Brian Dake

State of Wisconsin Ends Fiscal Year 2021 with $2.58 Billion Positive Balance

Wisconsin concluded Fiscal Year 2021, which ended on June 30, 2021, with a positive balance of $2.58 billion.  In addition, the state increased its Budget Stabilization Fund (“Rainy Day” Fund) to a record-high $1.73 billion according to the new Annual Fiscal Report released by the Wisconsin Department of Administration (DOA) today.

“A healthy rainy-day fund will help us face tomorrow’s challenges head-on,” said DOA Secretary Joel Brennan. “By prudently managing our way through this crisis, we’ve built the largest Budget Stabilization Fund in state history, making sure we’re ready for future challenges, and securing a strong pandemic recovery for our hard-hit communities, businesses and industries.”

Noteworthy items from the Fiscal Year 2021 Annual Fiscal Report include:

  • The state’s undesignated general fund balance at the end of Fiscal Year 2021 was $2.58 billion, more than double the prior year’s balance of $1.17 billion in Fiscal Year 2020.
  • Wisconsin transferred excess revenues of $967.4 million to its Budget Stabilization Fund, more than doubling the prior year balance. The current Budget Stabilization Fund balance now totals roughly $1.73 billion, the largest in the state’s history and more than five times larger than the balance at the end of Fiscal Year 2018.
  • State general fund tax collections in Fiscal Year 2021 increased by 11.6% over the prior year and exceeded the most recent estimates by nearly $319 million.

The full Fiscal Year 2021 Annual Fiscal Report is available here: https://doa.wi.gov/Pages/StateFinances/AnnualFiscalReportAFR.aspx 

Biden Administration Scales Back IRS Bank-Monitoring Plan

The Biden administration on Tuesday endorsed a scaled-back version of a proposal that could force banks to turn over customers’ account information to the Internal Revenue Service under growing criticism from banking groups and Republicans.

Under a new plan that Senate Democrats are expected to unveil, banks, credit unions and other financial institutions would be required to report annually on accounts with deposits and withdrawals worth more than $10,000, rather than the $600 threshold that President Biden initially proposed.

Banks are already required to report any transaction that exceeds $10,000 to the Financial Crimes Enforcement Network – part of anti-money laundering requirements.

In a September letter addressed to House Speaker Nancy Pelosi, D-Calif., and Minority Leader Kevin McCarthy, R-Calif., more than 40 banks urged lawmakers to vote against such a proposal, warning it could create a “tremendous liability” for all involved by requiring the collection of financial information for the majority of Americans “without proper explanation of how the IRS will store, protect and use this enormous trove of personal financial information.”

We Energies and WPS Customers Will See Higher Heating Bills

Two of the state’s largest utilities are warning of higher heating bills this winter as natural gas prices have more than doubled since earlier this year. Natural gas has been relatively cheap for years, but prices have surged due to lower supplies and rising demand worldwide.

The price to buy natural gas has spiked from $2.62 per million British thermal unit earlier this year to between $5 and $6 since late September, according to the Energy Information Administration.

In the agency’s winter fuels outlook, the EIA expects nearly half the nation’s households that use natural gas will spend between 22 and 50 percent more on average, depending on whether the winter is colder or warmer than normal. Homes that use propane for heating could see costs rise between 29 and 94 percent depending on the severity of winter weather.

The state’s largest electric and natural gas utility, We Energies, warns the cost to heat homes could go up by $25 per month for residential customers based on a typical winter. Wisconsin Public Service customers could pay $40 more per month.

OSHA Sends Employer Vaccine Rule to White House for Final Review

The Occupational Safety and Health Administration has submitted the text of a new vaccine rule for large employers to the Office of Management and Budget, bringing the emergency standard announced by President Joe Biden last month one step closer to taking effect.

“The Occupational Safety and Health Administration has been working expeditiously to develop an emergency temporary standard that covers employers with 100 or more employees to ensure their workers are fully vaccinated or undergo weekly testing to protect employees from the spread of coronavirus in the workplace,” a Labor Department spokesman said Tuesday.

“On Tuesday, October 12, as part of the regulatory review process, the agency submitted the initial text of the emergency temporary standard to the Office of Management and Budget.”

Once OMB concludes its review of the regulation, the emergency temporary standard will be published in the Federal Register, when it will go into effect.

