News of the Day

Reform Bill Would Lower Debilitating Litigation Costs for Wisconsin Businesses and Government

Business groups across Wisconsin and the nation applaud the efforts of Reps. Born and Nygren and Sens. Tiffany and Craig that build on Wisconsin’s past tort reform successes. Among other reforms, their legislation addresses the most pressing civil litigation challenge – escalating transactional costs relating to discovery.

The heart of this litigation reform initiative is aligning Wisconsin’s civil procedures for discovery and class actions to the corresponding federal rules. The modernization of these court procedures, mostly aimed at costly discovery practices, will reduce litigation costs for small and large businesses, as well as state and local governments who must spend taxpayers’ dollars responding to abusive discovery practices.

Uniformity between the state and federal rules makes it easier for both plaintiffs and defendants. It enhances predictability and provides judges with a larger body of case law upon which to draw. This is particularly helpful to Wisconsin Circuit Court judges.

These common-sense discovery reforms will do the following:

• Make it clear that both courts and parties have an obligation to pursue the just, speedy, and inexpensive resolution of each case.

• Establish cost-benefit and proportionality requirements for discovery to prevent litigants from abusing the discovery process to leverage a
higher potential settlement or engage in a “fishing expedition.”

• Put on hold discovery and other proceedings pending the court’s decision on a motion to dismiss or other dispositive motions, protecting parties from costly discovery in cases that may be dismissed or where refinement of the pleadings may clarify the allegations and scope of relevant discovery.

• Provide notice of third-party litigation financing, if the financier has a right to receive compensation that is contingent on and sourced from
the outcome of the action. Such third party finance can increase the cost of litigation and cause suits to be brought that would not
otherwise have been financially justified.

• Limit discovery of electronically stored information (ESI) to address the escalating volume of ESI that is now one of the most significant
discovery-related costs.

• Unless otherwise stipulated or ordered by the court, limit discovery to 25 interrogatories, 10 depositions, none of which may exceed 7 hours
in duration, and a look-back period of not more than 5 years prior to the accrual of the cause of action.

Governor Walker Calls for Ad Campaign to Attract Workers to Wisconsin

Gov. Scott Walker wants to launch a nearly $7 million national marketing campaign to persuade millennials and military veterans to move to his state to help with a worker shortage.

Walker on Wednesday called on the Legislature to approve funding for the $6.8 million ad campaign before the end of the current session in early 2018. He said the marketing campaign would pitch Wisconsin as a more affordable place for millennials to live where they could be spending more time in a canoe, having a drink with friends or attending a concert, rather than sitting in traffic.

Walker said it was “critically important” to “get more bodies” in Wisconsin. The effort would include $3.5 million in ads targeting military veterans and their families and $3 million marketing Wisconsin as a destination for young professionals, particularly those already living in nearby Midwest cities of Detroit, Minneapolis and Chicago, Walker said.

The effort would likely start after an already-funded $1 million ad campaign targeting University of Wisconsin alumni and millennials living in Chicago, said Tricia Braun, chief operating officer of the Wisconsin Economic Development Corp. That’s slated to run January through March, and the hope is the expanded campaign Walker announced would begin shortly after that, she said.

Walker is also calling for an additional $300,000 would be used to develop a mobile job resource center that could provide services and recruitment in areas in rural Wisconsin with limited access to permanent services.

“It’s not enough to just give speeches and talks, we have to put a whole campaign behind this,” Walker said.

Part of the effort would be to woo back young adults who attended college in Wisconsin. The key time to reach them is four or five years after graduation when they start thinking about where they want to live long term and raise children, Walker said.


Bill Would Make it Easier for UW researchers to Fund, Commercialize Discoveries

Republican and Democratic legislators are backing a bill designed to make it easier for University of Wisconsin employees to privately fund and commercialize their research.

Rep. Dave Murphy, R-Greenville, chair of the Assembly Colleges and Universities Committee, and former Sen. Sheila Harsdorf, R-River Falls, chair of the Senate Committee on Universities and Technical Colleges and a member of the Joint Finance Committee, ordered the drafting of a bill that would provide a new exemption from a state prohibition on public employees entering into contracts in which they have a private financial interest.

The bill would replace a 45-day review by the UW System Board of Regents — now typically required under an existing exemption for researchers who want to contract with a private entity in which they have an interest — with a plan to manage potential conflicts of interest.

The bill also changes the definition of a “research company” in the law to include nonprofits as well as businesses and allow UW campuses to contract with nonprofit organizations.

Murphy and Rep. Terese Berceau, D-Madison, sent a letter recommending the legislation to Sen. Dan Feyen, R-Fond du Lac, who chairs the Committee on Economic Development, Commerce and Local Government; and Sen. Fred Risser, D-Madison, who serves on the Law Revision Committee.

The state representatives pointed to substantial losses in funding they attributed to the antiquated conflict of interest procedures.

UW-Madison in 2015 received $42.8 million less in research and development funding from private businesses that the average of the other top-five research institutions, and $55.5 million less than the average funding from nonprofit organizations, they said.

