Month: June 2023

Republicans in the Wisconsin Assembly on Thursday passed their version of the next two-year state budget, which includes a massive income tax cut covering all taxpayers. It now heads to the desk of Democratic Governor Tony Evers, who can sign it, veto it, or use his powerful partial veto pen to change the plan.

Republicans framed the proposal as a “historic” investment in their priorities, and said the tax cut fulfilled a promise to voters about returning money to them.  Assembly Speaker Robin Vos, R-Rochester, said the tax cut would attract business to the state and make Wisconsin competitive among its neighbors.

“The goal is to try to keep successful people in Wisconsin, no matter what their income is,” Vos said shortly before debate began. “And one of the things that’s always frustrated me is when people choose to retire, they take their success and they move to another state.”

Democrats argued that the tax cut squanders the state’s estimated $7 billion surplus, which they said could have been spent on priorities like child care, transportation and youth mental health services.

The budget now headed to Evers would spend about $99 billion over the next two years when counting all funding, both state and federal. Evers’ budget would have spent about $105 billion by that same measure.

The GOP budget would still increase all spending by nearly 12 percent, including a 10 percent increase in the state’s general fund.

The plan includes raises for state and university workers, and a higher starting pay for corrections officers at a time when Wisconsin’s jails are on a path to overcrowding. Assistant district attorneys and public defenders would also see higher pay, which supporters say will help attract and retain staff, and deal with a backlog in the state’s court system.

The GOP budget would also create a $125 million fund to mitigate PFAS pollution and spend roughly $2.4 billion on Wisconsin’s capital budget for building projects.

It also included $1 billion between state and local funding for public education, which was negotiated between Evers and Republicans weeks ago as part of a sweeping deal on local government funding.

Yesterday, the nonpartisan Congressional Budget Office (CBO) released its Long-Term Budget Outlook, which offers a look at the nation’s fiscal health through 2053. The report highlights the structural misalignment in the country’s budget and the resulting unsustainable fiscal trajectory. Here are six key takeaways from CBO’s latest projections.

1. The national debt will nearly double in size by 2053. Debt held by the public equaled 97 percent of gross domestic product (GDP) at the end of fiscal year 2022. Under current law, CBO projects that ratio will continue to climb — reaching 181 percent of GDP in 2053.
2. The mismatch between revenues and spending will continue to grow. CBO projects that outlays will climb from 24.2 percent of GDP in 2023 to 29.1 percent in 2053. CBO also projects that revenues will rise slightly over the next 30 years relative to the size of the economy, but at a slower pace, reaching 19.1 percent of GDP in 2053.
3. Social Security and Medicare will drive the growth in programmatic spending. The aging population and rising healthcare costs will cause spending on Social Security and federal healthcare programs, primarily comprised of Medicare, to continue climbing over the next 30 years. Federal spending on Medicare will increase from 3.1 percent of GDP in 2023 to 5.5 percent by 2053, while outlays for Social Security will climb from 5.1 percent of GDP to 6.2 percent over that period.
4. Federal revenues won’t keep pace with rising spending. CBO projects that total federal receipts will rise by less than 1 percentage point of GDP over the next 30 years — from 18.4 percent in 2023 to 19.1 percent in 2053. Receipts from individual income taxes, which account for over half of federal revenues — are projected to moderate in the coming years, falling from 9.6 percent of GDP in 2023 to 8.8 percent in 2025, before rising again after 2025 because of the scheduled expiration of some provisions of the 2017 Tax Cuts and Jobs Act.
5. Interest rates, on average, are projected to gradually rise over the next 30 years. In their effort to fight inflation, the Federal Reserve raised the federal funds rate 10 times since March 2022. As a result, the average interest rate on federal debt held by the public rose — that rate was 2.1 percent in 2022 and is projected to reach 2.7 percent in 2023. Furthermore, CBO projects that the average interest rate on such debt will grow slowly over the next several years as existing debt matures, some of which may be refinanced at a higher rate. By the end of the projection period, the average interest rate on federal debt may reach 4.0 percent.
6. The accumulation of federal debt and rising interest rates will cause borrowing costs to rise. In CBO’s projections, interest costs would rise from 1.9 percent of GDP in 2022 to 3.2 percent in 2030, which would be the highest since 1940, the first year for which such data were reported. Interest costs would continue climbing over the following decades, reaching 6.7 percent of GDP by 2053. At that point, interest costs on the federal debt would account for 35 percent of federal revenues.

