News of the Day

New DOT Secretary: Audit Signals We “Must Change the Culture, Be Transparent”

Wisconsin’s new transportation secretary vowed Tuesday to “change the culture” at the Department of Transportation after an audit found it underestimated highway project costs by more than $3 billion, in part by failing to account for inflation.

Dave Ross’ comments came during a legislative hearing on a recent state audit of the DOT highway program. Lawmakers said the audit raises broad questions about DOT management, including whether lawmakers must oversee highway projects more closely.

Lawmakers and Ross signaled they will adopt recommendations in the audit, which Ross called a “template” to improve the agency.

Ross replaced Mark Gottlieb as DOT secretary in January. Acknowledging the audit found “inefficiencies,” Ross told members of the Joint Legislative Audit Committee that DOT must become more transparent and “break down silos” between its regional offices.

“We need to become more performance-driven. We need to become more accurate,” Ross said. “We need to build back up DOT’s confidence in your eyes.”

As examples of where the department must improve, Ross highlighted cost overruns on two Dane County projects: expansion and reconstructions of Verona Road and the Madison Beltline, and of Interstate 39-90 from the Beltline to the Illinois state line. Since lawmakers approved both projects in 2011, the Verona Road price tag has soared from $150 million to $283.3 million and the I-39-90 cost rose from $715 million to $1.2 billion.

Lawmakers hinted at the implications the audit findings could have for the state’s next transportation budget, debate on which is expected to be contentious.

The audit, in addition to project cost overruns, also found the DOT could save money by taking steps to curb engineering and construction costs. The findings have become a rallying cry for lawmakers, who say DOT must find more cost savings before they contemplate increasing gas taxes or vehicle fees. That includes some conservative GOP lawmakers and Gov. Scott Walker, whose 2017-19 budget proposal holds the line on taxes and fees.

“Giving (DOT) more money would be absolutely the wrong thing to do at this point,” Sen. Chris Kapenga, R-Delafield, said.

Others, such as Rep. John Nygren, R-Marinette, see it differently. He, along with fellow Assembly GOP leaders and legislative Democrats, is open to tax or fee hikes to resolve the transportation-funding imbalance.

Nygren noted the audit findings also say Wisconsin’s highway conditions are deteriorating and compare poorly to neighboring states. “Even after we make those reforms (outlined in the audit), we’re still in a position where, I believe, there’s a shortfall,” Nygren said.

The bill draft circulated before Tuesday’s hearing would require DOT to account for inflation and other factors, such as environmental studies, engineering or land acquisition, in future project cost estimates.

It also has recommendations for actions by DOT, including providing more information to lawmakers about highway project costs and compiling such information, including explanations for major cost increases, in a central location.Sen. Rob Cowles, R-Green Bay, co-chairman of the panel, said he expects the panel to watch the DOT closely in coming months to see how it responds to the audit.

“This committee is going to have to have ongoing dialogue … back and forth with the agency,” Cowles said.

States may have Best Plan to make Health Care Affordable Again

As President Donald Trump, Republican, and Democrats in Congress wrangle over the future of Obamacare and its replacement, the answer to how to make health care affordable for all Americans may not come from another contentious health reform battle in Washington.

Instead, we may follow Trump’s ideas on Medicaid and education reform. Let the states derive their own solutions, particularly when it comes to cost containment.

Gallup says that 26 percent — or more than 1 in 4 health care dollars — are completely wasted. These dollars are spent on defensive medicine or when physicians order more tests, procedures, and medications than are clinically necessary. I see it every day as my colleagues order everything from x-rays, blood work, MRIs, CT scans and a host of other unnecessary procedures to protect themselves from a potential lawsuit.

