News of the Day

Congressional GOP Lawmakers Want Answers on Unemployment Fraud in Wisconsin

In a June 17 letter signed by every Republican member of Wisconsin’s congressional delegation, legislators asked Gov. Tony Evers, a Democrat, to respond to reports of unemployment benefits claimed by fraudsters. They cited a May memo from the Secret Service warning against a “massive” scheme by a “well-organized Nigerian fraud ring exploiting the COVID-19 crisis to commit large-scale fraud against state unemployment insurance programs.” That memo didn’t name Wisconsin as one of the states targeted by that specific scheme, but did note “it is extremely likely every state is vulnerable.”

A spokesperson with the state Department of Workforce Development, which oversees the unemployment system, said in a statement that “Wisconsin has been a national leader at detecting fraud.” The department has a variety of means to detect fraud and abuse, including but not limited to auditing employer records, comparing benefit claims to payroll records in Wisconsin and other states, exchange of information between agencies, complaints from employers and tips from the public,” wrote DWD communications specialist Tyler Tichenor.

Every year, states pursue some fraud cases against individuals who claimed funds they weren’t eligible for. What is new is the presence of large-scale scams by organized criminal syndicates, including those operating in other countries, to claim United States unemployment funds. In May, announcing a new federal Department of Justice task force on the issue, President Joe Biden said the issue was among the most serious oversight issues his administration had inherited from the administration of former President Donald Trump.

The unprecedented spike in new jobless claims in 2020 led to long backlogs and a skyrocketing total number of payments. But according to the DWD’s 2021 fraud report, both the number of cases of fraud and the total amount of fraudulently paid benefits actually declined in 2020. There were 4,734 fraud cases in 2019, and just 3,561 in 2020. It accounted for about $4.7 million in 2019 and $4.5 million in 2020, according to the department.

One interpretation of that data, said economist Noah Williams of the conservative Center for Research on the Wisconsin Economy at the University of Wisconsin-Madison, is that “fraud detection basically dropped to near zero” in 2020.

“We had a huge explosion in claims in 2020, but the actual cases in the state that were referred for fraud fell,” Williams said. “We don’t know how big the problem is, but … I wouldn’t have expected the absolute number of cases to fall.”

In a report Williams authored in May, he wrote Wisconsin “was one of the worst-performing states” by several metrics of measuring its unemployment insurance system.

Bill to Eliminate Wisconsin’s Personal Property Tax Passes Committee with Bipartisan Support

A bill to eliminate the state’s personal property tax, which businesses pay on equipment and furnishings, received bipartisan support in a Senate committee Tuesday.

The bill was recommended for approval by the Senate workforce committee 4-1, with Sen. Janis Ringhand, D-Evansville, the lone vote against the measure over concerns future Legislatures could stop providing local entities more state aid to make up for the lost revenue.

The budget committee last week voted to set aside about $202 million for such payments over 2021-23 biennial budget. However, officially eliminating the tax, which lawmakers described as an antiquated and unfair tax on businesses, would be done through separate legislation rather than through the budget process.

Both the budget and a standalone bill to end the tax are expected to come before the Assembly and Senate next week. “It’ll be a great day when we can finally get rid of this tax,” bill author Sen. Duey Stroebel, R-Saukville, said Tuesday.  Stroebel said the intent is to keep providing local taxing authorities with state money to compensate for the reduction in revenue.

Sen. Brad Pfaff, D-Onalaska, said he hoped that revenue to local jurisdictions would be included in future budgets.

“I too have heard from my small-business owners. I recognize the importance of this,” Pfaff said. “But I do want to make sure we keep whole our local units of government.”

More than 40 lobbying groups have filed in favor of eliminating the tax, including business groups and local chambers of commerce. The AFSCME International Union and the League of Women Voters of Wisconsin oppose the bill.

Eliminating the personal property tax through standalone legislation would limit Gov. Tony Evers’ ability to alter it through his partial veto power, which can only be used on bills that spend money, like the budget. But it also opens the door to the Democratic governor vetoing the legislation altogether.

