News of the Day

McConnell Abandons Obamacare Repeal and Replace Effort

Senate Majority Leader Mitch McConnell pulled the plug late Monday on the Republican effort to overhaul the U.S. health insurance system and pledged the chamber will now focus on only dismantling the 2010 health care law.

“Regretfully, it is now apparent that the effort to repeal and immediately replace the failure of Obamacare will not be successful,” the Kentucky Republican said.

McConnell said the Senate will now take up the House-passed health care bill and amend it with legislation the Senate supported in 2015 to repeal the 2010 health care law “with a two-year delay to provide for a stable transition period to a patient-centered health care system that gives Americans access to quality, affordable care.”

Before McConnell’s announcement on the next steps, President Donald Trump tweeted Monday night that “Republicans should just REPEAL failing ObamaCare now & work on a new Healthcare Plan that will start from a clean slate. Dems will join in!”

Democrats have made it clear they won’t support anything that would repeal the law but indicated they would discuss changes to stabilize the health insurance marketplaces.

“Rather than repeating the same failed, partisan process yet again, Republicans should start from scratch and work with Democrats on a bill that lowers premiums, provides long term stability to the markets and improves our health care system,” said Senate Minority Leader Charles E. Schumer in a statement issued before McConnell announced next steps.

State Estimates Employers will Save $637 Million on Unemployment Taxes by 2018

Recently, Gov. Scott Walker  touted the savings of $637 million in unemployment taxes for businesses paying into the state’s unemployment program.

The majority of those savings, $482 million since 2013, are the result of an improving economy and roughly a quarter come from changes made to unemployment tax schedules since 2016. Walker says the state went from having the highest tax to the lowest over the last three years, resulting in $155 million in savings, including an estimated $20 million in the 2018 tax year.

Funding for the unemployment trust fund comes from roughly 140,000 covered employers in the state, meaning the savings from tax schedule changes amounted to about $1,100 per employer over three years and the improving economy savings resulted in $3,440 per employer over five years.

Walker pointed out that the state’s unemployment trust had a $1.4 billion deficit in December 2010 and was one of 30 states to use federal loans to pay benefits during the Great Recession, but now has a $1.3 billion positive fund balance as of June 30.

“With a significantly improved business climate, economic growth and smart UI system reforms, employers are adding jobs and Wisconsin workers are finding good-paying opportunities to support themselves and their families,” Walker said.

After hovering around 4.2 percent for much of 2016, the state’s unemployment rate has steadily fallen over the first five months of the year to 3.1 percent in May. Month-to-month declines in unemployment have picked up since the start of the year, averaging a drop of about 6,100 or 5.3 percent.

Employment, meanwhile, has averaged a 0.5 percent increase from one month to the next this year, a jump of about 14,000.

Walker also touted reforms to the state unemployment program instituted in recent years. Those changes included a rule making a failed or refused drug test count as a failure to accept suitable work, although those who do fail could keep their benefits by enrolling in drug treatment and completing a job skill assessment.

The changes also lowered the wage threshold for suitable work by 5 percentage points and require those with an expectation of reemployment to job search if they were going to be laid off for more than eight to 12 weeks.

Wisconsin Republicans Propose Sweeping Changes to Department of Transportation

A group of Republican lawmakers on Thursday introduced a package of legislative proposals aimed at making the state Department of Transportation more efficient and accountable.

The proposals, rolled into an omnibus bill, come as the majority party struggles to reach a consensus on the broader issue of how to fill a project $1 billion deficit in the transportation fund. The dispute has brought progress on the state budget, now 12 days overdue, to a halt.  While that debate centers on whether the state should borrow money or raise revenue, the lawmakers behind the “DOT Reform” bill say regardless of the budget outcome, changes are needed within the agency.

The new proposal is being spearheaded by Sens. Chris Kapenga, R-Delafield, and David Craig, R-Town of Vernon, and Reps. Joe Sanfelippo, R-New Berlin, and Rob Hutton, R-Brookfield.