The impact of wasteful spending by physicians –known as defensive medicine — is astounding. Consider this:

  • BioScience Valuation, a health care economics firm, says that doctors ordered $487 billion in defensive medicine in 2015. That, of course, results in higher premiums, co-pays, deductibles and out-of-pocket expenses for consumers and employers.
  • A 2015 survey conducted by the Congress of Neurological Surgeons found that 75 percent of neurosurgeons said they practice defensive medicine to protect themselves from litigation.
  • A 2014 survey of hospital administrators conducted by Jackson Health care, one of the nation’s largest medical staffing firms, found that 32 percent of costs generated in a hospital could be attributed to wasteful, defensive medicine.

According to the Centers for Medicare and Medicaid Services (CMS), health care spending is expected to consume more than 20 percent of our nation’s GDP by 2025, up from 17.5 percent today. In 2015, federal, state and local governments spent $1.5 trillion. In the same year, the private sector spent $1.7 trillion on health care, according to CMS. Spending will continue to skyrocket if we don’t offer incentives for physicians to change their behavior when it comes to defensive medicine.

That’s why we may need to look to six states that are aggressively working to contain costs. The Florida, Georgia, Alabama and Tennessee legislatures are considering a proposal to eliminate defensive medicine by abolishing each state’s medical malpractice system and replace it with a no-blame model similar to workers’ compensation. Two other states are also examining the concept.

When doctors are no longer the target of litigation, they would be less likely to order unnecessary tests, medications and procedures.

Under the proposal known as the Patients’ Compensation System, a patient could still file a claim if a physician had injured them. But the claim would no longer go through the traditional legal system and instead would be heard by a state administrative panel of health care experts. This administrative system, similar to workers’ comp, would hear a claim in a matter of months instead of the years it takes to litigate a case. Compensation would be identical to awards in a legal system. Patients with smaller injuries could also be compensated for a loss.

But completely abolishing the malpractice system and replacing it with a no-blame model would change the behavior of our nation’s physicians. It would result in annual savings of $115 billion in Medicare and $133 billion in Medicaid, according to BioScience Valuation. In the private sector, employers could save 11 to 22 percent in health care costs for each employee annually– as premiums, co-pays, deductibles and out-pocket costs drop with the elimination of defensive medicine, according to BioScience.

No matter how swiftly Congress acts to repeal and replace Obamacare, there is no doubt that waste in our health care system has to be a top priority. Eliminating defensive medicine with a new state-based solution may just be what’s needed to make health care affordable again for all of us.

Governor Walker’s Budget Extends Funding for Extra Tax Auditors

Gov. Scott Walker is proposing to increase funding for an enhanced tax auditing program that generated nearly $27 million in additional revenue last year — more than enough to cover the cost, but about $4.6 million short of its goal.

Business groups are closely monitoring the Audit 2020 initiative, which the Walker administration promoted two years ago as focusing on out-of-state companies. The auditors are keying on corporate and sales tax collections, and not individual income taxes.

The latest budget adds 46 four-year project positions with the expectation they will generate $64 million in revenue over the next two years. The goal of 102 permanent positions in the last budget was to collect $113.5 million more over two years.

The Department of Revenue reported to the Legislature last month that in the first year of the biennium the new positions and related expenses — such as expanding offices in Minnesota, Illinois, Madison and Appleton — cost $9.2 million out of a budgeted $11.8 million. The rest of the money paid for additional audit bureau staff and a bureau reorganization.

The positions generated $26.9 million in new revenue, though the goal was $31.5 million. The report noted the agency’s compliance bureau, which collects delinquent taxes, exceeded its agency goal by $22 million, more than making up for the shortfall in the auditing program. Some of those extra delinquencies were generated by the additional audits.

The program’s corporate auditors also billed companies $15 million that weren’t collected last year, but are due in the current year.

Wisconsin Manufacturers & Commerce, the state’s largest business lobby, opposes the new program. Scott Manley, WMC’s vice president of government relations, said members have reported the audit process is “very long, cumbersome and expensive in terms of investment of time and employee resources to comply.”