Wisconsin Housing Market Strong Even as Inventories Remain Tight

Both existing home sales and median prices rose by double-digit margins in May compared to their levels 12 months earlier, when the economy was in lockdown. Housing supply remains very tight with just 2.8 months of available supply in the state. Inventory is tight in all regions, across all urban/rural classifications and across all price ranges

“Basic economics tells us that strong and growing demand in a world of tight supply is going to create significant price pressure, and that’s exactly what we’re seeing in the state housing market. Median prices through the first five months are up at an annual pace of 12.1%. Unless demand moderates or supply improves, neither of which is likely in 2021, we can expect to see more of the same price appreciation through the end of this year. The good news is that mortgage rates remain very low by historical standards, which has at least partially offset the impact of significant price pressure on housing affordability in the state.  Hopefully the inflationary pressures don’t intensify, which could cause mortgage rates to increase and lower affordability,” said Michael Theo, President & CEO of the Wisconsin Realtors Association.

 

WEDC Looking to Ramp Up Tax Credit Revocation Following Audit

WEDC officials say they’re looking to pick up the pace on revoking tax credits from businesses that fail to meet the terms of their contracts.

During a meeting of the agency’s Audit and Budget Committee, members discussed actions being taken in response to the latest biennial WEDC audit from the state Legislative Audit Bureau. The April audit included a number of recommendations for improving WEDC’s processes, including updating procedures on tax credit revocation to do so in a more “timely manner.”

In one example, a business that received tax credits from the state indicated in March 2017 that it had lost all of the contractually required jobs that were previously created. But WEDC didn’t revoke the $125,000 in tax credits until more than three years later, in June 2020.

Another recommendation from LAB directs WEDC to change its procedures for Enterprise Zone tax credits such that credits are only awarded for wages paid to employees providing a service within the defined enterprise zone. As it stands, WEDC could be awarding these tax credits for wages paid to employees working elsewhere, LAB said.

WEDC will be providing a report in response to the audit’s recommendations to the state’s Joint Legislative Audit Committee in October.

Wisconsin Legislature’s Budget Committee Wraps Up with Massive Tax Cuts

Taking advantage of an unexpected revenue windfall, Republicans on the Wisconsin Legislature’s budget committee voted Thursday to approve about $3.4 billion in income, business and property tax cuts, wrapping up its work on the two-year spending plan.

The Republican plan would bring the state’s third income tax bracket down from 6.27%  to 5.3%, generating about $2.7 billion in relief. That bracket encompasses individuals making between $23,930 and $263,480 per year, and households earning between $31,910 and $351,310 per year.

Lawmakers set aside $202 million to offset a repeal of the state’s personal property tax which applies, in general, to furniture, equipment, machinery and watercraft owned by businesses. A portion of that tax — which provides funding to schools and local governments — was eliminated in the 2017-19 budget.

Committee co-chair Sen. Howard Marklein, R-Spring Green, noted that the tax is frustrating for those who pay it because it continues to apply every year — not just when the taxed item is purchased.

The motions passed Thursday also include a $72 million increase in aid to technical colleges and an additional $408 million for general school aid. They also remove a reduction in general school aid associated with some independent charter schools. Because spending caps remain in place, that funding would result in a decrease in property taxes. In total, the budget reduces property taxes by about $647 million.

The Republican tax measures are based on the idea that “taxpayers will do a better job, a more responsible job” than government would with the majority of the $4.4 billion more than expected that the state is projected to take in over a three-year period, said co-chair Rep. Mark Born, R-Beaver Dam.

Federal Reserve Moves Up its Timeline for Interest Rate Hikes as Inflation Rises

The Federal Reserve on Wednesday considerably raised its expectations for inflation this year and brought forward the time frame on when it will next raise interest rates.

As expected, the policymaking Federal Open Market Committee unanimously left its benchmark short-term borrowing rate anchored near zero. But officials indicated that rate hikes could come as soon as 2023, after saying in March that it saw no increases until at least 2024. The so-called dot plot of individual member expectations pointed to two hikes in 2023.

Though the Fed raised its headline inflation expectation to 3.4%, a full percentage point higher than the March projection, the post-meeting statement stood by its position that inflation pressures are “transitory.” The raised expectations come amid the biggest rise in consumer prices in about 13 years.

The committee did raise the interest it pays on excess reserves by 5 basis points to 0.15%.

In a separate matter, the FOMC announced that it would extend dollar-swap lines with global central banks through the end of the year. The currency program is one of the last remaining Covid-era initiatives the Fed took to keep global markets flowing.