“This bill will restore taxpayer confidence in an agency that has strayed from the sound fiscal and good-government principles we expect,” Sanfelippo said in a statement.

Under the bill, DOT would have more options for project delivery to bring down costs and shorten completion times. The bill would also create a Technical Review Committee to review contract proposals, and create incentives to use Wisconsin-based contractors.

The amount of engineering work allowed to be done by DOT staff would be limited to 20 percent, and the agency would be required to revise its funding formula to be based on need rather than baseline funding.

The agency would be required to report its progress to the Legislature, and would be subjected to an operational and financial audit.

The bill also includes proposals that have already been introduced as separate legislation. Roundabouts could not be constructed without approval from local communities, and communities could not implement a wheel tax without approval granted through a referendum. The state auditor would appoint an inspector general to investigate the operations and finances of the DOT, and a portion of federal funds would be “swapped” with state dollars to cut down on federal regulations. The bill also includes a repeal of the state’s prevailing wage.

“After demonstrating a poor use of taxpayer dollars, substantial reform is essential at the DOT,” Kapenga said in a statement. “These reforms have been proven around the country to save significant money and deliver projects in a more efficient and effective manner. It is part of what is need to help get the agency back on track.”

Assembly Speaker Robin Vos, R-Rochester, said he supports most components of the bill, including the prevailing wage repeal.

“I look forward to working with my colleagues in both chambers to improve the DOT to bring about a more effective and efficient agency,” Vos said in a statement. “However, it’s important to understand that reforms alone won’t resolve the transportation funding issue that must be addressed in order to maintain a reliable and safe highway system.”

Federal Appeals Court Upholds Wisconsin Right-to-Work Law

A federal appeals court panel has upheld Wisconsin’s right-to-work law.

The law prohibits businesses and unions from reaching agreements that require all workers at a company to pay union dues. Unions maintain the law enables nonunion members to receive free representation. The International Union of Operating Engineers filed a lawsuit last year alleging that amounts to an unconstitutional taking.

U.S. District Judge J.P. Stadtmueller upheld the law in September, citing a 7th U.S. Circuit Court of Appeals ruling upholding Indiana’s nearly identical right-to-work law.

A three-judge panel from the 7th U.S. Circuit Court of Appeals upheld Stadtmueller on Wednesday. The panel noted that the 7th Circuit has upheld Indiana’s law and the union didn’t show a reason to revisit that decision.

Wisconsin Mortgage Foreclosures Fall to 17-year Low

Amid a better jobs climate, tougher lending standards and rising home prices, mortgage foreclosure filings in Wisconsin have fallen to their lowest level in at least 17 years.

In the first half of 2017, there were 4,132 foreclosures filed with courts in the state, according to the University of Wisconsin-Whitewater’s Fiscal and Economic Research Center. That is down about 12% from 4,712 during the first six months of last year, and below the 4,740 foreclosure filings recorded in 2001 — as far back as the UW-Whitewater data goes.

The 2017 total is less a third of the number of foreclosure cases seen from January through June in 2009, the year with the worst start in Wisconsin during the foreclosure crisis.

The improved employment environment has made it more likely that borrowers will stay current with monthly house payments, but lenders are more careful now about who gets a mortgage to begin with, said Russell Kashian, a UW-Whitewater economics professor who runs the university’s research center.

“I think prior to the financial crisis the economy was doing very well, but there were a lot people that were on the bubble, that were on the precipice. I don’t think we’re making those loans today,” Kashian said.

Michael Zimmerman, senior vice president for investor relations for Milwaukee-based mortgage insurer MGIC Investment Corp., said that since about 2009, credit scores for mortgage borrowers have been “significantly higher” than before the recession and housing crash. Mortgage insurers cover part of the cost for lenders if a loan isn’t repaid.

“Stronger credit profiles since 2009, rising home values pretty much across the country, and a comparatively strong labor market with increasing wages just put borrowers in a better position to maintain the payment,”  ZImmerman said. “And if they do get into trouble, they can sell the property.”