President Biden Seeks to Spearhead New Effort to Ease Supply-Chain Delays

President Joe Biden will turn his focus to supply-chain transportation bottlenecks on Wednesday, as the congested Port of Los Angeles will announce a 24 hours a day, seven days a week effort to confront the squeeze on goods.

A meeting at the White House will convene corporate executives, labor leaders as well as port officials, and Biden plans to highlight their efforts to ease distribution backlogs and respond to product demands that have grown during the coronavirus pandemic, two administration officials said on the condition of anonymity to preview the day’s events.

The 24/7 shift by the Port of Los Angeles follows a move last month by the nearby Port of Long Beach to a similar schedule. FedEx Corp., United Parcel Service Inc. and Walmart Inc. are also pledging to move to 24/7 operations, the official added, while Target. Corp., Samsung Electronics Co. and Home Depot Inc. are taking steps to start addressing the backlog in distribution.

The White House said that among those six companies, a total of 3,500 additional containers a week would be moving at night through the end of the year.

“Large companies are announcing they will use expanded hours to move more cargo off the docks, so ships can come to shore faster,” the White House said. “Unlike leading ports around the world, U.S. ports have failed to realize the full possibility offered by operation on nights and weekends.”

Despite Wisconsin’s Strong Economic Recovery, Participation in Government Programs Remains High

While Wisconsin’s unemployment situation has rebounded since April 2020, participation in government safety net programs remains elevated, according to a new Badger Institute brief authored by Dr. Angela Rachidi, senior fellow in poverty studies at the American Enterprise Institute and Badger Institute Visiting Fellow.

In her brief, titled “Employment and the Safety Net During the Pandemic,” Rachidi found that as of September 2021, receipt of unemployment insurance, federal food assistance and cash for low-income parents in Wisconsin remains higher than pre-pandemic levels. Although the economy has improved dramatically and the labor market is tight, food and cash aid caseloads continue to rise. Additional findings in the brief include:
· By the first week of September, the number of continuing unemployment insurance claims in Wisconsin was 41,000, still almost double the number of claims during the same week in 2019.
· Payments to SNAP households in Wisconsin have skyrocketed, increasing 167% from June 2019 to June 2021, while participation increased almost 30%. This is more per SNAP household on average in constant dollars than at any time in the past 20 years.
· The number of people receiving TANF started increasing in March 2020, consistent with a higher unemployment rate, but has continued to increase even as the employment situation in Wisconsin has improved.
· The labor force participation rate in Wisconsin was 66.5% in August 2021, slightly below the rate in August 2019 of 67.2%.
Higher government benefits increase the likelihood that people will reduce work hours or leave employment altogether, according to Rachidi. For Wisconsin’s economy to regain its footing fully, people must be available and willing to work.

Wisconsin Taxpayers to Benefit from State Tax Withholding Change

Wisconsin taxpayers will begin to see the benefits of recently passed income tax relief starting January 1, 2022, now that the Wisconsin Department of Revenue (DOR) plans to update individual income tax withholding tables by that date.

The update corresponds with income tax relief passed by Republican legislators and signed into law by Governor Tony Evers in early July. The individual income tax rate was reduced from 6.27% to 5.3%, with the tax relief effective retroactive to January 1, 2021. At the time, however, the governor vetoed a provision directing the DOR to update the withholding tables to reflect the change.

Not updating the tables would have amounted to Wisconsinites providing an interest-free loan to the government until they finally received refunds during the 2023 tax filing season, said Tax Foundation senior policy analyst Katherine Loughead.

“Updating withholding tables is a routine responsibility of state revenue departments to ensure taxpayers see tax changes reflected in their paychecks as soon as is practical following rate reductions and other changes,” she added. “A timely withholding table adjustment is especially important given the magnitude of Wisconsin’s recent tax cut, which in total will provide nearly $2.4 billion in relief to taxpayers over the current budget period.”

Prior to the tax relief becoming law, Wisconsin’s second-highest rate was higher than the top marginal rates in 23 other states (not counting eight states with no income tax). The rate kicks in at just over $24,000 in taxable income for single filers and $32,000 for married couples, affecting a vast majority of the state’s taxpayers who, before the tax relief was signed, wound up paying more than they would with the same amount of income in most other states. The rate decrease also impacts Wisconsin’s small businesses, most of which pay taxes under the individual income tax code.

