinel article by Jason Stein points out, the amendment relating to the waiting period could be problematic in the Assembly, which creates a risk that the bill will be derailed or delayed (even though both the 13-week extension and elimination of the waiting period were unanimously endorsed by the UI Advisory Council).

Approaching Hazards for a Fragile Recovery

The recovery from the recession continues to be slow. Recent job reports, both nationally and in Wisconsin, are disappointing, with Wisconsin adding just 900 jobs in May. (The Wisconsin Budget Project has more on that in a 6/14/11 blog post.) Wisconsin lost more than 170,000 jobs during the recession and has regained just a fraction of that amount.

The feeble nature of the economic recovery is especially alarming considering that several measures aimed at bolstering the economy are slated to end in the coming months. A recent article in the New York Times warns of the upcoming expiration of several provisions targeted to speed the recovery from the recession.

The Problem(s) with Block Grants

As federal lawmakers grapple with options for reducing the federal deficit, some have suggested that the welfare reform block grants, known as Temporary Assistance to Needy Families (TANF), serve as a model for how to reshape the funding for other public benefits, such as Medicaid and food stamps. House Budget Committee Chairman Paul Ryan and others contend that the “success” of welfare reform and the TANF block grants illustrates how the federal government can save money by giving states more flexibility, in exchange for reduced funding and an end to the current entitlement nature of these programs.

A July 14 paper by the Center on Budget and Policy Priorities (CBPP) refutes that argument by examining the role TANF played in the recent recession, and showing that the block grant did not respond effectively to the sharp economic downturn. This blog post summarizes their findings and supplements them with our own observations about recent TANF challenges in Wisconsin.

Catching up on 31 Ways in 31 Days

If you haven't been following the 31 Ways in 31 Days series by the Wisconsin Council on Children and Families, it's not too late to start!

Every day in July, the WCCF blog has been highlighting a different way the state budget affects children and families. Following the series is a good way to keep abreast of the impact the budget will have on children and families.

Here’s topics the 31 Ways in 31 Days project has covered so far in July:

Or you can click here to see all the topics so far.

New Resources Showing Tax Cuts, Increases

Did you know that the biennial budget bill includes $92.8 million in tax cuts and $69.8 million in tax increases? These figures and more can be found in a new fact sheet released today by the Wisconsin Budget Project.

This new two-page document shows the fiscal effect of tax changes enacted in the biennial budget and in the special legislative session earlier this year. Seven different tax cuts totaling $210 million (over two years) were enacted in the special session and biennial budget. Two of those cuts primarily benefit high-income earners, and the other five benefit businesses or corporations. The two tax increases, on the other hand, fall on low-income individuals and families.

The fact sheet also includes information on the ten-year cost of the tax cuts, which as we noted before in a June 2011 blog post tops $2.3 billion.

You can find the fact sheet here.

Tamarine Cornelius

Wednesday, July 13, 2011

A Balanced Approach to Deficit Reduction

In their efforts to reduce looming federal deficits, President Obama and Congress must take a balanced approach to deficit reduction. Under a balanced approach, everything is on the table, including revenue savings.

The alternative means massive cuts in Medicaid, Medicare, and other programs – and possibly even Social Security — that provide economic security for millions of Americans. It also means cutting investments in education, student aid, medical research, food safety, road and bridge construction and repair, law enforcement and many other areas that help all Americans, especially the middle class.

To be sure, the nation’s leaders need to reduce projected budget deficits. Left unaddressed, they will weaken the economy over time and could cause another serious economic crisis.

But, there’s no reason why they cannot address the problem by adopting a balanced approach that protects the middle class, critical investments and our most vulnerable citizens.

Extension of Unemployment Benefits Put on Fast Track for Legislative Action

A few weeks ago it appeared highly unlikely that Wisconsin was going to accept an estimated $88 million of federal funding (through the Recovery Act) for extended jobless benefits for the long-term unemployed. Wisconsin is one of only nine states that haven’t accepted those funds, among about 40 states that are eligible for the extended benefits (which are fully funded with federal dollars). A small legislative change is needed to implement the federally-funded 13-week extension of unemployment insurance (UI) benefits, but the Legislature failed to make that change before adjourning for the summer, and the majority party appeared uninterested in taking up the issue.

However, GOP leaders have now gotten behind the legislation needed to receive the federal funding and allow the long-term unemployed to receive benefits for up to 86 weeks (compared to the current 73-week limit). On Thursday July 7, bills making the change (SB 147 and AB 197) were introduced in both houses of the Legislature, and on Monday they got a public hearing in a joint meeting of Senate and Assembly committees, and they were voted on in both committees.

The Senate committee unanimously recommended SB 147 for passage, and there was only one dissenting vote in the Assembly committee against the identical Assembly version. The bills have now been scheduled for floor votes next week (probably July 19), during a special session called primarily for the purpose of fast-tracked action on a reapportionment bill.

CEO Pay, State and Federal Policies Contribute to Disparities

Quickly growing CEO pay is a significant contributor to income disparity, according to a recent Washington Post article that ran in the Milwaukee Journal Sentinel. Executive pay has increased fourfold since the 1970s according to the article, while the average worker pay remained relatively flat. Of the top 0.1% of earners in 2008, 59% were CEOs, managers, or financial professionals. This top 0.1% of earners took in more than 10% of total personal income in the U.S.