DOR was unable to provide historic data on the number of audits it conducts each year, but the number of higher corporate tax assessments increased from 429 in 2014 to 670 in 2015 to 981 last year, according to DOR spokesman Casey Langan. The number of higher sales and use tax assessments increased from 1,195 in 2014 to 1,201 in 2015 to 1,256 last year.

Steve Baas, vice president of government relations for the Metropolitan Milwaukee Association of Commerce, lauded Walker’s goal of recovering more money from tax cheats to help reduce taxes elsewhere.

“The implementation of strategies to meet that goal, however, need to be carefully monitored to see when/if the DOR reaches a point of diminishing return where the marginal increase in collections will be outweighed by the cost of funding the additional auditors,” Baas said in an email.

An Alternative to Raising the Minimum Wage

 

If there’s one blessing in the election of Donald Trump as president of the United States, it’s that it has highlighted one of the worst festering social problems of the country: the slow decline of the working class (not just white), buffeted by the combined social forces of globalization, technology, and social liberalism.

Working-class incomes have stagnated for too long, and low-skill unemployment and underemployment are highly problematic. If conservatives are serious, as we claim to be, about upward mobility, this is a problem we can no longer afford to ignore.

Underemployment and low wages in working-class communities have led not just to the loss of the dignity of work, but to a host of ensuing societal diseases that should have conservatives horrified: family breakdown and illegitimacy, drug addiction, crime.

A solution that has been kicking around for years solves a big part of the problem of stagnating working-class wages while, unlike a minimum wage, allowing the market to clear. It is called wage subsidies.

The idea is just what it sounds like: Employers pay low-wage workers the prevailing market wage, and the government supplements that wage. Everyone wins: The labor market remains efficient, and low-wage workers get real wages for real work. What’s more, in an era of ever-increasing global competition, it would make the American workforce much more competitive.

Before you get agitated about the idea of government subsidies, let’s remember that such a policy is actually in the best conservative tradition. A wage subsidy would be an extension and a reform of one of the most successful poverty-reduction programs in history, and a major conservative policy win: the Reagan-era Earned Income Tax Credit (EITC). The EITC is exactly what it sounds like: a tax credit for low-wage work. It’s the proverbial “hand up, not hand out” on the ladder of opportunity. But while the EITC has done a phenomenal amount of good, it also needs reform. The program is overly complicated, and many eligible families don’t sign up for it. What’s more, it no longer is the 1980s, and the issue of competitiveness has grown ever sharper over the intervening decades.

It’s time for conservatives to go even further than the Gipper and revamp and expand the EITC by turning it into a larger wage-subsidy program. Senators Marco Rubio and Mike Lee have already proposed plans to this effect. It would be a policy and political winner, by increasing the competitiveness of American workers — bringing more industrial employment — and increasing the wages of working-class families, two things that the government desperately needs to do, both to reward the core of the GOP coalition and for the common good more generally. As the issue of tax reform in Congress slowly rises into view, this is an issue conservatives need to rally around.

State Senator wants Audit of Federal Funding, Obligations in State Programs

A conservative lawmaker wants an audit conducted of all state programs that use federal funds — and the ultimate costs federal obligations place on state and local freedom.

State Sen. David Craig sent a letter Tuesday to the Joint Legislative Audit Committee requesting it direct the Legislative Audit Bureau to conduct a “comprehensive audit of all state programs which receive or utilize federal funds.”

The Town of Vernon Republican wants a review of the “federal requirements, regulations, and restrictions which bind the usage of those (federal) funds and tie the hands of our state government officials, local officials, and limits the freedom of our constituents.”

Craig asks the audit bureau to consider:

  • The cost of compliance and freedom lost by the state agency and local officials due to regulation.
  • The estimated savings that could be realized should a regulation be lifted or lessened.
  • The cost of compliance and loss of freedom born by the citizens of the state as a result of the regulation.

A Tax Foundation review found that in fiscal year 2013 a combined 30 percent of state revenues nationally were derived from federal grants-in-aid. That included everything from federal Medicaid payments and education funding assistance to cash for infrastructure projects and housing grants.

