News of the Day

Both existing home sales and median prices rose by double-digit margins in May compared to their levels 12 months earlier, when the economy was in lockdown. Housing supply remains very tight with just 2.8 months of available supply in the state. Inventory is tight in all regions, across all urban/rural classifications and across all price ranges

“Basic economics tells us that strong and growing demand in a world of tight supply is going to create significant price pressure, and that’s exactly what we’re seeing in the state housing market. Median prices through the first five months are up at an annual pace of 12.1%. Unless demand moderates or supply improves, neither of which is likely in 2021, we can expect to see more of the same price appreciation through the end of this year. The good news is that mortgage rates remain very low by historical standards, which has at least partially offset the impact of significant price pressure on housing affordability in the state.  Hopefully the inflationary pressures don’t intensify, which could cause mortgage rates to increase and lower affordability,” said Michael Theo, President & CEO of the Wisconsin Realtors Association.

WEDC officials say they’re looking to pick up the pace on revoking tax credits from businesses that fail to meet the terms of their contracts.

During a meeting of the agency’s Audit and Budget Committee, members discussed actions being taken in response to the latest biennial WEDC audit from the state Legislative Audit Bureau. The April audit included a number of recommendations for improving WEDC’s processes, including updating procedures on tax credit revocation to do so in a more “timely manner.”

In one example, a business that received tax credits from the state indicated in March 2017 that it had lost all of the contractually required jobs that were previously created. But WEDC didn’t revoke the $125,000 in tax credits until more than three years later, in June 2020.

Another recommendation from LAB directs WEDC to change its procedures for Enterprise Zone tax credits such that credits are only awarded for wages paid to employees providing a service within the defined enterprise zone. As it stands, WEDC could be awarding these tax credits for wages paid to employees working elsewhere, LAB said.

WEDC will be providing a report in response to the audit’s recommendations to the state’s Joint Legislative Audit Committee in October.

Taking advantage of an unexpected revenue windfall, Republicans on the Wisconsin Legislature’s budget committee voted Thursday to approve about $3.4 billion in income, business and property tax cuts, wrapping up its work on the two-year spending plan.

The Republican plan would bring the state’s third income tax bracket down from 6.27%  to 5.3%, generating about $2.7 billion in relief. That bracket encompasses individuals making between $23,930 and $263,480 per year, and households earning between $31,910 and $351,310 per year.

The Federal Reserve on Wednesday considerably raised its expectations for inflation this year and brought forward the time frame on when it will next raise interest rates.

As expected, the policymaking Federal Open Market Committee unanimously left its benchmark short-term borrowing rate anchored near zero. But officials indicated that rate hikes could come as soon as 2023, after saying in March that it saw no increases until at least 2024. The so-called dot plot of individual member expectations pointed to two hikes in 2023.

Though the Fed raised its headline inflation expectation to 3.4%, a full percentage point higher than the March projection, the post-meeting statement stood by its position that inflation pressures are “transitory.” The raised expectations come amid the biggest rise in consumer prices in about 13 years.

The committee did raise the interest it pays on excess reserves by 5 basis points to 0.15%.

In a separate matter, the FOMC announced that it would extend dollar-swap lines with global central banks through the end of the year. The currency program is one of the last remaining Covid-era initiatives the Fed took to keep global markets flowing.

Republicans on the Legislature’s state budget committee voted Tuesday evening to approve $125 million to expand broadband internet access in Wisconsin, a bipartisan goal that has emerged as the COVID-19 pandemic laid bare technology disparities across the state.

According to a report released earlier this year based on Federal Communications Commission data, more than 430,000 people, who make up 25 percent of the state’s rural population, lacked access to high-speed internet in Wisconsin in 2019. The report ranked Wisconsin 36th nationwide for accessibility in rural areas.

Responding to those issues, Democratic Gov. Tony Evers and GOP legislative leaders have agreed state funding for broadband expansion should be a priority for the next two-year state budget.

However, their exact funding plans have differed. In his plan, the governor called for roughly $152 million for broadband expansion grants statewide and $50 million on other related programs. The governor would have paid for the grants out of the state’s general fund.  The $125 million GOP plan would be dedicated solely to the grants and be funded by borrowing.

Broadband expansion grants, which were first offered in 2013, are aimed at expanding broadband internet service to homes and businesses that don’t have service or are only able to get lower-speed internet.

Prices charged by producers for goods and services rose 5.3 percent in the 12 months leading into May, according to data released Tuesday by the Labor Department.

The Producer Price Index (PPI) for final demand — not parts or components — rose at the fattest unadjusted annual rate since the Labor Department began calculating yearly data in 2010.

The record-breaking annual jump in the PPI also reflects a sharp rebound from a steep decline in prices last year. Since prices fell drastically during the onset of the pandemic, the subsequent recovery has also appeared sharp.

“The ongoing mismatch between supply and demand continues to fuel price pressures, while the influence of base effects after last spring’s collapse in prices likely peaked last month,” wrote Mahir Rasheed and Gregory Daco of Oxford Economics in a Tuesday analysis.

Even so, most economists expect the rate of price increases to settle down as the economy hits a more sustainable pace.

“Looking past the noise, producer price increases will slow as supply constraints relax and recalibrate to demand in the second half of 2021,” Rasheed and Daco wrote. “With inflation expectations cooling and fiscal stimulus fading, we continue to share the Fed’s view that we are not entering an environment of spiraling prices.”