Under the bill, “Wisconsin’s conflict of interest regulations for university employees will still be consistent with those of other public universities, while removing the impediments currently in place that suppress Wisconsin small business creation,” they said.

Wisconsin among States Backing Bid to Collect Online Sales Tax

Business groups, federal lawmakers and public officials’ associations have signed on to support South Dakota’s legal bid to collect sales taxes from out-of-state internet retailers.

South Dakota is asking the U.S. Supreme Court to review whether retailers can be required to collect sales taxes in states where they lack a physical presence. The case could have national implications for e-commerce.

South Dakota Attorney General Marty Jackley’s office said this week that organizations ranging from the National Governors Association to the National Retail Federation have filed friend-of-the-court briefs supporting South Dakota’s petition to the high court.

The state is seeking to overturn legal rulings issued mostly before the online shopping boom.

Thirty-six attorneys general from states including Colorado, Minnesota, North Dakota and Wisconsin have also filed a friend-of-the-court brief.

FCC will Vote to Overturn Net Neutrality Rules in December

Ajit Pai, the Republican chairman of the Federal Communications Commission (FCC), announced on Tuesday that the FCC will vote to roll back Obama-era net neutrality rules that require internet service providers to treat all web traffic equally. Pai in a statement blasted the rules as “heavy-handed, utility-style” regulation of the internet imposed by Democrats.

Today, I have shared with my colleagues a draft order that would abandon this failed approach and return to the longstanding consensus that served consumers well for decades,” Pai said. “Under my proposal, the federal government will stop micromanaging the Internet.”

“Instead, the FCC would simply require Internet service providers to be transparent about their practices so that consumers can buy the service plan that’s best for them and entrepreneurs and other small businesses can have the technical information they need to innovate,” he said.

The commission will vote on the proposal at its Dec. 14 meeting. With Republicans holding three of the FCC’s five seats, the repeal is expected to pass.

Pai said he would release the full text of his plan to the public on Wednesday, but he made clear that he believes the Federal Trade Commission is better equipped to police internet service providers than the FCC.


Lawmakers Introduce Bill to Increase Minimum Wage for Wisconsin Workers

Two Democratic legislators, Rep. Melissa Sargent, D-Madison, and Sen. Bob Wirch, D-Somers, introduced a bill Friday to increase the state minimum wage to $15 over the next five years.

Under this bill, the minimum wage would gradually increase to $15 each year over a five-year time period. After the five-year period ends, the bill will require the Department of Workforce Development to adjust minimum wage income annually to match the trends of the current economy.

The two Democratic lawmakers introduced a similar bill together in the last legislative session, but it did not pass.

Sargent admits the bill faces a partisan legislature, but she argues introducing these types of bills can “change the fabric of the state” even though they might not pass because it allows people to think and talk about issues that matter to them.

“The people of Wisconsin are asking for this [minimum wage] bill to be introduced,” Sargent said. “Folks are overwhelmingly saying ‘It’s time to increase the minimum wage to $15 an hour.’ It’s my job as a legislator and people’s servant to hear the voices of the people and bring what is that they find important [into] the building to discuss.”

The co-sponsorship period for this bill ends Dec. 1. The bill has not yet been scheduled for a committee hearing.

Spending in New State Budget Diverges From Recent Trends

Planned spending in the recently enacted 2017-19 state budget departs from recent patterns in two important ways. First, general fund expenditures rise 8.8% over the two years, the largest biennial increase since 2009-11 (12.1%). Second, much of the increase is for school aid, which has grown less in recent years. K-12 aid will grow 8.3% over two years, the largest biennial jump since 2005-07 (9.0%). These are two important findings from a new review of the 2017-19 state budget, “Decisions Made, Questions Deferred,” from the Wisconsin Taxpayers Alliance (WISTAX).

State general fund appropriations are budgeted to increase from $15.9 billion in 2017 to $16.6 billion in 2018 and to $17.4 billion in 2019. Over half of all general fund expenditures go, not to fund state services, but to aid local governments, WISTAX noted. Another 26% aids individuals and organizations, particularly Medicaid for the poor and disabled. State operations, including the U.W. System, consume the remaining 24%.

The state’s largest expenditure is for K-12 school aid, which grows significantly over the next two years. School aids are rising 3.4% ($187.4 million) this year and 4.7% ($264.3 million) in 2019 to $5.9 billion. School aids rose 5.6% and 3.9%, respectively, during the prior two biennia. Nearly all of the additional dollars are directed into a relatively new “per pupil” aid, rather than into the much larger equalization aid formula; this is a major shift in school funding.

Two other areas claim the bulk of remaining new spending. The budget uses income and sales taxes to reduce property taxes. It eliminates the state levy for forestry programs ($90 million annually) and the personal property tax on machinery, tools, and parts ($74 million); increases the school levy credit by $87 million per year, and raises the lottery credit by shifting $48 million of general fund taxes to pay lottery expenses.

As with prior budgets, Medicaid expenditures are growing. General fund spending on the program totals $6.1 billion over two years, a 4.9% increase.

Key Differences Between the Senate and House Tax Plans

Senate Republicans on Thursday unveiled a tax reform bill that breaks with the House in significant ways. If the House Republican bill was a first draft of tax reform, the Senate bill is the first rewrite.