Illinois Tax Increase Welcome in Wisconsin

Many Illinois lawmakers say that following the state’s 32 percent income tax increase, neighboring states will try and recruit Illinois businesses and taxpayers. But one Illinois lawmaker on the Wisconsin border says recruiting won’t even be necessary.

State Rep. Joe Sosnowski, R-Rockford, said communities in southern Wisconsin don’t need billboards or ad campaigns to lure Illinois taxpayers and businesses over the border.

“Wisconsin doesn’t really have to [recruit], we do a good enough of shooting ourselves in the foot,” Sosnowski said.

Higher taxes, such as last week’s 32 percent state income tax increase, are driving people out of Illinois.

And he’s right. Illinois’ population has declined each of the past three years, and it lost more people than any other state in the U.S. between July 2015 and July 2016, according to the U.S. Census. At the same time, Chicago lost more people last year than any other major U.S. city.

Southern Wisconsin State Rep. Todd Novak said lower taxes and more job opportunities are driving Illinoisans to Wisconsin.

“I am seeing an influx of people who are looking to move into Wisconsin,” Novak said. “Out here we have one of the lowest unemployment rates in Wisconsin. So you can easily find a job, and a pretty good-paying job.”

The unemployment rate in Winnebago County, Illinois, Sosnowski’s district, is 6.4 percent. Lafayette County, Wisconsin, Novak’s district, has a 2.2 percent jobless rate.

Novak says there are 100,000 jobs open in Wisconsin. He says Illinois’ economic refugees are welcome to apply.

Homeowners Don’t Have to Let Assessors In to Challenge Tax

Wisconsin homeowners don’t have to let assessors inside as a condition for challenging their property taxes, the state Supreme Court ruled Friday.

The court said in a 5-2 decision that such visits amount to unreasonable searches and that assessors need to get warrants if they can’t obtain the homeowners’ consent.

The ruling involves Vincent Milewski and Morganne MacDonald, who own a home in the Town of Dover in Racine County. According to court documents, they tried to challenge their 2013 property tax assessment in front of a town review board.

The board refused to hear the challenge because Milewski and MacDonald wouldn’t let an assessor inside their home. Under state law, people who refuse an assessor’s request to view their property can’t contest the assessment to local review boards.

Milewski and MacDonald sued. A judge dismissed the lawsuit and a state appellate court upheld his decision. The state Supreme Court reversed that ruling.

Writing for the majority, Justice Dan Kelly said Milewski and MacDonald were faced with a difficult decision: relinquish their constitutional right to be free of unreasonable searches so they could challenge the assessment or exercise their rights and forfeit their ability to contest the assessment.

Kelly said an assessors’ visit without consent is a search as defined in the U.S. Constitution’s Fourth Amendment, which protects people from unreasonable searches and seizures. The town failed to show how assessing taxes is such a special need that the Fourth Amendment doesn’t apply, which means assessors must obtain search warrants to enter without consent, he wrote. Assessors can use other means to gather information about the property, he said. Milewski and MacDonald can challenge the assessment without an interior inspection, he concluded.

He said the law isn’t unconstitutional on its face. But it can’t be read to require a property viewing that violates the Fourth Amendment in order to allow a challenge, he wrote.

The town’s attorney, Jason Gehring, didn’t immediately respond to a voicemail seeking comment.

The court’s conservative-leaning majority handed down the decision. Shirley Abrahamson and Ann Walsh Bradley, the only two liberal-leaning justices, dissented. Abrahamson wrote in a joint dissent with Bradley that such choices are common in the law and are seen as constitutionally valid.

The Wisconsin Institute for Law and Liberty, a conservative law firm that represents Milewski and MacDonald, issued a statement calling the decision “a victory for private property rights.”

The Wisconsin Realtors Association, the state Department of Justice and the Institute of Justice, a law firm specializing in constitutional protections, all filed friend-of-the-court briefs urging the Supreme Court to strike down the law.

