News of the Day

House Republicans will enter the 119th Congress with a razor-thin majority after an election that saw Democrats score a net gain of one seat.

The final race to be decided — nearly one month after Election Day — was in California’s 13th District, where Democrat Adam Gray ousted Republican incumbent John Duarte.

That means Republicans won a total of 220 House seats this year, while Democrats won 215.

House Republicans are expected to start the new Congress on January 3 already down by at least one seat. That’s because their final tally includes the Florida seat won by Republican Matt Gaetz, who resigned from the House in November.

The GOP margins are expected to shrink even further in the session’s early months when another Florida Republican, Rep. Michael Waltz, resigns to serve as Trump’s national security adviser — a White House role that doesn’t require Senate confirmation. Waltz is expected to step down on or around Inauguration Day on Jan. 20.

The timing of outgoing House GOP Conference Chair Elise Stefanik’s departure is slightly less clear, though it’s likely that the New York lawmaker will win fast approval from the Republican-led Senate to become U.S. ambassador to the United Nations in the next administration.

The special elections for Gaetz’s and Waltz’s seats are slated for April 1, according to the Florida secretary of State’s office, with primaries on January 28. And once Stefanik resigns, New York law gives Democratic Gov. Kathy Hochul a 10-day window to call the special election, which would need to be set for between 70 and 80 days after that.

Assembly Speaker Robin Vos and Senate Majority Leader Devin LeMahieu are vowing to appeal a Dane County judge’s ruling that restored collective bargaining powers for public employees who lost them under Act 10 more than 13 years ago.

Judge Jacob Frost this summer found parts of the law unconstitutional because it treated some public safety employees, such as municipal police officers, differently from others in law enforcement, such as wardens working for the Department of Natural Resources.

Following that ruling, GOP lawmakers had asked Frost to only strike down the definition of public safety employees but otherwise leave the law largely intact. But he rejected that in Monday’s decision.

The 2011 law  barred state general employees from negotiating for anything other than base wage increases that were capped by changes in the consumer price index.

Frost struck down that measure along with two other key components of the law:

• Requiring 51% of all members in a bargaining unit to certify the union while allowing a simple majority of those who voted to certify for those who fell under the public safety employee definition.
• Allowing union dues to be deducted from the paychecks of public safety employees, but barring the practice for others.

In all, Frost struck down 87 provisions from Act 10 and another three from a 2015 law that modified the original statute.

Public employee unions and workers who were part of the suit challenging the law hailed the ruling. They also noted it is likely the case will be tied up in the courts “for some time” with expected appeals.

The American economy expanded at a healthy 2.8% annual pace from July through September on strong consumer spending and a surge in exports, the government said Wednesday, leaving unchanged its initial estimate of third-quarter growth.

Consumer spending, which accounts for about 70% of U.S. economic activity, accelerated to a 3.5% annual pace last quarter, up from 2.8% in the April-June period and fastest growth since the fourth quarter of 2023. Exports also contributed to the third quarter’s growth, increasing at a 7.5% rate, most in two years.

But growth in business investment slowed sharply on a drop in investment in housing and in nonresidential buildings such as offices and warehouses. By contrast, spending on equipment surged.

Wednesday’s report also contained some encouraging news on inflation. The Federal Reserve’s favored inflation gauge — called the personal consumption expenditures index, or PCE — rose at just a 1.5% annual pace last quarter, down from 2.5% in the second quarter. Excluding volatile food and energy prices, so-called core PCE inflation was 2.1%, down from 2.8% in the April-June quarter.

The head of Forward Analytics says limited housing availability and the high cost of child care are top affordability challenges as lawmakers gear up for the next legislative session.

Economist and researcher Dale Knapp discussed these and other topics during a recent Newsmakers interview on WisconsinEye, focused on potential areas of legislative action in the coming years. Forward Analytics is the research-focused division of the Wisconsin Counties Association.

Knapp touched on the possibility of state policymakers leveraging the surplus for tax relief, noting property tax reductions “might have the biggest chance” to get bipartisan support.