The nation is on an unsustainable fiscal path, driven by the mismatch between the government’s commitments and its revenues. Furthermore, the accumulation of federal debt and relatively high interest rates will push the government’s borrowing costs increasingly higher — crowding out investments in other priorities. Policymakers should work together to establish a positive fiscal future for the United States.

Fraudsters scooped up more than $200 billion in COVID-19 relief funds meant to help struggling small businesses during the pandemic, a government watchdog says.

The inspector general of the Small Business Administration (SBA) released a report Tuesday that gives the largest estimate yet of how much of the $1.2 trillion disbursed by the SBA was stolen by fraudulent claims. At least 17% of all COVID-19 Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) funds were given away to potentially fraudulent actors, according to Inspector General Hannibal “Mike” Ware.

In 2020, Congress approved $953 billion for the PPP program, designed to keep workers employed during the pandemic. But the program was an easy target for thieves who took advantage of the loose controls on emergency spending to enrich themselves while employers could not afford to keep their workers on payroll.

So far, the Justice Department has opened more than 140 cases of fraud totaling millions of dollars, including a Minnesota man who claimed to have 28 employees when he had none, a Maryland pastor who bought luxury cars, and a Florida family who bought a $3 million home.

Of the 22.1 million loans and grants disbursed, 21%, or 4.5 million, were handed to potential fraudsters, according to Ware’s report.

Multiple federal agencies are working to recover the stolen money, and there are 570 ongoing investigations in addition to congressional hearings. So far, nearly $30 billion in COVID-19 EIDL and PPP funds have been seized or returned to the SBA, the inspector general said.

Moving forward, the inspector general is working to obtain additional datasets from lenders and third-party processors to find potential fraud and bring criminals to justice.

Wisconsin will receive $1.1 billion to spend on broadband expansion as part of the federal Infrastructure Investment and Jobs Act..

The state-by-state breakdown of the funding was announced Monday. Nationwide, the infrastructure law will spend a total of $42.5 billion on high speed internet grants.

Speaking to reporters Monday afternoon, Mitch Landrieu, a senior advisor to the president and the White House infrastructure coordinator, called the investment a “big deal,” one that rivaled the electrification of rural America in the 1930s. “High speed internet is not a luxury,” Landrieu said. “It’s a necessity if anybody wants to fully participate in society.”

The federal government spent the last 18 months mapping broadband access state by state, with the goal of using these funds to achieve universal broadband access by 2030. Landrieu said that in Wisconsin, 253,000 homes and small businesses either had no high speed internet or lacked access to “minimally acceptable” speeds.

Landrieu said the bulk of the funding would go toward laying fiber, or high-speed fiber optic cable in the ground. “Essentially, 80 percent of that is digging dirt,” Landrieu said. “A lot of it is manufacturing the cable and then just the hard work of laying out where it needs to be based on the mapping that has been done. And then we expect the work to be complete 100 percent by 2030 across America.”

Landrieu said the next step in the process would be for the Evers administration to present a plan to the federal government on how to use the funding. Construction, Landrieu said, could begin early next year.

A package of bipartisan measures bolstering affordable housing in Wisconsin has received final approval from Democratic Gov. Tony Evers, while Republicans have signed off on more than half a billion dollars to pay for the effort.

Governor Evers signed five bills into law Thursday establishing loan programs for builders and landlords and making it easier for developers to get permits for new residences. One of the measures sets limits on who can challenge permitting decisions and requires that local governments approve permits for residential housing projects that don’t violate local standards.

Meanwhile, Republicans who control the Legislature’s budget-writing committee set aside $525 million on Thursday to fund the new loans, which are targeted to projects that improve aging units, expand infrastructure such as roads and utilities to serve affordable housing, or convert vacant commercial buildings into affordable housing.

“Access to safe, reliable, and affordable housing statewide is an absolutely critical part of addressing Wisconsin’s long-standing workforce challenges,” Evers said in a statement.

The Legislature is expected to pass the state budget, which includes funding for the housing projects, this week.

Income taxes would be cut across the board by $3.5 billion under a plan passed Thursday by Republicans who control the Wisconsin Legislature’s budget-writing committee.