Mississippi topped the dependency list in fiscal year 2013, deriving nearly 43 percent of its revenue from federal assistance. Louisiana was next at 41.9 percent, followed by Tennessee (39.5 percent).

Wisconsin ranked 36th in the nation, with 27.7 percent of revenue coming from federal sources, according to the Tax Foundation.

North Dakota was least dependent, at 19 percent, followed by Hawaii (21.5 percent), and Alaska (22.4 percent).

Such dependency creates obligations that can be costly for state and local governments, particularly in funding areas such as transportation and health care. In essence, the federal government demands that state and local governments follow costly rules and procedures or risk losing a portion or all of the federal dollars.

“As part of the on-going efforts to return powers and flexibilities back to the states though our (legislative) Federalism Committee, I am seeking additional information to identify the areas which would lift the burden of federal government regulations and mandates so the committee can craft reforms which will bring efficiency to our state government and liberty our citizens,” Craig wrote in the letter to state Sen. Robert Cowles, R-Green Bay, and Rep. Samantha Kerkman, R-Salem, co-chairs of the Joint Audit Committee.

Senator Marklein Introduces Rural Broadband Bill to Increase Funding and Expand Access

State Senator Howard Marklein (R-Spring Green) introduced LRB -2042/1, a collaborative rural broadband expansion bill today that is a combination of the proposal that was promoted by Governor Scott Walker on December 1, 2016 and recommendations made by the 2016 Study Committee on Rural Broadband, which he chaired in 2016.

“This bill is the product of hundreds of hours of hard work and study by many dedicated people in Wisconsin,” Marklein said. “We took the funding ideas from the Governor and combined them with the Rural Broadband Study Committee’s recommendations to produce legislation that will make an immediate, significant impact on rural broadband in Wisconsin.”

LRB -2042/1 is co-authored by Rep. Romaine Quinn (R-Rice Lake) and is part of the Assembly’s Rural Wisconsin Initiative for the 2017-2018 session. The bill is currently in circulation for co-sponsorship through Friday, February 17, 2017.

“The Study Committee on Rural Broadband developed several recommendations for improving the Rural Broadband Expansion Grant program that is administered by the Public Service Commission,” Marklein said. “This bill insures that these ideas are applied to any new grants from the program.”

“In December, the Governor announced the availability of surpluses in other programs that could be used for broadband,” Marklein said. “Combining these funds with the study committee’s recommendations is good policy and I look forward to moving this bill through the legislative process quickly.”

The bill accomplishes the following:

1. Allocates an additional $15.5 million to the Rural Broadband Expansion Grant Program for additional 2017 grant awards from surplus funds in E-Rate ($5 million) the Universal Service Fund (USF) ($6 million) and the unencumbered balances from other USF-funded appropriations (estimate $4.5 million).

2. Provides the PSC with a requirement that the grants go to the areas of the state with the greatest need. We want to use scarce resources to “fill from the bottom up”.

3. Includes a policy that prevents broadband service providers from “cherry picking” high value customers, while ignoring the needs of residential customers.

4. Directs the PSC, in evaluating grant proposals, to consider the impact of improved broadband on our students at home, and patients at home.

5. Discourages the duplication of existing service. Seeks to supplement the federal CAFII funding in areas not benefiting from the federal money.

6. Adds funding to the Technology for Educational Achievement (TEACH) program and expands the number of rural school districts who are eligible for the program.

Judge Upholds City of Oshkosh Ordinance Requiring Inspection of all Rental Housing

United States District Court judge sided with the city of Oshkosh on Monday after the Winnebago Apartment Association asked for an injunction to stop the city from beginning inspections on rental properties in the area.

The city wants to inspect roughly 14,000 rental properties over a five-year cycle to make sure landlords are keeping apartments and rental houses up to code. The city would inspect about 2,800 properties per year.

