House Vote Expected This Week on a “Robin Hood in Reverse” Tax Package

H.R. 8 Includes Bush Tax Cuts for the Rich, Reduced Estate Taxes, and Higher Taxes for Low-income Working Families

In the next day or two, the House is expected to vote on tax legislation (H.R. 8) that would substantially increase the federal deficit while doing the following:

• extending all the Bush-era income tax cuts, including those that exclusively benefit the richest two percent of Americans;
• extending the 2010 temporary estate tax cuts that exempt all but the richest 0.3 percent (estates up to $10 million per couple); and
• ending tax credit improvements for low- and moderate income families enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA).

H.R. 8 would ensure that no millionaire or billionaire would lose a penny of tax cuts, but 13 million middle- and lower-income families would lose tax benefits – including almost three-quarters of low-income families with children and 37% of all families with children.

In contrast, the bill introduced by House Democratic leaders, H.R. 15, would limit the tax cuts for the richest two percent (who would still fare very well), while extending the Bush-era tax cuts on income up to $250,000 per couple ($200,000 for a single taxpayer) and also extending the ARRA tax cuts for working families.

Walker’s Washington Post Column Misrepresents the Cost of the ACA

Figure the Governor Uses Arbitrarily Excludes the ACA’s Enhanced Federal Aid

A PolitiFact article in Sunday’s Journal Sentinel critiques an op-ed column by Governor Walker in the July 12 Washington Post, in which he contended that that the federal health care reform law would “devastate” Wisconsin.   PolitiFact analyzes four of the factual assertions in the Governor’s column and rates them as false, concluding that the Governor’s op-ed: “cherry-picks data, leaves out critical facts and mischaracterizes some of the numbers, creating a highly misleading impression.”

The article by Guy Boulton and Dave Umhoefer notes that they will look later at the fiscal claims in Walker’s column, such as the assertion that during the period 2014 through 2019: “after all federal aid and tax credits are applied, the state’s portion of the bill [for implementing the ACA] will be $433 million.”

I evaluated some of the problems with the Governor’s column two weeks ago and later in a guest blog post for the Center for Children and Families at Georgetown University.  However, it took me a little longer to track down the source of the $433 million figure, which I finally found in the January 2011 testimony of DHS Secretary Dennis Smith to Congressman Ryan’s committee.  I hadn’t guessed that the op-ed would use such an early and incomplete calculation of the costs and benefits of ACA implementation, and then neglect to acknowledge the portion of Smith’s testimony that obliquely says  the $433 million estimate doesn't account for enhanced federal aid that might approach $1 billion (from 2014 through 2019) if Wisconsin closes the current gap in BadgerCare coverage. 

States that Follow ALEC's Recommendations Fare Worse

States with minimal public services, tax systems that favor the rich, and weak or non-existent unions fared worse economically during the recession compared to other states, according to a new report. States that followed recommendations made by the conservative American Legislative Exchange Council (ALEC) were more likely to experience increased poverty rates and falling income. And ALEC’s Outlook Ranking, which forecasts state economic growth, “fails to predict economic performance,” according to the report.

Arkansas Analysis Illustrates the Fiscal Benefits of Closing the Gap in Health Care Coverage

Comprehensive Analysis of Costs and Benefits Calculates a $372 Million Gain

The Medicaid expansion authorized by the federal health care reform law is a great deal for the states. That conclusion was recently reinforced by a fiscal analysis by the state of Arkansas, which found that using the Affordable Care Act to close the gap in adult coverage in that state would yield the state treasury an estimated net gain of $372 million over the first six years of implementation.

The Arkansas analysis takes into account that there would be added Medicaid costs to the state because of enrollment growth among already-eligible adults and children, as well as newly-eligible adults. Notwithstanding the costs for those who are already eligible (which I think should be analyzed separately), their fiscal estimate concluded that the net budget impact would be positive because of the following factors:

Obama, GOP Differ on More than Just Bush Tax Cuts

Wisconsin families with children could lose $139 million in tax credits next year – nearly $900 per affected family – unless expansions of two tax credits aimed at working families are preserved. President Obama and Congressional Democrats have proposed extending the expanded credits, and Congressional Republicans favor letting the expansions expire.

In jeopardy are the Child Tax Credit and the Earned Income Tax Credit, both of which were expanded by the Recovery Act in 2009. The effect of expanding the credits was two-fold: the credits helped pump more money into the economy to boost consumer demand, and they also helped mitigate the worst effects of the recession for the families receiving the credits. The expansions are set to expire at the end of 2012, at the same time the Bush tax cuts expire, the temporary payroll tax cut expires, and the federal unemployment program ends.

