News of the Day

Higher mortgage rates and interest rates likely contributed to a recent decline in new homebuilding in Wisconsin, according to an economics expert at Marquette University.

David Clark is a professor of economics and executive associate dean in the university’s College of Business Administration. In a recent interview, he explained rising mortgage rates and construction loans are impacting related building activity.

The national average for a 30-year fixed rate mortgage fell slightly from 5.52 percent in June to 5.41 percent in July, Clark said. But that remains well above the rate from July 2021 — 2.87 percent.

“Those higher mortgage rates, and those higher rates that are going to show up on construction loans as well, that’s certainly something that will have an impact on people pulling permits,” he told WisBusiness.com. “I think that’s more likely to be the primary driving factor than other things that might impact the decision to take out a loan.”

And he noted federal officials have been raising short-term interest rates in hopes of tamping down inflation, which hit a recent peak of 9.1 percent earlier this summer.

The number of new home construction permits fell 24 percent over the year in the second quarter of this year, a recent report from the Wisconsin Builders Association found. A total of 3,328 permits were issued between April 1 and June 30, compared to 4,382 during the same period of 2021, the report shows.

The University of Wisconsin System is seeking $262.6 million in additional state funding in its two-year budget request and plans to use the bulk of that to boost employee pay by 8 percent by 2025.

Inflation was a major theme on Thursday as the UW System Board of Regents discussed its 2023-25 biennial budget request. UW-Milwaukee Vice Chancellor of Finance and Administrative Affairs Robin Van Harpen told members the university has felt some impact from rising costs, but expects the full brunt to hit in the coming year and beyond.  “The pressure on salaries and wages is like nothing I’ve ever seen before,” said Van Harpen.

UW System President Jay Rothman is also seeking $24.5 million through 2025 for a tuition waiver program for students from low-income families at all universities except UW-Madison.  The Wisconsin Tuition Promise would cover remaining student costs not covered by financial aid for students from families with annual incomes below $62,000 starting in the fall of 2023.

Before unanimously approving the UW’s budget request Thursday, some regents expressed concern that the system is not seeking an increase in tuition rates for in-state, undergraduate students.

In-state tuition for undergraduates has been frozen for a decade, either at the direction of state lawmakers or regents. The 2021-23 state budget lifted the freeze, which lawmakers first instated in 2013, but UW system officials opted not to raise tuition in their last budget.

Regent Ashok Rai said continuing the freeze indefinitely is not sustainable.

“At some point in time, we’re going to need to seriously consider taking our in-state tuition up a modest amount,” said Rai.

How the UW System’s request for an additional $262.6 million in state support will be received depends on who wins the governor’s office in November and crafts a 2023-25 state budget proposal.

Challengers Mandela Barnes and Tim Michels both saw post-primary bumps in the first Marquette University Law School Poll since they won their parties’ nominations for U.S. Senate and Governor.

Fifty-one percent of registered voters surveyed backed Barnes, the Dem lieutenant governor, in the U.S. Senate race over Republican Ron Johnson, who was favored by 44 percent.

Meanwhile, 45 percent supported Dem Gov. Tony Evers, while 43 percent backed Michels, a GOP construction exec. Independent Joan Beglinger, a nurse from Cross Plains whose platform aligns with the views of many Donald Trump supporters, was at 7 percent.

Poll Director Charles Franklin said the difference between the U.S. Senate and guv contests was largely driven by independent voters.

Barnes had slightly more crossover support from Republicans than Evers. But he had a 14-point advantage among independents at 52-38. Evers had a 4-point edge at 41-37.

The latest poll also found the enthusiasm gap between Republicans and Dems has largely disappeared.

Eighty-three percent of Republican registered voters said they are absolutely certain to vote, while 82 percent of Dems and 66 percent of independents said the same.

This poll of 811 registered voters was conducted Aug. 10-15. Seventy-five percent were reached via cell phone and 25 percent by landlines. The margin of error was plus or minus 4.2 percentage points. Franklin said this is the first sample to include cell phone numbers for those who live in Wisconsin but have out-of-state area codes. They make up about 16 percent of the state.

President Biden signed the Inflation Reduction Act into law on Tuesday, saying “the American people won, and the special interests lost.”

The bill, which was passed by the Senate earlier this month and the House of Representatives last week, costs an estimated $437 billion, with $369 billion going toward investments in “Energy Security and Climate Change,” according to a summary by Senate Democrats.

Democrats project that the legislation will reduce the deficit by bringing in $737 billion. This includes an estimated $124 billion from IRS tax enforcement, the projected result of hiring 87,000 new IRS agents who will ramp up audits.

The bill also imposes a 15% corporate minimum tax that the Joint Committee on Taxation predicts will raise $222 billion, and prescription drug pricing reform that the Senate estimates will bring in $265 billion.

One thing the Inflation Reduction Act is not expected to do, according to multiple analyses, is reduce inflation. The Congressional Budget Office said the bill will have “a negligible effect” on inflation in 2022, and in 2023 its impact would range between reducing inflation by 0.1% and increasing it by 0.1%.

Yesterday, the Wisconsin Department of Revenue (DOR) released its annual Equalized Values Report. The report shows Wisconsin’s total statewide equalized property value as of January 1, 2022, was $745 billion, a 14% increase over the prior year, which is the largest increase since 1979. Growth occurred in all property classes and was led by residential and commercial property. Equalized values are based on data from January 1, 2021, to December 31, 2021.