“A tax cut can provide a little bit of money in people’s pockets, so that could help,” he said, adding “the bigger issues in terms of household finance, I think of the cost of child care, I think of the cost of buying a house, those kinds of things that the state can help address to some degree.”

For a family with two children, the cost of obtaining child care can exceed one-third of annual income, Knapp noted. He added the market for these services is largely young couples who are just getting started in their career and often don’t have much money. But at the same time, child care workers are “some of the lowest paid workers” in the state.

“So it’s this real challenge, that I think is a case of the private market, in and of itself, can’t solve this,” he said. “A lot of times, we want the market to solve this, but I think this is one case where in some form, the public sector has to come in and help to some degree.”

Knapp said one solution, though likely an unpopular one, would be for the state’s K-12 school system to take over child care.

“That would be the extreme of an almost total government takeover, and I don’t think that works. But I think in some ways, there has to be a funding stream for this that comes from the public sector,” he said, adding the child care challenge could be contributing to a decline in labor force participation among women aged 30-45 in Wisconsin.

Meanwhile, Knapp said “I think there’s a good chance we’ll see more” legislative efforts to improve housing availability in the state. He’s previously said the state needs to build between 130,000 and 200,000 more housing units this decade alone, while also making housing more affordable.

President-elect Donald Trump on Monday pledged big tariffs on the United States’ three largest trading partners – Canada, Mexico and China.

Trump, who takes office on January 20, said he would impose a 25% tariff on imports from Canada and Mexico until they clamped down on drugs, particularly fentanyl, and migrants crossing the border.

Trump separately outlined “an additional 10% tariff, above any additional tariffs” on imports from China. It was not entirely clear what this would mean for China as he has previously pledged to end China’s most-favored-nation trading status and slap tariffs on Chinese imports in excess of 60% – much higher than those imposed during his first term.

“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump said.

The United States accounted for more than 83% of exports from Mexico in 2023 and 75% of Canadian exports.

After a dip in September, Wisconsin home sales rebounded slightly last month. But despite an increase in new listings, inventory remains tight and the median price grew to $310,000.

The Wisconsin Realtors Association’s October report shows existing home sales rose by 3.5 percent compared to the same time last year. Still, demand continued to outpace supply, especially in metropolitan counties. That pushed the median home price up by nearly 11 percent compared to the same 12-month period ending last October.

Dave Clark is a Marquette University emeritus professor of economics. He told WPR that the only price range close to a six-month inventory, which realtors consider a balanced market, is for homes selling at $500,000 or more.

For homes selling at or below $200,000, which is considered entry level, Clark said there’s just more than three months of supply.

“It’s especially challenging for first time buyers, because they tend to be buying at those entry level price ranges and the supply is tightest there,” Clark said.

The association reported mortgage rates increased by a quarter percent in October for a state average of 6.43 percent. Clark said that’s also affecting sellers, who likely refinanced at historically low interest rates at the end of 2020 during the COVID-19 pandemic.

State and local taxes in 2022 totaled 9.9% of personal income, a record low that was driven by rising incomes, state caps on property taxes and an income tax cut, according to the Wisconsin Policy Forum.

That dropped Wisconsin to the 35th highest state and local tax burden — another all-time low. It continued a two-decade trend of Wisconsin falling down the rankings of the highest taxed states; in 2000, it ranked No. 3.

The 9.9% of personal income that went to state and local taxes in 2022 was down from 10.3% the year before. It was also 1.2 percentage points below the national average of 11.1% for fiscal year 2022.

The drop in the tax burden occurred even as state and local tax revenues rose 4.6% in 2022 amid inflation, according to the report. Nationally, those collections grew 12.6%. But the state implemented a reduction in the third-highest tax bracket that began in calendar year 2021, taking the rate to 5.3% from 6.27%. That helped limit the growth in government revenues.

The Wisconsin Policy Forum conducts a review of the state and local tax burden each year by looking at data from the U.S. Census Bureau, along with population and personal income figures from the U.S. Bureau of Economic Analysis.