 

States and Cities Slow to Spend Federal Pandemic Money

As Congress considered a massive COVID-19 relief package earlier this year, hundreds of mayors from across the U.S. pleaded for “immediate action” on billions of dollars targeted to shore up their finances and revive their communities.

Now that they’ve received it, local officials are taking their time before actually spending the windfall.

States had spent just 2.5% of their initial allotment while large cities spent 8.5%, according to the AP analysis. Many state and local governments reported they were still working on plans for their share of the $350 billion, which can be spent on a wide array of programs.

Though Biden signed the law in March, the Treasury Department didn’t release the money and spending guidelines until May. By then, some state legislatures already had wrapped up their budget work for the next year, leaving governors with no authority to spend the new money. Some states waited several more months to ask the federal government for their share.

The Treasury Department set an aggressive reporting schedule to try to prod local planning. It required states, counties and cities with estimated populations of at least 250,000 to file reports by Aug. 31 detailing their spending as of the previous month as well as future plans.

More than half the states and nearly two-thirds of the roughly 90 largest cities reported no initial spending. The governments reported future plans for about 40% of their total funds.

 

Bill Introduced to Reform Wisconsin’s Unemployment Insurance Program

Yesterday, State Representatives Warren Petryk (R-Eleva) and Will Penterman (R-Columbus), and Senator Roger Roth (R-Appleton) introduced legislation to fundamentally reform the unemployment insurance (UI) program in Wisconsin. The new Reemployment Assistance Act would refocus UI to help people find employment while they continue to receive financial job loss assistance.

“Wisconsin has a workforce crisis right now and we need to make sure that we do everything we can go get people off of the labor market sidelines and into employment as quickly as possible,” said Representative Petryk. “There are more jobs right now in Wisconsin than before the pandemic started. We need to take this opportunity now to reform the existing unemployment insurance program in our state, which has failed under the leadership of the current governor, and help those folks get the workforce supports they need to land their next career as quickly as possible.”

One of the key provisions of the bill is the expansion of reemployment services for those who are receiving UI. This bill will require universal workforce assessments of an individual’s skills sets. This data can be used to send people customized employment offers. In addition, the data will be used to provide people customized employment plans which will allow them to access services like resume writing workshops, soft-skills training, and employment workshops.

“Businesses in every city, town and village in Wisconsin are looking for workers right now, and this legislation is the missing link in the reemployment journey for Wisconsinites who are currently out of the workforce,” said Senator Roth. “We will repurpose the UI system, utilizing the tools and resources of the state, to give people the job-specific training and skills needed to get them back on their feet. It’s past time for the state to facilitate connecting workers to employers to get businesses back open and back in the black.”

This legislation also aims to help those who are about to end their UI and for those who recently lost their UI. The bill requires the Department Workforce Development to provide a one-on-one employment counseling sessions before someone reaches the end of their claim. It also provides a one-time tax credit to businesses who hire the nearly 43,000 people whose unemployment claim recently ended. These credits could be used to help remove the barrier keeping these people on the workforce sidelines.

 

Modernization Efforts are Moving Forward for Wisconsin’s Outdated Unemployment System

The Wisconsin Department of Workforce Development moved forward Wednesday with plans to modernize the state’s unemployment insurance system as it emerges from problems brought to light by the COVID-19 pandemic.

Madison-based software development company Flexion will help bring the department’s decades-old computer systems and technology up to date as part of a $16.5 million contract.

DWD is working to release updates to the unemployment system as they become ready, said Stacia Jankowski of the department’s Office of Integrity and Accountability.

“Our modernization strategy reflects an iterative approach to … customer service improvements as soon as possible while claims processing continues uninterrupted,” said Jankowski.

Jankowski said the overall cost of those modernization efforts was projected to be around $80 million. According to the department press release, federal funds from the American Rescue Plan Act and the CARES Act are paying for those upgrades.

The changes would bring more timeliness and automation into DWD’s operations, such as in the addition of chat bots and virtual agents, said Neeraj Kulkarni, the department’s chief information officer and IT bureau director.

“DWD will be able to respond quickly to changing UI needs through greater flexibility in hiring and training resources to assist in times of need because using the system will be familiar and intuitive,” said Kulkarni.