Oshkosh city manager Mark Rohloff says the city has heard from renters who have problems that their landlords aren’t fixing.

“We really feel that it’s necessary to make this as broad a program as possible so we can identify those problem areas and really get them addressed with very common health and safety issues that we have concerns about,” Rohloff explained.

Officials can already inspect properties where the tenants have submitted their complaints to the city, and the Winnebago Apartment Association’s lawyer wonders why that isn’t enough.

“The major problem with the program that the city has adopted now is it applies to every rental unit in the city, which we think is an overly broad solution to a problem that the city is trying to address with certain apartment units,” the WAA’s lawyer, Jeff Vercauteren of Husch Blackwell LLP, said.

The Association also said the wording of the city’s ordinance seemed that it would allow inspectors to go on the property without proper consent, which the group argued was a violation of landlords’ and tenants’ Fourth Amendment rights.

Oshkosh City Council plans to update the ordinance to make it more clear, and keep it in line with state and federal laws.

“We’re making some clarifications to our ordinance that the 21-day inspection window is going away because we’re going to be making appointments with people,” Rohloff said.

Inspectors are allowed inside an occupied property as long as they have consent from the tenants, and allowed into empty properties with permission from the landlord.

The city will also charge each landlord a fee per inspection, a $100 trip charge and $45 per-unit charge.

Oshkosh officials will charge that fee and inspect the outside of the property, even if the tenant or landlord does not allow the inspector inside.

State law requires the city to charge a fee that’s reasonable in relation to the inspection costs to the city, and we have yet to see the $100 trip charge and the $45 per unit charge is really reasonable,” Vercauteren said.

Oshkosh City Council is expected to approve the amendments to the ordinance on Tuesday night, and could start inspecting properties as early as Wednesday.

The Winnebago Apartment Associations plans to continue to fight against the new ordinance.

Wisconsin Bankruptcy Filings Lowest in Nine Years

Bankruptcy filings in Wisconsin fell to their lowest level in nine years last year as an improving economy and jobs climate helped more consumers keep up with their debts.

U.S. Bankruptcy Court data show there were more than 16,800 bankruptcy petitions of all types filed in Wisconsin in 2016. That was down almost 9 percent from 2015 and was the fewest since 2007, when there were just more than 15,600.

Milwaukee bankruptcy attorney James Miller said the slowdown seems to track with a reduction in mortgage foreclosures.

Bankruptcy filings peaked in Wisconsin at nearly 30,000 in 2010 and have been declining ever since, as the economy slowly has healed from the Great Recession and the unemployment rate has dropped, the Milwaukee Journal Sentinel reported.

Preliminary data show the unemployment rate in Wisconsin in December was 4 percent, the lowest since January 2001. Wisconsin’s worst unemployment rate was at the end of 2009, at 9.2 percent.

The 9 percent reduction in bankruptcy filings in Wisconsin last year was better than the overall national average reduction of 6 percent, according to the American Bankruptcy Institute.

About two-thirds of bankruptcy petitions in the state were Chapter 7 filings, which are intended to give people a fresh start by wiping out debt such as overwhelming credit card balances and medical or utility bills.

But bankruptcy attorneys say they’ve found that as employment has increased, fewer people want to file Chapter 7 liquidation bankruptcies. They instead opt for a Chapter 13 filing, which allows consumers with regular income to develop a plan to repay all or some of their debts over three to five years.

“A lot of people are saying, `Look, I created these debts. I can’t pay them all back right now but I want to pay as much as I can afford to pay,”‘ said attorney Todd Esser, of EsserLaw LLC in Milwaukee. “And so those repayment plans are working out well.”

Numerous Ways Governor Walker’s Budget Would Impact Businesses

Gov. Scott Walker’s proposed budget made news on plenty of fronts – including K-12 education, the UW System and transportation — when it was released, but look a little deeper into the executive budget and the budget bill itself and there are some other provisions businesses could be interested in.