Republican Lawmakers Approve $125 Million for Broadband Expansion Across Wisconsin

Republicans on the Legislature’s state budget committee voted Tuesday evening to approve $125 million to expand broadband internet access in Wisconsin, a bipartisan goal that has emerged as the COVID-19 pandemic laid bare technology disparities across the state.

According to a report released earlier this year based on Federal Communications Commission data, more than 430,000 people, who make up 25 percent of the state’s rural population, lacked access to high-speed internet in Wisconsin in 2019. The report ranked Wisconsin 36th nationwide for accessibility in rural areas.

Responding to those issues, Democratic Gov. Tony Evers and GOP legislative leaders have agreed state funding for broadband expansion should be a priority for the next two-year state budget.

However, their exact funding plans have differed. In his plan, the governor called for roughly $152 million for broadband expansion grants statewide and $50 million on other related programs. The governor would have paid for the grants out of the state’s general fund.  The $125 million GOP plan would be dedicated solely to the grants and be funded by borrowing.

Broadband expansion grants, which were first offered in 2013, are aimed at expanding broadband internet service to homes and businesses that don’t have service or are only able to get lower-speed internet.

Producer Prices Rise at Fastest Recorded Yearly Rate

Prices charged by producers for goods and services rose 5.3 percent in the 12 months leading into May, according to data released Tuesday by the Labor Department.

The Producer Price Index (PPI) for final demand — not parts or components — rose at the fattest unadjusted annual rate since the Labor Department began calculating yearly data in 2010.

The record-breaking annual jump in the PPI also reflects a sharp rebound from a steep decline in prices last year. Since prices fell drastically during the onset of the pandemic, the subsequent recovery has also appeared sharp.

“The ongoing mismatch between supply and demand continues to fuel price pressures, while the influence of base effects after last spring’s collapse in prices likely peaked last month,” wrote Mahir Rasheed and Gregory Daco of Oxford Economics in a Tuesday analysis.

Even so, most economists expect the rate of price increases to settle down as the economy hits a more sustainable pace.

“Looking past the noise, producer price increases will slow as supply constraints relax and recalibrate to demand in the second half of 2021,” Rasheed and Daco wrote. “With inflation expectations cooling and fiscal stimulus fading, we continue to share the Fed’s view that we are not entering an environment of spiraling prices.”

Wisconsin Supreme Court Strikes Down Dane County Health Department Order to Close Schools

The Wisconsin Supreme Court on Friday sided with private school parents and students in striking down a Dane County order from last August that sought to close all schools to most students to limit the spread of COVID-19.

The court found that because state statute does not specifically allow local health officers to close schools during a public health emergency, Public Health Madison and Dane County director Janel Heinrich overstepped her authority, and it deemed flawed her reliance on a part of state statute that says people in her position can take all “reasonable and necessary” actions to protect public health.

“The power to take measures ‘reasonable and necessary’ cannot be reasonably read as an open-ended grant of authority,” Justice Rebecca Bradley wrote for the majority. “Doing so would swallow the rest of the statute and render it mere surplusage.”

Rick Esenberg, president of the conservative Wisconsin Institute for Law and Liberty, which represented some of the plaintiffs in the case, hailed the decision.

“The order from Public Health Madison and Dane County closing all county schools was illegal, unnecessary and unconstitutional,” he said in a statement. “Even as the COVID-19 pandemic recedes, the court’s decision provides a critical correction that ought to prevent future abuses of power in an emergency.”

OSHA Issues a New COVID Safety Rule, But Only for the Health Care Industry

The Occupational Safety and Health Administration announced a rule on Thursday outlining steps that employers must take to protect workers from the risk of Covid-19, but it will apply only to the health care industry, not to other high-risk workplaces, as the Biden administration initially indicated.

“The science tells us that health care workers, particularly those who come into regular contact with the virus, are most at risk at this point in the pandemic,” Labor Secretary Martin J. Walsh said on a call with reporters. “So following an extensive review of the science and data, OSHA determined that a health care specific safety requirement will make the biggest impact.”

The rule will require health care employers to provide protective equipment like masks, to screen and triage patients for the risk of Covid-19 and to ensure adequate ventilation and distancing, among other measures. It will also require those employers to provide adequate paid time off for workers to receive vaccinations and manage their side effects.

Mr. Walsh, whose department includes OSHA, said the administration was issuing optional guidance to employers outside health care that would focus on workplaces in the manufacturing, meat processing, grocery and retail industries.