Under the income tax cut, which is retroactive to January 1, 2023, the average reduction would be 15% for all filers or $573, Republicans said. The state would still go from four to three brackets, with the lowest rate dropping to 3.5% and the highest rate being 6.5%.

The largest percentage point drop comes at the highest rate, paid by married couples who earn more than $405,550 or single people making more than $304,170. That rate would drop from 7.65% to 6.5%. The middle two brackets would collapse so all married couples earning between $9,210 and $202,780 would pay 4.4%. The lowest rate for the poorest taxpayers would drop only slightly, from 3.54% to 3.5%.

The income tax cut will be paid for by tapping the state’s projected $7 billion surplus. Republicans also devoted $622 million to keep property taxes in check.

Republican Representative Terry Katsma said the cuts were designed to keep Wisconsin competitive with neighboring states with lower rates, like Illinois, which has a flat tax of 4.95%. “We have to be competitive with the states around us,” Katsma said.

The laws governing Wisconsin’s multibillion-dollar liquor industry would be streamlined and updated under a sweeping measure passed by the state Assembly on Wednesday that’s supported by groups from the smallest craft brewers to the largest national brewers, bar owners and alcohol distributors.

The massive overhaul to the laws affecting the production, distribution and sale of alcohol passed with broad bipartisan support. The measure now heads to the Senate for final approval. Democratic Gov. Tony Evers, who was involved with discussions of the measure, is expected to sign it into law.

The proposal would create a new division within the state Department of Revenue, which would be in charge of overseeing and enforcing the state’s alcohol laws. The absence of such a unit now has led to inconsistent enforcement of the law — and questions over how they affect new businesses that weren’t envisioned when the laws were enacted, supporters of the bill said.

The bill affects every level of the state’s alcohol industry governing the licensing, producing, selling and distribution of beer, wine and liquor. The so-called three-tier system, created in the 1930s, has been eyed for changes for years, but policymakers and the alcohol industry have been unable to reach agreement.

The three-tiered system was designed to prevent monopolies, so the same company could not produce and sell alcohol at the wholesale and retail levels. But for years the system has been criticized for not keeping up with changes in the industry, including the explosion of small craft breweries and the rising popularity of wedding barns.

The bill would require venues that provide alcohol at special events, known generally as wedding barns, to be regulated in a new way. They could either get a permit that would allow them to host events six times a year or no more than once a month — or obtain a liquor license that would allow them to sell alcohol at as many events as they wish.

The bill would also allow for expanded hours at wineries and would regulate them the same as craft breweries and distilleries. It would permit brew pubs to operate stand-alone retail stores and allow craft breweries to sell products from other out-of-state breweries. The bill would also create new guidance for contract brewing, winemaking and distilling, which is a growing segment of the industry.

The measure also creates a new statewide bartender license. Currently, bartenders are licensed by local municipality, a system that proponents of the change argued is cumbersome. It also allows for bars in 14 southeastern Wisconsin counties to stay open two to four hours longer than the current 2 a.m. limit — during the Republican National Convention next summer in Milwaukee.

Wisconsin’s unemployment reserves averted catastrophe during the pandemic, but the state has work to do to ensure the fund can withstand job losses from a potential future recession.

That’s according to a new report released Tuesday by the Wisconsin Policy Forum. It examined how the state avoided increasing the tax burden on employers during the pandemic-induced recession to fund its unemployment system, and examined where Wisconsin’s unemployment reserves sat by the end of 2022.

While the state’s unemployment fund has increased since the pandemic cut it nearly in half, it still isn’t at pre-pandemic levels and only has enough money to cover about 6.5 months of unemployment benefits if it were to reach a historically high jobless rate, the report said. The federal government recommends states keep enough money on-hand to cover one year.

“The unemployment fund has dropped out of the headlines, and it is no longer getting the attention that it got in early 2020 — and that’s appropriate because things have improved and it’s no longer in dire condition,” said Jason Stein, research director for Wisconsin Policy Forum. “But there remain issues, and we shouldn’t have it dropped entirely off the radar.”

Unemployment Insurance benefits are funded by state and federal payroll taxes that are paid exclusively by employers, but can indirectly limit compensation for workers, the report says. Typically, employers responsible for a greater proportion of layoffs are required to pay more than those with fewer layoffs.