A number of recent public policy decisions at the federal and state level also contribute to and reinforce income disparity. The Bush tax cuts are among the policies that predominantly help high earners. In a recent blog post, the Wisconsin Budget Project highlighted a new report showing that the top 1% of income earners in the state alone 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%). However, that is just one of the many public policy choices factoring into a widening gap in incomes and wealth between the rich and the majority of Americans.

New Fact Sheet on Unemployment Benefits in Wisconsin

Unemployment compensation is a lifeline for those unable to find work. With Wisconsin’s unemployment rate above 7%, these benefits are more important than ever. The Wisconsin Budget Project recently published a quick, one-page fact sheet on unemployment benefits in the state.

Click here to learn more about what benefits are currently offered and why Wisconsin needs to act to draw down federally-funded extended benefits for those who have been looking for work the longest in our state.

Friday, July 8, 2011

31 Ways in 31 Days Series in Full Swing

Have you been following the 31 Ways in 31 Days series by the Wisconsin Council on Children and Families?

Every day in July, the WCCF blog will be highlighting a different way the state budget (as signed by the Governor) affects children and families. Now that some of the hubbub surrounding the budget has passed and the dust is beginning to settle, following the WCCF series is a good way to keep abreast of the impact the budget will have on children and families.
Here’s topics the 31 Ways in 31 Days project has covered so far in July:

Or you can click here to see all the topics so far.

States Renew Attempts to Collect Sales Tax on Purchases Made Online

Recently, a number of states have turned their focus to collecting sales tax owed on purchases made from internet retailers. This may be because state tax revenues have been slow to recover from the effects of the recession, leading states to make a renewed emphasis on collecting tax revenues that are owed to the state but are not collected.

This uncollected sales tax can add up quickly. A recent Associated Press article estimated that each year, uncollected sales tax on internet purchases total more than $23 billion nationally. In Wisconsin, the state loses $127 million each year in uncollected sales tax revenue for purchases made online, according to a University of Tennessee study.

Wisconsin Spends an Increasing Amount of Its Money on Corrections

A new analysis by the Wisconsin Budget Project shows that Wisconsin is spending a greater share of its scarce revenue on corrections. The analysis also notes that Wisconsin spends far more than neighboring states on corrections, despite having similar violent crime rate. The result is that Wisconsin has fewer resources to invest in promoting the well-being of our communities.

State GPR spending on corrections increased over 9% between 2001 and 2010 in inflation-adjusted terms, while spending on other programs decreased by over 7%.

Our neighbors Minnesota and Iowa spend far less on corrections than Wisconsin does on a per capita basis, as shown in the chart below. State and local governments here spent 47 percent more on corrections in 2008 than was spent in Minnesota, and 75 percent more than in Iowa.

Saving for a Rainy Day?

Most of us try to save a little while times are good, stashing away extra funds in case we’re stuck without a job or with extra expenses. In the best cases, this allows us to survive on our savings rather than charging the credit card or falling into poverty. Unfortunately, the state has not chosen to do the same on an important program currently supporting more than 90,000 Wisconsinites – unemployment insurance.

The Wisconsin Legislative Audit Bureau recently released a report on the state unemployment insurance (UI) reserve fund that pays benefits to jobless workers. This UI fund is financed with a payroll tax on employers.

The audit report highlights a dramatic draw-down of the fund over a ten-year period, from $1.9 billion available for unemployment benefits in 2000, to a deficit of $920 million in 2010. Wisconsin has been borrowing from the federal government to pay for benefits since the fund went into the red. As a result, our state currently owes the federal government $1.4 billion, along with more than $25 million in interest.

The Audit Bureau report reveals a troubling trend in the fund’s financial status. Throughout the 2001-03 recession, the fund provided more in benefits than it took in from employer taxes. This is typical in a recession, as increased joblessness leads to both an increase in benefit claims and a decrease in total payroll, the basis for the tax on employers that finances the fund.

31 Ways in 31 Days Update

Wisconsin Council on Children and Families (WCCF) has started a new series, called “31 Ways in 31 Days,” which highlights how children and families will be affected by the state budget. Every day in July, check the WCCF blog for information on a specific provision in the budget.

Here’s topics the 31 Ways in 31 Days project has covered so far in July:

Friday, July 1, 2011

New Series Examines Effect of Budget on Children and Families

Wisconsin Council on Children and Families (WCCF) is launching a series called “31 Ways in 31 Days,” which examines the impact of the state budget on children and families. Each day in July, the WCCF blog will highlight a different provision in the state budget, discuss the effects on Wisconsin families, and outline better options the state should consider moving forward.

We encourage you to follow the series by reading the WCCF blog or “liking” their Facebook page. Please consider sharing the series with members of your own social networks. We’ll also be linking to relevant posts, including today’s:

31 Ways in 31 Days Way #1: Massive Cuts to School Funding Threaten Wisconsin’s Tradition of High-Quality Education

Tamarine Cornelius

P.S. Happy New Fiscal Year!