Governor Recommends Cutting Road Borrowing as Stalemate Continues

Seeking to break an impasse on the state budget, Gov. Scott Walker has proposed reducing borrowing for transportation projects while sticking to his pledge not to raise gas taxes or vehicle fees. The plan gained no immediate traction and his fellow Republicans who control the Legislature signaled they remain far apart on highway funding — the biggest reason for the budget stalemate.

Walker sent his letter Wednesday to Assembly Speaker Robin Vos (R-Rochester) and Senate Majority Leader Scott Fitzgerald (R-Juneau) and made it public Thursday.

“We can pass a budget that provides meaningful increases to local governments to improve roads and bridges — as well as add significant investments in safety and maintenance and highway rehabilitation —  all without raising the gas tax or vehicle fee,” Walker wrote.

The governor’s original transportation plan would delay work on some projects, including the north leg of the Zoo Interchange in Milwaukee County and I-94 south of Milwaukee. But he said his new plan would not result in further delays because of projected savings and tax collections that were better than expected.

Assembly Republicans want to find new money for roads by raising gasoline taxes or other fees. Walker and Senate Republicans are opposed to that.

Underlining the disconnect between the two sides, Fitzgerald emerged Thursday from a meeting with fellow GOP senators to say his caucus won’t support raising new money for roads

“No gas tax, no increase in fees,” he said when asked to sum up the position of Senate Republicans.  “In our caucus … there certainly is the idea we’re not going to support any new revenue because we believe there’s enough revenue in the system and believe that (the Department of Transportation) needs to be significantly reformed,” he said. “We think there’s some money that’s in DOT that’s currently being wasted.”

Senate Republicans want to borrow $750 million for roads over the next two years, a modest decrease from their previous positions of seeking $850 million in highway loans.

Senate Republicans want to prevent further delays on the Zoo Interchange and I-94 south of Milwaukee, Fitzgerald said. They also want to begin work on the east-west portion of I-94 between the Marquette and Zoo interchanges — an idea Walker rejected this spring.

Rep. John Nygren (R-Marinette), the co-chairman of the Legislature’s budget committee, praised Walker’s letter as a good first step but offered little reason to think it would solve the stalemate on its own.

“It’s good that the governor’s engaged and looking for a solution,” Nygren said.

Meanwhile, the DOT is seeking $341 million through a special federal highway program — more than 10 times as much as it has received through that program in recent years.

When states don’t use all their federal aid, other states can compete for what’s left over. Wisconsin has received $34 million annually on average through that program in the last five years, according to the Legislature’s nonpartisan budget office.

During that time, the state applied for between $30 million and $137 million annually. But the most the state has ever gotten since 2012 is $40 million, according to the Legislative Fiscal Bureau.

Nygren said that Assembly Republicans would be willing to provide more state matching dollars to capture such additional federal aid for highway projects. But he was skeptical that Wisconsin would see a huge jump in federal money for roads.

“Passing a budget based on (federal money) being there — I’m not sure we’re there,” he said.


Wisconsin’s Cap on Medical Malpractice Awards Unconstitutional, Courts Rules

Ruling that Wisconsin’s $750,000 cap on medical malpractice claims is unconstitutional, an appellate court said Wednesday that a Milwaukee woman who lost all four limbs should collect the $16.5 million for pain and suffering awarded to her and her husband.

“We conclude that the statutory cap on non-economic damages is unconstitutional on its face,” Judge Joan Kessler wrote in the 19-page unanimous opinion by the three-judge First District Court of Appeals panel.

Kessler added that “Wisconsin’s cap on non-economic medical malpractice damages always reduces non-economic damages only for the class of the most severely injured victims who have been awarded damages exceeding the cap, yet always allows full damages to the less severely injured malpractice victims.”