Wisconsin was not one of the 22 states that borrowed money from the federal government to make jobless payments during the pandemic. But that’s not to say the state’s unemployment reserves weren’t impacted by COVID-19. From 2019 to 2020, its end of year fund balance dropped from $2 billion to $1.1 billion, according to the report. It stayed at $1.1 billion in 2021.

Wisconsin’s unemployment reserves increased to end 2022 at $1.4 billion, still below 2019’s $2 billion, and below federal recommendations, according to the Wisconsin Policy Forum. Meeting the federal benchmark of being able to fund one year of benefits at historically high levels would qualify Wisconsin for interest-free federal loans if the state needed to borrow to fund the program.

The report lists some ways policymakers could help Wisconsin prepare for a possible recession including using the state’s nearly $7 billion budget surplus, reducing unemployment benefits in targeted ways or increasing revenues from state payroll taxes.

“None of these options are painless,” Stein said, noting that using the state’s one-time budget surplus could be less problematic than some of the other options.

“Putting some of it into the unemployment fund would be a one-time use of the funds,” he continued. “In that sense, it wouldn’t set up budget problems for the state in the future, and, in fact, it would do the opposite — it would make the state better prepared for the future.”

A report from Forward Analytics, the research arm of the Wisconsin Counties Association, says the state needs to build at least 140,000 housing units by the end of the decade to keep pace with current demand. The shortage has been especially challenging for marginalized groups and low-income individuals.

State lawmakers Wednesday approved a bipartisan package of bills aimed at improving Wisconsin’s housing stock. The package includes bills to create loans for workforce and senior housing.

Besides incentivizing housing development, one of the bills would make it harder for residents to block new housing projects. It would require local governments to approve housing projects that meet existing zoning requirements, and would lay out a court process for developers who feel the rules have been changed on them mid-project.

Currently, many new projects must make it through multiple votes from local plan commissions and other municipal boards, a process that can take months or years and creates a number of opportunities for opponents to torpedo new projects.

The bill is meant to address what some call the “not in my backyard,” or NIMBY, problem, a term for those who raise objections to projects that may be beneficial to a city because they don’t want new development located in their own neighborhood.

Jerry Deschane, executive director of the League of Wisconsin Municipalities, said community residents throughout the state block housing “more often than anybody would care to admit.”

“Your long-range comprehensive plan says, ‘We’re going to develop this neighborhood in this way,'” Deschane said. “Your zoning says, ‘We’re going to develop this neighborhood in this way.’ Well, a developer shows up and says, ‘OK, I can build that — here’s my request for a permit.’ Then all of a sudden, the world gets turned upside down.”

State Sen. Romaine Quinn, R-Cameron, is also a realtor for Rice Lake-based Real Estate Solutions. He cosponsored the legislation and recently told Wisconsin Public Radio’s “Central Time” that it’s aimed at giving developers more certainty.

“When they develop a project, they have to know it’s going to be approved in a timely manner, because our construction season is short in northern Wisconsin,” he said. “Communities would no longer be allowed to move the ball on developers when a project is trying to come in.”

GOP leaders told party activists today at the Republican state convention they plan to cut income taxes for Wisconsinites by at least $3 billion as they wrap up work on the state budget.

Senate Majority Leader Devin LeMahieu and Assembly Speaker Robin Vos told reporters following the announcement that they aim to meet on Monday to discuss the proposal, which would reduce all four of Wisconsin’s tax brackets.

The top rate is 7.65 percent, which kicks in for income above $374,600 for married joint filers. Dem Gov. Tony Evers has previously said he opposes lowering the top rate.

The announcement comes on the heels of the GOP-controlled Joint Finance Committee approving an education package that would allow school property taxes to go up by $647 million over the next two years.

“The one thing that unites Republicans is the idea that government has too much money, and I think that’s one thing to end on,” Vos said.

The leaders made the announcement during a panel discussion today with former GOP Assembly Speaker Mike Huebsch, who served as Administration secretary under former Gov. Scott Walker.

LeMahieu during the panel said as budget sessions finish up, the state still has enough money to provide major tax cuts.

“So I look forward to putting another tax cut on the governor’s desk. Hopefully he signs it again,” he said.