Wisconsin’s 130 state-chartered banks continue to demonstrate solid financial performance as of September 30, 2022, according to data released today by the Wisconsin Department of Financial Institutions (DFI).

Total assets of Wisconsin’s state-chartered banks stand at more than $67.1 billion through September 30, 2022, down from $67.8 billion reported September 30, 2021. Despite rising interest rates, the net interest margin is holding steady, decreasing slightly from 3.35% as of September 30, 2021, to 3.33% as of September 30, 2022. Net loans have increased 5.1% from September 30, 2021, up $2.2 billion.

In the twelve months ending on September 30, 2022:

• The capital ratio remained satisfactory at 9.38% compared to 10.97% in September 2021;
• The past due ratio improved to 0.56% from 0.76% in September 2021;
• Net operating income was over $594.3 million, but down from $679.4 million in September 2021 due, in part, to the end of the Paycheck Protection Program (PPP) fee income and secondary market income;
• The return on average assets ratio showed a decline to 1.19% from 1.39% in September 2021; and
• Bank liquidity remained adequate but was impacted by the increase in the loans to assets ratio at 68.89% compared to 64.82% in September 2021.

“As interest rates continue to rise and economic uncertainty persists, Wisconsin’s state-chartered banks are displaying sound decisions and financial performance through the third-quarter of 2022,” said DFI Secretary-designee Cheryll Olson-Collins. “Overall, Wisconsin’s state-chartered banks are financially stable and a source of strength for the economy.”

Last week, the Centers for Medicare and Medicaid Services (CMS) approved Wisconsin’s application for an extension of the Section 1332 State Innovation Waiver (1332 waiver) which has allowed the successful operation of the Wisconsin Healthcare Stability Plan (WIHSP). With this extension, WIHSP will be able to operate under the 1332 waiver for an additional five years through Plan Year 2028.

WIHSP is a reinsurance program that covers a portion of high-cost enrollee claims within certain parameters. The program is funded with a sum sufficient state appropriation and federal pass-through funds totaling $230 million per year.

An actuarial analysis of WIHSP found that the average premium paid by Wisconsin enrollees on the individual health insurance market was reduced by approximately 13.2% due to the program. The analysis also found that the program led to an increase in enrollment. During the 2022 Open Enrollment Period, 212,209 Wisconsinites signed up for health insurance on HealthCare.gov- Wisconsin’s highest enrollment since the 2018 Open Enrollment Period.

“Expanding access to high-quality, affordable health insurance coverage has been a priority for Governor Evers and it is critical for the overall well-being of our state. WIHSP is one of our agency’s most important tools in that effort,” said Commissioner Houdek. “This five-year extension will allow us to build on past success to ensure that more Wisconsinites can get the health coverage they need.”

The Wisconsin Public Service Commission approved overall electric rate hikes of 8.8 percent for We Energies and 9 percent for Wisconsin Public Service, according to commission staff. The increase is higher than what utilities initially proposed, but less than changes they suggested later that would have shifted more costs to residential customers.

This fall, the utilities owned by Milwaukee-based WEC Energy Group asked for electric rate hikes of 13 percent for We Energies residential customers and a nearly 15 percent increase for Wisconsin Public Service, or WPS, ratepayers. That increase would have cost the average homeowner at least $14 more per month beginning in January.

Now, We Energies residential customers will see a nearly 11 percent increase that will cost them $11 to $12 more per month, according to preliminary figures from the commission and utilities. WPS customers will spend $9 more per month.

For natural gas, commission staff estimate rates will increase 6.2 percent, or roughly $47 annually, for Wisconsin Gas customers and 9.5 percent, or roughly $63 annually, for Wisconsin Electric Gas customers. WPS gas rates will climb 7 percent overall. With heating bills slated to rise, the utilities expect gas customers to pay $20 to $30 more per month this winter, including the rate hikes.

Utilities are raising rates as they face increasing costs due to inflation, clean energy projects and plans to increase the resiliency of its system in the face of extreme storms. Brendan Conway, spokesperson for the utilities, said they’re still evaluating the decision. Even so, he said typical bills for residential customers will remain under the national average.