Report highlights:

• Change in equalized value = $90.6 billion, a 14% increase from 2021

o   $77.3 billion due to market value increases (12%)

o   $11.6 billion due to new construction (2%)

• Menominee and Price Counties saw the largest increase at 31% and 19%, respectively

The Equalized value represents an estimate of a taxation district’s total taxable value and provides for the fair apportionment of school district and county levies to each municipality. Changes in equalized value do not necessarily translate into a change in property taxes.

Wisconsin lawmakers were divided over the Inflation Reduction Act that passed the U.S. House on Friday. The legislation now goes to President Joe Biden for his signature.

The bill provides around $375 billion over 10 years to help industry and consumers transition away from fossil fuels to cleaner energy sources. The bill provides around $64 billion to extend the Affordable Care Act to around 13 million people who need help paying health care premiums for insurance bought on the private market. The bill raises around $740 billion in revenue over the next 10 years, and that includes around $222 billion raised from a 15 percent minimum tax on corporations.

“That will make us more energy independent and less dirty,” said Pocan.

Republican U.S. House Rep. Tom Tiffany called the bill a “tax-and-spending bonanza” amid record inflation. The nonpartisan Congressional Budget Office found the bill’s impact on inflation could be positive or negative, and its effects are largely uncertain.

The Centers for Disease Control and Prevention (CDC) on Thursday relaxed many of the guidelines for COVID-19 in communities, a major shift that emphasizes living with the virus rather than strict prevention of infection. The new guidance puts the onus on individuals to assess their own personal risk levels, rather than businesses, governments or schools.

The new guidelines no longer recommend case investigation and contact tracing, except in health care settings and certain high-risk congregate settings. The new guidance also treats a COVID-19 exposure in the same way regardless of whether the person exposed is vaccinated. Under the new guidelines, there is no quarantine recommendation.

The agency no longer recommends physical distancing, and instead asks individuals to consider the risk in specific settings.

CDC will also no longer recommend screening testing of asymptomatic people without known exposures, except in certain high-risk settings like nursing homes and prisons.

“Screening testing might not be cost-effective in general community settings, especially if COVID-19 prevalence is low,” CDC wrote.

In schools, CDC removed the recommendation that kids avoid mingling with other classrooms, a practice known as cohorting.

It also removed a recommendation on “test-to-stay,” which was aimed at keeping children who were exposed to COVID-19 in the classroom as long as they had no symptoms and repeatedly tested negative.

Thursday’s report from the Labor Department showed that the producer price index — which measures inflation before it reaches consumers — declined 0.5% in July. It was the first monthly drop since April 2020 and was down from a sharp 1% increase from May to June.

Construction executive Tim Michels has won the Republican primary for governor in Wisconsin, defeating former Lt. Gov. Rebecca Kleefisch with the help of a “political outsider” message, millions of dollars of his personal wealth and a critical endorsement by former President Donald Trump.

As of 10:37 p.m., unofficial totals from the Associated Press showed Michels defeating Kleefisch 47-43 percent.

I’m here to say the American dream is still alive, and good people need to step up and run,” Michels told a cheering crowd at his campaign victory party in Waukesha. “We’re going to get an outsider, a businessman and a veteran in the governor’s office.”

Michels won his race by performing well in a wide swath of rural counties that have supported Trump in his runs for office, but he also performed better than Trump in some suburban counties. For example, Michels carried one of the vaunted “WOW” counties in southeast Wisconsin, winning Washington County while Kleefisch narrowly won Waukesha and Ozaukee counties.

Along with Wisconsin’s race for U.S. Senate, the race for governor is likely to be fiercely competitive. Thirty-six states will hold elections for governor this year. Wisconsin is one of just four of those races considered toss-ups by the Cook Political Report.

Building on its multifaceted, modernized approach to detect and prevent fraud, the Wisconsin Department of Workforce Development (DWD) is now participating in the National Association of State Workforce Agencies’ Integrity Data Hub, which provides states with cross-matching verification options for identifying potential unemployment insurance (UI) fraud and improper payments.

Data from the National Association of State Workforce Agencies (NASWA) shows that the integrity data hub has assisted with the prevention of $2.4 billion in improper payments in the states and territories where it is utilized through June 2022.

“Combating UI fraud is a top priority,” DWD Secretary-designee Amy Pechacek said. “These additional tools available through NASWA’s Integrity Data Hub will give our UI staff more options in the fight against fraud, helping to protect the integrity of the UI program and ensuring that benefits remain available to individuals who are out of work through no fault of their own.”

The additional fraud identification tools available through the data hub include:

• The Suspicious Actor Repository (SAR), which allows states to compare UI claims against a list of suspicious claims from other states;
• A database of suspicious email domains;
• A database of foreign IP addresses;
• Data analysis tools that allow states to compare claims to national data and conduct cross-state validation checks;
• A multistate database of UI claims data;
• A centralized identity verification service;
• The Fraud Alert System, which allows states to share information about new fraud schemes; and,
• Bank account verification, which enables states to validate bank account ownership and status.

These modernized tools add to DWD’s existing fraud prevention and detection technology, which includes the wage records cross-match, state and national new hire cross-matches, work search audits, interstate cross-match, deceased citizen cross-match, and many others.