The Wisconsin Supreme Court on Friday sided with private school parents and students in striking down a Dane County order from last August that sought to close all schools to most students to limit the spread of COVID-19.

The court found that because state statute does not specifically allow local health officers to close schools during a public health emergency, Public Health Madison and Dane County director Janel Heinrich overstepped her authority, and it deemed flawed her reliance on a part of state statute that says people in her position can take all “reasonable and necessary” actions to protect public health.

“The power to take measures ‘reasonable and necessary’ cannot be reasonably read as an open-ended grant of authority,” Justice Rebecca Bradley wrote for the majority. “Doing so would swallow the rest of the statute and render it mere surplusage.”

The Occupational Safety and Health Administration announced a rule on Thursday outlining steps that employers must take to protect workers from the risk of Covid-19, but it will apply only to the health care industry, not to other high-risk workplaces, as the Biden administration initially indicated.

“The science tells us that health care workers, particularly those who come into regular contact with the virus, are most at risk at this point in the pandemic,” Labor Secretary Martin J. Walsh said on a call with reporters. “So following an extensive review of the science and data, OSHA determined that a health care specific safety requirement will make the biggest impact.”

The rule will require health care employers to provide protective equipment like masks, to screen and triage patients for the risk of Covid-19 and to ensure adequate ventilation and distancing, among other measures. It will also require those employers to provide adequate paid time off for workers to receive vaccinations and manage their side effects.

Mr. Walsh, whose department includes OSHA, said the administration was issuing optional guidance to employers outside health care that would focus on workplaces in the manufacturing, meat processing, grocery and retail industries.

Republicans in the state Legislature have voted to discontinue federal unemployment insurance benefits that were added during the coronavirus pandemic.

The weekly $300 benefits, down from $600 earlier in the pandemic, were set to expire in September. Unless Wednesday’s move is vetoed by Gov. Tony Evers, they’ll end much sooner for Wisconsinites. His administration did not immediately respond to a request for comment on the vote.

The bill passed the Senate without debate. The vote was on party lines, with 20 Republicans in favor and 12 Democrats opposed.

In contrast, there were more than two hours of discussion in the Assembly, where Republicans focused on the challenges facing Wisconsin businesses. More businesses than not have “Help Wanted” signs in the window, Speaker Robin Vos, R-Rochester, noted. Ending supplemental unemployment benefits won’t be a silver bullet to address the lack of workers, but unemployment is meant to serve as a short-term bridge, he said.

“Now, if we were in the middle of a recession or a pandemic where jobs are difficult to come by, I could understand, perhaps, those on the other side who advocate for keeping the bonus unemployment longer,” he said. “But we are now in the most critical season for many businesses in Wisconsin, and that’s the summer.”

Ultimately, the bill passed the Assembly with a vote of 60-37. More than two dozen states have already discontinued the supplemental benefits, which Congress passed three times during the pandemic.

The legislation passed Wednesday ends four types of federal unemployment aid: Pandemic Unemployment Assistance, Pandemic Emergency Unemployment Compensation, Federal Pandemic Unemployment Compensation and Mixed Earner Unemployment Compensation.

As a new estimate puts $4.4 billion more than previously estimated into politicians’ hands for the next state budget, Wisconsin lawmakers face a standoff about how to spend the extra money.

The estimate from the nonpartisan Legislative Fiscal Bureau comes after an initial January estimate, and projects more than $4.4 billion in state revenue than previously thought over the next three years–separate from another $2.5 billion from federal pandemic aid that is entirely up to the governor to spend.

This time, the new estimate includes record-setting state tax revenues from April and May that have shifted the picture of what the post-pandemic state revenue picture will look like. An LFB official called it “unprecedented,” and said the new projection was because of “vastly improved economic forecasts for the remainder of this year and the next two years.”

Gov. Evers responded Tuesday morning by immediately lifting agency budget requirements for the 2020-2021 fiscal year, meaning state departments–like the UW System which had to cut $45 million–no longer have to trim millions from their 20-21 budget. In total, the governor had directed the Department of Administration to find more than $250 million in cuts across 18 state agencies this year, a now-lifted requirement–and money that will have to be spent quickly by the end of the fiscal year.

“I think Democrats are open to a tax cut,” Assembly minority leader Gordon Hintz said in an interview. “I think we have the resources. But let’s maximize the resources that we have…this is a one-time opportunity to reinvest in broadband, reinvest in our infrastructure, get more money in the classroom to address opportunity, address mental health, and then look at ways to put money in more people’s pockets with a targeted income tax cut.”

Republican legislative leadership immediately pushed back on using the extra funds to expand government, calling the windfall temporary and saying the funds should instead find their way back directly to taxpayers.

“If we recklessly spend this new money and grow taxpayer obligations in an unsustainable way, we risk future fiscal stability – a stability Republicans have spent a decade cultivating,” Joint Finance Committee co-chair Howard Marklein said in a joint statement with budget leaders and Senate majority leader Devin LeMahieu.

LeMahieu also took the opportunity to call for ways to use the money to reduce tax burdens. “Hard-working taxpayers gave the state a massive surplus,” he noted.

“This is a temporary jump in tax revenue—sound financial planning would require this money is not spent on more government programs but returned to the taxpayer.” Senate president Chris Kapenga (R-Delafield) said in a statement. “There is no magic money tree, folks.”

According to the Associated Press, Speaker Robin Vos after meeting with Sen. LeMahieu will target a $4 billion tax cut, but isn’t sure yet which taxes will be targeted.