The commission is expected to finalize and approve a written order on its decision this month. We Energies serves more than 1.1 million electric customers and 1.1 million natural gas customers in Wisconsin. Wisconsin Public Service provides electricity to 457,000 electric customers and 338,000 natural gas customers.

The Worker’s Compensation Advisory Council (WCAC) is seeking suggestions from stakeholders and the public for its next slate of recommended legislative changes.

The Council will host a hybrid public hearing from 3 to 6 p.m. on Thursday, December 15, 2022, using WebEx web conferencing technology and in person at 201 East Washington Avenue, Madison, Wisconsin. In addition, written comments may be submitted through Monday, January 16, 2023.

“Since 1911, a citizen advisory council has played an instrumental part in amending the Wisconsin Worker’s Compensation Act, which has served as a national model for state worker’s compensation programs, and the Council’s work is further supported through additional feedback from the public,” DWD Secretary-designee Amy Pechacek said. “We welcome public engagement at the hearing and through the public comment period. We also greatly appreciate the collaborative work of the Council, which includes equal numbers of employee and employer members who work together for the benefit of our state’s worker’s compensation program.”

Submit Written Comments: Written comments may be submitted to Steve Peters, Chair, Worker’s Compensation Advisory Council, 201 E Washington Avenue, Room C100, Madison, WI 53703, or via email to: WCAdvisoryCouncil@dwd.wisconsin.gov. The submission deadline for written comments is Monday, Jan. 16, 2023.

Attend the Public Hearing

• TIME: 3 p.m. to 6 p.m.
• DATE: Dec. 15, 2022
• LOCATION: 201 E. Washington Ave, Madison, Conference Room H103
• ATTEND VIRTUALLY: Register via WebEx. You must register in advance to attend virtually.

Local governments across Wisconsin are dealing with increasing debt burdens, according to a new report from the Wisconsin Policy Forum.

The report found that total debt owed by the state’s cities, counties, villages and towns rose by 5.4 percent to $11.04 billion in 2020 — the highest amount on record.

Cities including Milwaukee, Madison and Kenosha hold the most debt, but Wisconsin towns have seen the fastest growth in borrowing since 2015.

The Policy Forum looked at Wisconsin Department of Revenue data from more than 1,920 local governments from 2000 to 2020. According to the report, on December 31, 2000, local governments owed a total of $5.23 billion — or $7.86 billion in 2020 dollars. Twenty years later, those same local governments owed $11.04 billion — a more than 40.5 percent increase after adjusting for inflation.

The report points to several reasons why borrowing has grown over the last two decades, including a need to replace aging infrastructure and upgrade technology across the state. Interest rates have also been extremely low. The report also points to state law that incentivizes taking on more debt.

Levy limits matter for debt because property taxes used to pay for a local government’s operating budget are constrained by the levy limit, but property taxes used to make payments toward debt are outside the levy limit.

Yesterday, the nonpartisan Legislative Audit Bureau (LAB) released a limited-scope review of the We’re All In and Wisconsin Tomorrow grant programs. These programs, which used supplemental federal funding and were intended to assist Wisconsin businesses that experienced economic damages during the public health emergency, were administered by the Department of Revenue (DOR). In February 2022, the Joint Legislative Audit Committee directed LAB to evaluate the State’s administration of supplemental federal funding received in response to the public health emergency.

DOR awarded $595.9 million in We’re All In and Wisconsin Tomorrow program grants to small businesses, restaurants, and lodging establishments.

Written eligibility requirements were included in DOR’s agreements with the Department of Administration and in additional written requirements that DOR developed. DOR indicated it adjusted the eligibility requirements in order to meet the needs of businesses that had experienced economic damages as a result of the public health emergency. However, LAB found that DOR did not modify its agreements with DOA or modify the written eligibility requirements it developed in order to reflect the adjustments it made to the eligibility requirements.

“As a result of the forced lockdowns, all of our small businesses across our state were affected and it became necessary for us to assist them. Overall, DOR did a fine job administering the $595.9 million to them and appreciate that they are taking steps to remedy the errors that occurred,” said Representative John Macco (R-Ledgeview).

DOR did undertake certain program integrity efforts to identify fraudulent grant applications and recover grants awarded inappropriately. In addition, DOR indicated it was determining the extent to which it may have awarded certain grants in error. LAB made recommendations to DOR related to the efforts to identify grants DOR awarded in error, including that DOR report to the Joint Legislative Audit Committee.