June Job Loss in Wisconsin is Largest in Three Years

Wisconsin lost more than 13,000 jobs between May and June 2012, according to preliminary employment figures released today, and the state’s unemployment rate increased.

Wisconsin lost 11,700 private sector jobs between May and June, according to the figures from the Bureau of Labor Statistics, and another 1,500 government jobs, for a total job loss of 13,200. This represents the largest month-to-month job loss since June 2009, three years ago.

One Year Later: More Big Changes on Tap?

Over the past several days, we have explored some of the big changes that have taken place in Wisconsin’s budget priorities during the first half of the 2011-13 biennium. The unbalanced, cuts-only approach that marked the most recent state budget is having a major impact on some of the state’s most important systems and institutions, an impact being felt by Wisconsinites of all ages in every part of state.

Here’s a quick summary of the impacts and challenges we have examined in this series of blog posts:

• Deep cuts to school aid, tighter revenue caps for districts, and changes in public sector labor laws have resulted in teacher layoffs and greater disparities between districts.
• Working people are paying more in state taxes, while wealthy people and corporations are paying less.
• 17,000 adults have lost BadgerCare coverage, and many people remaining in the program must pay a greater share of the cost of their health care.
• In spite of tax breaks designed to spur the economy, Wisconsin has lagged the rest of the nation in job creation and economic development.
• While nearly every area of the state budget was cut—including state aid for local road repairs and public transit—resources available for highways have increased.
• Major reductions in state aid to communities have resulted in cutbacks to a wide array of local services, such as snow removal, crossing guards, and sanitation.
• Huge cuts in state funding for technical colleges have come at a time when demand for tech school education and training is at an all-time high.

One Year Later, Big Changes to Wisconsin Technical Colleges

Big Change #7: Reduced Funding in a Time of Sharply Rising Demand

We wrap up this seven-part series by taking a look at a large budget cut that I did not expect last year – the sharp reduction in funding for the Wisconsin’s technical colleges.  The magnitude and timing of the cut came as a surprise for me because the very weak economy has generated tremendous demand for education and training in the technical college system. As Paul Gabriel, Executive Director of the Wisconsin Technical College District Boards Association, wrote in a guest blog post for WCCF:

“Record numbers of young people recently out of high school and older displaced or underemployed workers are looking to Wisconsin’s technical college system as their best option for getting education and training that will qualify them for well-paid jobs. Businesses have also shown keen interest in the technical education system, as they grapple with a mismatch between the types of skills they are looking for in employees and the qualifications of Wisconsin’s jobless workers.”

Despite the growing demand for technical college education, the 2011-13 state budget slashed their general state aid by 30%, or about $36 million annually. The Governor’s budget bill also imposed a strict freeze on their local property tax levies – prohibiting local property tax support from rising above the 2010 amount or tax rate unless approved by a referendum.

One Year Later: Big Changes to Communities

Big Change #6: State Budget Cuts Mean Fewer Crossing Guards, Sheriff’s Deputies, and Snow Plows

In Fond du Lac, the city has reduced the number of crossing guards who help children safely cross the street on the way to school. In LaCrosse, the city is weighing buying less road salt for the coming winter, and waiting to plow until five inches of snow have accumulated, up from three inches. In Kenosha, the city has plans to scrap Saturday bus service altogether – or double fares.

Significant reductions in support for communities included in last year’s state budget mean that scenarios like these are playing out in communities across Wisconsin. Whether it’s deferred road maintenance in Green Bay or four dozen sheriff’s deputies laid off in Milwaukee County, cuts included in last year’s budget are affecting the safety, stability, and livability of many of our communities.

One Year Later: Big Changes to State Highways

Big Change #5: More Money for Highways, Less for Everything Else

If there was a significant winner in last year’s budget, it was state highways. In essence, resources were taken from Wisconsin’s public schools, university system, and health care for working families and redirected toward state highway spending.

The budget required that the state make a series of transfers from the state’s General Fund – which supports most state functions – to the state’s Transportation Fund. The state transferred $22.5 million from the General Fund to the Transportation Fund last fiscal year, and is scheduled to transfer another $137.6 million this year.  That’s a total of $160.1 million in transfers from the General Fund to the Transportation Fund over two years. (To put that amount in context, Governor Walker turned down a federal grant for high-speed rail because the state would have had to spend $7.5 million per year from the Transportation Fund in support of rail service.)