Wisconsin law caps non-economic damages in medical malpractice cases at $750,000 but does not put a ceiling on the amount that could be awarded for economic damages, such as medical costs, which in Mayo’s case was awarded at $8.8 million. That award and $750,000 has already been paid by the $1.3 billion state-managed medical malpractice insurance fund.

The case is expected to be appealed to the state Supreme Court.

Wisconsin has had various ceilings on medical malpractice damages since 1986. A $350,000 cap enacted in 1995 was struck down by the state Supreme Court in 2005 as being arbitrary and violating the equal protection provision of the state constitution. It was replaced a year later by the $750,000 ceiling.

Republican Lawmakers Want to Change the Way Wisconsin Taxes its Residents

With its largest Republican majority in decades — momentum is growing behind what could amount to more significant changes to the way Wisconsin taxes its residents, including an effort to move the state toward a flat income tax and a proposal to eliminate the personal property tax.

Todd Berry, a longtime tax policy analyst and president of the Wisconsin Taxpayers Alliance, is “not inclined to predict” any major changes to the way the state raises revenue. A proposal to repeal the personal property tax would require an adjustment in priorities. Moving to a flat tax requires more support than currently exists. Even a significant change in transportation funding — the largest source of discord among lawmakers and the governor during the budget process this year — is unlikely, he said.

What is significant in the current climate, Berry said, is that so much of the push for major tax reform is coming from lawmakers, particularly from a group of trained accountants known as the “CPA Caucus.”

The four-member group is composed of three certified public accountants — Sen. Chris Kapenga, R-Delafield, Sen. Howard Marklein, R-Spring Green, and Rep. Dale Kooyenga, R-Brookfield. Rep. John Macco, R-Ledgeview, is a financial adviser. Marklein and Kooyenga both sit on the Legislature’s Joint Finance Committee, which reviews, refines and rewrites the state budget after it is introduced by the governor.

The accountant-lawmakers have led the charge on tax policy changes large and small: eliminating 18 tax credits in three years, reducing the number of income tax brackets, reducing the number of people required to pay the alternative minimum tax and reducing the so-called “marriage penalty.”

Kooyenga, a U.S. Army Reservist and potential U.S. Senate candidate with a penchant for quoting the Broadway musical “Hamilton,” said his goal is to pull back on efforts made by politicians to “move levers” and control behavior through tax policy.

“I’m a firm believer that there should be less power in Madison and less power in D.C. And one of the ways that even Republicans have tried to assert their power is by creating mechanisms in the tax code to try to get people to do what they want to do,” Kooyenga said. “And I think that people should decide what they want to do and try to minimize the government trying to penalize or reward certain actions.”

The personal property tax, implemented in the early days of Wisconsin, when most of its governmental revenue came from property taxes, began as a tax on items like livestock, furniture, jewelry and vehicles. Its property tax counterpart — real property — covers land and buildings.

The list of exemptions to the personal property tax has grown to include, among other items, clothing, personal items, stocks and bonds, vehicles, farm and manufacturing machinery and business computers. The tax now applies, in general, to furniture, equipment, machinery and watercraft owned by businesses.

According to an analysis by the Wisconsin Taxpayers Alliance, personal property has accounted for between 2.2 and 2.6 percent of the state’s property tax base since 2005. Compared to the 40 other states with some form of a personal property tax, Wisconsin taxes less than most, but more than most of its neighbors.

While the personal property tax brings in a relatively small sum compared to other taxes, the state Department of Revenue estimates eliminating it would result in a loss of about $261 million per year in funding for schools and local governments. That’s based on a proposal introduced in April by Sen. Duey Stroebel, R-Saukville, and Rep. Bob Kulp, R-Stratford.

Depending on the proposal, the money would either be gone or accounted for with an increase to real property taxes — paid by homeowners and business owners, rather than only business owners, as it is currently.

Kooyenga said in an interview that his plan would reclassify some personal property items as real property, putting the fiscal impact below $240 million. It would also eliminate and reduce some tax credits.

“We would be replacing (the revenue),” Kooyenga said.