Lawmakers Considering Proposals that would Hinder Wisconsin’s Ability to Make Investments in State’s Future
State lawmakers are considering a number of bills and constitutional changes that would make it difficult for Wisconsin to make necessary investments in local schools, communities, and health care systems. Several of the proposals are aimed at changing the budget process in ways that would make it more difficult for elected officials to boost the economy, lessen the economic effects of recessions, and protect vulnerable residents.
Wisconsin lawmakers are considering the following proposals:
More corporate tax cuts (Assembly Bill 623/Senate Bill 503) This bill contains a variety of innocuous-seeming changes to corporate tax law, but there is nothing innocuous about the cost of this proposal, which could be as much as a whopping $384 million a year! Keep in mind that this bill comes in the wake of a recent tax cut that gives manufacturers and agricultural producers a virtual pass on paying any corporate income tax at all.
At the hearing held by the state Senate on January 13, the bill author indicated he was open to changes that would pare back the cost. Read more
[Note: This post has been updated — primarily to add a reference to the WPR story about the increased GAAP deficit.]
When a state report is released late on a Friday with no fanfare, it’s a pretty good bet the report contains bad news. A case in point is Wisconsin’s Comprehensive Annual Financial Report (CAFR) for 2015, which was quietly posted online last Friday afternoon by the Dept. of Administration. In this instance the bad news is that the state’s General Fund deficit, as measured by Generally Accepted Accounting Principles (GAAP), increased in fiscal year 2015 by $414 million (from roughly $1.4 billion to $1.8 billion).
Release of the report had been expected about a week earlier. I don’t know what caused the delay until last Friday (Dec. 18), but I can’t help wondering if the quiet posting of the report on a Friday afternoon was intended to minimize media coverage. Read more
SJR 55 Would Enable Private Group to Set Wisconsin’s Budget Parameters
A proposed constitutional amendment that is coming up for a public hearing this week is likely to have harmful unintended consequences. Although the proposed amendment – Senate Joint Resolution (SJR) 55 and its Assembly companion, AJR 66 – has the laudable goal of making state budgeting more transparent and more fiscally responsible, it would tie the hands of future lawmakers and delegate some of the authority to set budget parameters to an unelected private organization. One potential consequence is that Wisconsin could be prevented from withdrawing money from the Rainy Day Fund when that funding is needed most.
The proposed constitutional change would prevent lawmakers from passing a budget that causes or increases a deficit, based on Generally Accepted Accounting Principles (GAAP). GAAP is a set of accounting standards developed and periodically updated by a private national organization. The constitutional amendment would also require that every year until the state has eliminated the GAAP deficit in the General Fund (and in any other fund), lawmakers would have to use at least 10 percent of that year’s growth in the revenue deposited in that fund to reduce the GAAP deficit. Read more
An efficient transportation network can’t exist entirely of one-way streets. It needs to be adaptable, with multiple modes of transportation and some areas where traffic flows in different directions. Likewise, the financing for a good transportation network needs flexibility, and it shouldn’t invariably be restricted to one-way flows of revenue.
Next week Wisconsin voters will cast ballots on a proposed constitutional amendment that we think would be too restrictive. Although it would allow state lawmakers to continue to make transfers between many state funds, such as supplementing the Transportation Fund with money from the state’s General Fund, it would prohibit ever moving Transportation Fund revenue in the opposite direction. That would create a double standard for state revenue transfers. It would be a mistake to lock an inflexible policy for state budgeting into the Wisconsin Constitution, as this editorial explains.
Some who favor a constitutional amendment point to past transfers that reduced resources for transportation programs. Read more
A broad range of groups sent a letter to state Senators last Thursday in opposition to Assembly Joint Resolution 79, which would require a supermajority vote for legislators to approve certain tax rate increases. The letter, which was signed by 20 organizations, asks Senators “not to tie the hands of future lawmakers by putting a supermajority requirement into the state constitution.”
AJR 79 was approved last week by the Assembly on a straight party-line vote. It would apply to three tax rates: the individual income tax, the corporate income tax, and the sales tax. In contrast to increases in the gas tax and tobacco taxes, which wouldn’t be affected by the proposed amendment, none of the three tax rates that the resolution applies to have increased more than once in the last 28 years.
The letter points out that even though those three tax rates are rarely increased, the proposed constitutional change could have a number of unintended consequences:
“For example, it could have the effect of increasing property taxes by limiting the state’s ability to appropriate funding for property tax relief. Read more
A constitutional amendment proposed by Wisconsin legislators would restrict the budget options of future lawmakers by making it harder to raise taxes. It would have the effect of making it more difficult to manage the state’s finances, and would probably shift costs from some residents to others and raise the cost of capital projects.
The amendment would change the state’s constitution to require a two-thirds majority of both houses of the Legislature to pass an increase in the rate of the state individual income tax, corporate income tax, or sales tax. The legislature could raise tax rates without a supermajority if voters passed a statewide referendum approving the change. A proposed constitutional amendment requires passage by two consecutive legislatures and a statewide referendum in order to go into effect.
A supermajority requirement would damage Wisconsin’s capacity to manage its budget in way that helps families and businesses. Here’s how:
- The amendment would tie legislators’ hands and make it harder to respond to recessions.
- Establish formulas for capping the rate of revenue growth for the state, each school district and technical college district, and most other local governmental units.
- Require state revenue collected in excess of the cap to either be deposited into a budget stabilization fund or returned to taxpayers in the next fiscal year.
- Require local revenue in excess of the cap to be returned to taxpayers in the next fiscal year.
- Limit spending from the state budget stabilization fund – so it can only be used: a) to provide tax relief, b) for certain emergency events, or c) in a fiscal year in which the amount of allowable revenue is greater than the amount of collected revenue.
Almost all of the sponsors of AJR 100 are Republicans, with the exceptions of Rep. Molepske and Rep. Ziegelbauer (who is an Independent). However, a Senate Democrat, Julie Lassa, is circulating a bill to require the state to use GAAP accounting. Her proposal would actually require the current GAAP deficit to be paid down at a faster pace than AJR 100, but Senator Lassa wouldn’t make the changes constitutional requirements.Read more