“Thanks to the important work of LAB and their review of these grants, DOR is now undertaking necessary efforts to identify inappropriate and fraudulent activity targeting these grants. I believe that this effort is going to be a very important element to not only ensure the proper administration of the We’re All In and Wisconsin Tomorrow Grants, but also to potentially kickstart other state agencies to identify and report fraudulent actively in programs they’ve administered with federal COVID relief funds,” said Senator Robert Cowles (R-Green Bay).

LAB reviewed 172 program grants totaling $4.1 million and found that DOR did not follow its written eligibility requirements when it awarded 45 grants totaling $475,000. Because LAB’s review is not based on a statically valid sample of grants, it is not appropriate to extrapolate the results of the review to all grants that DOR awarded.

Inflation will likely persist into 2024, St. Louis Federal Reserve President James Bullard warned on Wednesday, suggesting interest rates could likely surge even higher as the Fed battles rising prices.

I think we’ll probably have to stay there all during 2023 and into 2024,” Bullard told MarketWatch of high interest rates, estimating they could reach between 5 and 7 percent.

Bullard pointed to low unemployment numbers and indicated the jobs market’s strength would enable the Fed to tackle inflation head on through more rate hikes.

“The fact that the labor market is so strong gives us license to pursue our disinflationary strategy now and try to get the inflation under control now. So we don’t replay the 1970s, where the FOMC at that time took 15 years to get inflation under control,” he said.

Inflation stood at 7.7% as of October, down from a 9.1% high in June. The Federal Reserve rose interest rates by 0.75% earlier this month, for the fourth time this year. Current lending rates range from 3.75% to an even 4%.

There are growing concerns about a nationwide rail strike, now that more rail unions have rejected a proposed contract between the rail carriers and rail unions. Negotiations between the two sides have gone on for several years with some of the main sticking points for unions revolving around quality-of-life issues, such as time off.

Negotiators had reached a tentative agreement and avoided a strike several weeks ago, but were waiting for the unions to vote on that agreement. However, several unions have since rejected the deal. SMART Transportation Division is one of the largest unions, and part of that union voted the tentative agreement down, saying that it did not address some of the significant quality-of-life issues that it believes are fundamental.

Currently, the rail carriers and rail unions have entered into a cooling-off period, which prevents the rail carriers from locking out workers or union members from organizing a strike due to work conditions. However, that changes on December 9th.

In response to the results of some of the unions rejecting the contract agreement, Union Pacific said, “The railroads remain willing to enter into agreements based on the PEB-recommended framework. Should the unions, without ratified agreements, remain unwilling to do so, they are expected to strike, and Congress may need to intervene, just as it has in the past, preventing further disruption to the struggling supply chain.”

Wisconsin Republican legislative leaders said Tuesday they want to tap the state’s projected record-high $6.6 billion budget surplus to make “transformational” and once-a-generation tax law changes.

Senate Majority Leader Devin LeMahieu (R-Oostburg) said he wanted to move toward a flat income tax rate.

“We can make transformational tax changes in Wisconsin,” LeMahieu said. “We definitely need to drive down our top rates.”

Wisconsin’s income tax rates begin at 3.54% and increase to 7.65%. The top rate applies to single filers earning $280,950 and up; married joint filers making more than $374,600; and married people filing separate returns with taxable income of more than $187,300, according to the state Department of Revenue.

Assembly Speaker Robin Vos (R-Rochester) said he wanted to cut taxes “as much as we possibly can” and “it needs to be long term and permanent.” That includes eliminating a property tax, a tax paid by businesses. Evers last session vetoed a bill to eliminate the tax.

Wisconsin’s financial outlook appears even rosier than previously projected, with the state Department of Administration on Monday estimating the state’s general fund balance could surpass $6.5 billion by summer.

Updated projections released by the DOA underscore how increased state revenue over the course of the next two-year state budget is expected to result in a record-high general fund balance of more than $6.57 billion by the end of the current fiscal year on June 30. That balance does not include the state’s more than $1.7 billion budget stabilization fund, a rainy day fund to be used in times of emergency.