One Year Later: Big Changes to Job Creation

Big Change #4: Spending Cuts Have Slowed Wisconsin's Economy

When Wisconsin’s two-year budget passed last summer, proponents predicted that the deep spending cuts included in the budget would jump-start Wisconsin’s economy and spur private sector job creation.

That hasn’t happened.

Instead, private sector job growth in Wisconsin has been slow, public sector job loss has dragged down the economy, and Wisconsin has lagged other states in job creation. Wisconsin lost more than 20,000 jobs in the second half of 2011 after the budget passed, according to the Quarter Census of Employment and Wages. (Jobs figures for 2012 from this source are not yet available.) For 2011 overall, Wisconsin ranked 41st in job growth among the states.

One Year Later: Big Changes to Health Care

Big Change #3: Shifts in BadgerCare Policy and Policymaking

Now that we’ve reached the mid-point of the state’s two-year budget, we will soon begin to see the effects of significant changes in BadgerCare policy that grew out of cuts made in the last budget bill and a dramatic shift in policymaking authority to the executive branch.

Although the changes that are beginning to be implemented this month will cause an estimated 17,000 adults to lose their BadgerCare coverage, those changes are much smaller than what the Department of Health Services (DHS) proposed last fall. The narrower cost-cutting is because federal officials concluded that the “maintenance of effort” requirements in the health care reform law cannot be waived and do not permit Wisconsin to reduce eligibility or increase premiums for children or for lower income adults.

Strong Rebound in WI Wages in First Quarter (after a Long Drop-off)

DWD Reports 6.7 Percent Wage Growth, Compared to First Quarter of 2011

There was a bit of good economic news in our state Friday.  The Department of Workforce Development (DWD) issued a press release noting that, “Wisconsin wage earners received record 1st quarter wages of $27.6 billion, up 6.7 percent or $1.75 billion from the first quarter in 2011.”  The new figures come from the state's very comprehensive Unemployment Insurance system database. 

I think the recent Wisconsin wage growth is cause for a little celebration, but before you pop the cork on the good champagne I’d urge you to consider a couple of factors. First, keep in mind that Wisconsin’s job and wage numbers have been so depressed for the past few years that a bit of progress in regaining lost ground (compared to the U.S. average) is a big jump from where we’ve been.  That seems to help explain the new wage numbers. 

One Year Later: Big Changes in State Tax Policy

Big Change #2: Corporations and Well-Off Are Paying Less in Taxes, and Working Families are Paying More 

One year into the state’s two-year budget period, corporations and well-off individuals are paying less in taxes than they did before the budget, and working class individuals and families are paying more.

One Year Later: Big Changes to School Financing

Big Change #1: Schools Are Laying off Teachers and Disparities between Districts Are Widening

Wisconsin has long relied on a well-educated workforce as one of the foundations of the state’s economy and has made very substantial investments in our public education systems. In recent years, state support for K-12 education has accounted for about two-fifths of Wisconsin’s General Fund spending.

The magnitude of the state’s investment in public schools helps explain why, after deciding to balance the budget solely with spending cuts, Governor Walker chose to make deep cuts in school aid a key part of his budget plans. The Governor used a three-pronged strategy to cut both state and local support for public schools:

• Changes to public sector labor laws and pension system financing that sharply reduce the benefits and overall compensation of public employees, including teachers (and also sharply reduce the power of public sector unions).
• Cuts in school aid of about $792 million over two years, with $749 million of that coming from equalization aid. (According to an analysis by the Center on Budget and Policy Priorities, the cut in 2011-12 was the second-largest in the country when measured on a dollars-per-student basis.) 
• A reduction of 5.5% in the revenue cap for each district, which limits the total of a district’s local property taxes and state equalization aid.

One Year Later: 7 Big Changes to State Budget Priorities

July 1 marked the beginning of a new fiscal year for the State of Wisconsin. That means we are now halfway through the 2011-13 biennium, the period covered by the most recent state budget. As you may recall, that was the piece of legislation that made unprecedented spending cuts in a number of key areas, such as K-12 schools, health, care, aid to local government, post-secondary education, and other categories. It also brought tax changes that cost some of the state’s lowest-income families money, while giving breaks to corporations and some of the wealthiest households.

Over the course of this week and next, we will be publishing a series of blog posts examining how Wisconsin is faring in these key areas at the midpoint of the biennium, in hopes of illuminating the impact of the substantial spending cuts that have been made—cuts that could have been smaller had they been accompanied by measures to generate additional revenue. More importantly, we aim to assess where we stand in order to inform the debate about what direction the state budget should take from this point forward. Budget areas we will be looking at in this series include schools; taxes; jobs; health care; highways; communities; and UW/Tech Colleges.