A report released yesterday by the Wisconsin Department of Administration (DOA) estimates the state will have a gross general fund balance of approximately $4.0 billion at the end of the current fiscal year. This figure does not include the $1.9 billion plus balance in the state’s budget stabilization (“rainy day”) fund, which continues to be at a record-high level.

The Department of Revenue (DOR) provided updated tax revenue estimates, which are based on current state and federal tax laws. The new tax revenue estimates, which can be found in the report and are expected to rise modestly throughout the next biennium, include:

• $683.1 million in state tax revenue increases in FY 2024-25 (3.2 percent increase over FY 2023-24) for a total revenue estimate of $22.013 billion
• $644.5 million in state tax revenue increase in FY 2025-26 (2.9 percent increase over FY 2024-25) for a total revenue estimate of $22.657 billion, and
• $382.7 million in state tax revenue increase in FY 2026-27 (1.7 percent increase over FY 2025-26) for a total revenue estimate of $23.040 billion.

The DOA report includes a detailed fiscal overview of state agency budget requests that were submitted to Governor Evers for consideration in his 2025-27 executive budget. The Governor directed most state agencies to submit biennial budget requests that did not seek to increase GPR-funded expenditures in future fiscal years. The 2025-27 Executive Budget will be released in early 2025.

An economic analysis shows Wisconsin’s agriculture industry is pulling in more revenue in recent years but employing fewer people.

The report, titled “The Contributions of Agriculture to the Wisconsin Economy,” is published every five years. The newest survey found the industry earned $116.3 billion in revenue in 2022, the latest data available. That is a 10.9 percent increase from 2017.

However, the numbers are nuanced, Steve Deller and Jeff Hadachek, co-authors of the report out of the University of Wisconsin-Madison, said.

While revenues are up, the number of agriculture jobs are down and the number of farms are down. Meanwhile, the amount of production is staying the same. This is likely a result of consolidation and farm technology, Deller said.

Other highlights from the report:

• Number of farms are down from 64,793 in 2017 to 58,521 in 2022;
• Number of food processors up from 1,160 in 2017 to 1,245 in 2021;
• Employment declined from 437,700 jobs in 2017 to 353,900 jobs in 2022, a drop of 19.1 percent.

The report also outlines the diversity of Wisconsin’s economy and the strength of the dairy industry.

A federal judge in Texas has vacated the U.S. Department of Labor’s final rule increasing the salary thresholds for the “white collar” overtime exemptions under the Fair Labor Standards Act (FLSA) and did so on a nationwide basis. In a sweeping 62-page decision, U.S. District Judge Sean D. Jordan of the Eastern District of Texas declared that the DOL exceeded its rulemaking authority by attempting to raise the minimum salary for the executive, administrative, or professional (EAP) and highly compensated employee (HCE) exemptions under the FLSA.

The DOL rule took effect on July 1, 2024 and initially increased the minimum salary thresholds for the EAP exemptions from $684 per week ($35,568 annually) to $844 per week ($43,888 annually) and also increased the minimum salary threshold for the HCE exemption from $107,432 to $132,964 annually. Critically, these increases were only the beginning—the DOL rule would have raised salaries again on January 1, 2025 and provided for further increases beginning July 1, 2027 and every three years thereafter. The DOL posited that its new rule would have made approximately four million employees newly eligible for the FLSA’s overtime protections.

What happens now? Judge Jordan’s decision makes clear that the January 1, 2025 increases will not take effect as planned, and the decision retroactively nullifies those increases that took effect July 1, 2024. In effect, this restores the EAP and HCE minimum salary thresholds to their previous levels—$684 per week ($35,568 annually) for the EAP exemptions and $107,432 annually for the HCE exemption.

While there may be appellate activity, any such appeal could be short-lived given the arrival of the Trump administration in January 2025. The new administration might support different salary thresholds – for instance, in 2019, the previous Trump administration issued a rule which shifted the weekly minimum salary threshold for the EAP exemptions from $455 per week to the current $684 per week – and it’s unclear whether his second administration would support the now-voided Biden-era thresholds issued in 2024.