Changes in how employment disputes are handled

The governor’s budget would make several changes to the handling of employment disputes. The Wisconsin Employment Relations Commission would be changed from three part-time commissioners to a single chairperson. Walker’s office said the proposal is in recognition of the commission’s decreased workload. The commission conducts elections to determine collective bargaining units, mediates collective bargaining disputes and issues decisions on unfair labor practices.

Walker is also proposing the elimination of the Labor and Industry Review Commission, which reviews Department of Workforce Development decisions on unemployment insurance, employment discrimination and equal enjoyment of places of public accommodation and worker’s compensation decisions by the Division of Hearings and Appeals in the Department of Administration. Instead, those decisions would be reviewed by administrators in the department or division before being appealed to circuit court.

The governor says the change would streamline appellate functions and decrease the time to get a decision for unemployment insurance, equal rights and worker’s compensation cases.

Limiting historic rehab tax credits

The budget puts an annual $10 million limit on the historic rehabilitation tax credit. It also requires the Wisconsin Economic Development Corporation to award the credits competitively based on the potential for job creation, benefit to the state, projected impact on the local economy, likelihood the project would happen without the credits and number of credits given out in the area in prior years. Those receiving the credits could have to repay some of the money if they come up short on job projections.

Energy efficiency construction projects at schools

Walker’s budget would eliminate a loophole that allowed school district to exceed their revenue limits for energy efficiency building projects. Many districts had used the exemption to implement multi-million dollar capital improvement campaigns in recent years. Districts would still be able to use referendums for the projects.

The budget also directs the Public Service Commission to prioritize school energy efficiency projects in the Focus on Energy program. Walker proposes an additional $10 million in Focus on Energy funding annually prioritized to public elementary and secondary schools.

Sales tax holiday

The governor is proposing a two-day sales tax holiday in August of the next two years on items related to school supplies, including clothing, computers and certain other supplies. The holiday is expected to reduce tax revenue by $11 million each year.

Businesses get their own court

The state Supreme Court is directed to establish rules for a pilot program that would create a specialized business court program for commercial disputes. The court would have until Jan. 1, 2019 to establish the rules for the project.

Changes to manufacturing and ag tax credit

Walker is proposing a change that would eliminate an “unintended overlap” that allowed businesses to claim the manufacturing and agriculture tax credit and the taxes paid to other states credit on the same income. The change is expected to increase tax revenues by $9.7 million in fiscal 2018 and 2019.

Governor’s Budget Includes $600 Million in Tax and Fee Reductions

Gov. Scott Walker on Wednesday called for nearly $600 million in reduced taxes and fees along with significant new spending in areas where he made sizable cuts in the past as part of his $76.1 billion two-year budget proposal.

Walker is proposing to cut the state’s two lowest income tax rates by a tenth of a percentage point — to 3.9 percent and 5.74 percent — and increase the amount of income taxed at the second-lowest rate by about $30,000. A median income four-person family making about $86,000 a year would save $139 over two years, while state revenues would decline by $203 million under the proposal.

Walker is also seeking to make good on a promise to reduce property taxes below 2010 levels by eliminating a state forestry property tax that brings in about $90 million a year and paying for the programs it funds with other state tax revenue; boosting a property tax credit by $87 million; and increasing aid to school districts by $72 million, which, paired with a state-imposed lid on district revenues, will drive down property taxes.

Walker also plans to create a sales tax holiday in August on certain school supplies, clothing and computers, estimated to cost the state about $11 million in lost sales tax revenue.

His budget also increases a tax credit for low-income working families with one child and increases the Homestead Tax Credit for seniors and the disabled.

For the 2017-19 state budget, Walker and lawmakers are working with revenue estimates that are about $700 million better than expected in the fall when agencies prepared their budget requests. The better budgeting position comes from improved economic forecasts since the November presidential election, which translates to higher tax collection projections and lower-than-anticipated Medicaid costs.