Here are the key differences between the Senate and House bills.

State and local taxes 

The Senate bill will entirely repeal the deduction for state and local taxes, making no exception for property taxes. The House bill would allow deductions up to $10,000 for property taxes.

Home mortgage interest deduction

The Senate would keep in place the deduction for newly purchased homes up to $1 million while the House plan would cut the threshold to $500,000.

Popular tax credits and deductions

The Senate would keep in place a variety of popular tax credits and deductions that would have been eliminated by the House tax bill released last week. It preserves tax credits and deductions for adoption, medical expense, teacher expenses, and student loan interest.

Tax brackets

The House bill would condense the number of tax brackets to four: 12 percent for income up to $90,000; 25 percent for income up to $260,000; 35 percent for income up to $1 million; and 39.6 percent for income over $1 million.

The Senate bill would establish seven tax brackets at 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent and 38.5 percent for the nation’s highest income earners.

Estate tax

The Senate bill would double the estate-tax exemption for wealthy estates from $11 million to $22 million per couple (or from $5.5 million to $11 million per individual) while the House bill would repeal the estate tax entirely.

Corporate tax rate

The Senate would cut the corporate tax rate to 20 percent, like the House would, but delay its implementation until 2019 to reduce the projected cost of the bill over ten years. The House would cut the corporate tax rate next year.

Pass-through businesses

The Senate would establish a 17.4 percent deduction for pass-through businesses based on the Section 199 domestic manufacturing deduction that would lower the effective tax rate for small businesses in the top tax rate to slightly more than 30 percent, according to Senate Finance Committee aide.

The House bill, by contrast, would have established a 25 percent rate for pass-through companies but would only make 30 percent of their revenue eligible for that rate and tax the other 70 percent as wages under the individual tax rate. That would result in a blended rate for many small businesses between 35 percent and 38 percent.

WEDC Board Approves Foxconn Contract

The Wisconsin Economic Development Corp. board Wednesday approved a $3 billion contract with Taiwanese manufacturer Foxconn, a deal the company’s CEO is personally backing should it fall apart. The board voted 8-2 with member Tom Sylke, an intellectual property lawyer, abstaining.

Under the terms of the 29-page contract, released publicly for the first time Wednesday, the company will be able to collect up to $1.35 billion in construction-related tax credits if it creates a gradually increasing number of manufacturing jobs up to 8,450 through 2025. It will also be able to collect up to $1.5 billion in tax credits if it creates up to 13,000 manufacturing jobs by 2022 and maintains that number through 2032.

The jobs must pay at least $30,000 per year and average $53,875 annually. The job credits pay out 17 percent of the first $100,000 of salary, which is higher than 7 percent for the state’s typical enterprise zone job credits. The construction credits equal 15 percent of capital investment, up from 10 percent in a typical enterprise zone.

The company will be eligible to receive up to $10 million in job credits starting in 2018 if it creates 1,040 jobs in the state. To receive any credits next year, the company must create at least 260 jobs. But if the company doesn’t earn the credits in a given year, they can be carried forward into subsequent years.

Within five years, the state can reclaim any credits it pays out if the company provides false information, leaves the state or ceases operations and doesn’t restart within a year. Those violations could result in the company owing as much as $965 million if they occur in the years after 2022. Also after that point, if the company employs fewer than 6,500 workers the state can reclaim a sliding scale ranging from $500 million in 2023 to $250 million in 2032.

Compliance with the terms will be audited by an independent accountant based on a sample of the company’s workforce at the end of each year.

Gou and his holding company, SIO International, are pledging to pay back 25 percent of the amount that would be refunded to the state should the company default. Publicly traded parent company Hon Hai Precision Products, the 27th largest company in the world, would back the rest.

Employer, Health Care Groups Clash over Workers’ Compensation

Powerful employer and health care groups are clashing over a proposed workers’ compensation bill that would set fees for medical care in the state program.

The Worker’s Compensation Employers Coalition, including Wisconsin Manufacturers and Commerce and more than 40 other groups, says workers’ comp medical costs are going up, and care costs much more for work injury patients than people covered by regular health insurance.

Employers are “seeing that they’re paying more, and they just don’t quite understand why,” Chris Reader, Wisconsin Manufacturers and Commerce’s director of health and human resources policy, said Tuesday at a Wisconsin Health News panel debating the bill expected to be introduced in the Legislature soon.

Mark Grapentine, the Wisconsin Medical Society’s senior vice president of government relations, said overall workers’ comp claims in Wisconsin run about the same as the national average, in part because workers use fewer medical services and return to their jobs three weeks shorter than average.

Although the vast majority of states use fee schedules, the proposal in Wisconsin is “a solution in search of a problem,” Grapentine said.

In a decades-old process, the Worker’s Compensation Advisory Council, which has members from labor and management, hash out proposed changes to the program in a bill each two-year legislative session.

The group incorporated the fee schedule again into its proposed 2017-19 bill, which also calls for curbing opioid use and other changes. The fee schedule would set rates for medical care at 2.5 percent higher than the average negotiated prices for regular health insurance plans.