News of the Day

Local Governments Still Face Deficits after Shared Revenue Deal

State lawmakers passed a sweeping, bipartisan agreement to send more money to local governments last year, but many Wisconsin municipalities are still facing budget challenges.

The shared revenue deal allowed Milwaukee County to raise its sales tax, which was expected to generate millions in revenue. But receipts have been lower than projected. Joe Lamers, director of the county’s office of strategy, budget and performance, said the county has collected close to $10 million less than anticipated this year.

Eau Claire County Executive Kathryn Schauf says her county currently has a budget shortfall of about $5.2 million.

Counties are mostly funded through state aid and property taxes, neither of which have kept pace with inflation. Most counties also have a sales tax, which Schauf said has value as a source of revenue. “It’s also very volatile… and so it’s also a revenue source that we don’t really have a lot of control over,” she said.

Jason Stein, president of the Wisconsin Policy Forum, said the property tax rate for municipalities has been tied to the rate of net new construction since 2011.

“The statewide average for net new construction for municipalities in Wisconsin has never risen above 1.7 percent since the Great Recession,” Stein said, including recent years when inflation has been as high as 8 percent.

 

 

EIA Expects Mixed Bag for Energy Prices in 2024

The U.S. Energy Information Administration (EIA) expects that U.S. residential electricity prices will increase by about 1% in 2024, the slowest rate of year-over-year growth since 2020. Natural gas prices have been falling since late 2023, and those lower prices are now being factored into retail electricity rates. Natural gas provides the largest share of U.S. electricity generation.

Conversely, EIA forecasts that the Brent crude oil price could increase to about $87 per barrel by the end of the year, according to the agency’s August Short-Term Energy Outlook (STEO). The Brent crude oil price is currently below $80 per barrel. EIA expects that continued oil production cuts from OPEC+ will reduce global oil inventories through the first quarter of 2025, which is likely to push oil prices up.

“The good news from a consumer perspective is that even though we expect oil prices to increase, we expect gasoline prices through this year and next year to remain lower than they were in 2023,” said EIA Administrator Joe DeCarolis. “U.S. motorists are using less gasoline than they did before the pandemic, and we expect that to help keep gasoline prices from climbing with oil prices.”

The full August 2024 STEO is available on the EIA website.

Wisconsin Launches Federally-Funded Home Energy Rebates Program

Last Friday, Governor Evers joined U.S. Department of Energy (DOE) Secretary Jennifer Granholm and Public Service Commission of Wisconsin (PSC) Chairperson Summer Strand in Milwaukee to announce the launch of the Home Efficiency Rebate (HOMES) Program. Wisconsin is the first state in the nation to launch the HOMES Program to deliver rebates to households undertaking whole-home, energy-saving improvements under the new program.

Under the HOMES Program , $74.8 million will be available to support whole-home energy efficiency improvements, including insulation, air sealing, heating, ventilation, and air conditioning upgrades. All Wisconsin households are eligible for HOMES, including multifamily buildings. Beginning August 1, 2024, interested households can verify eligibility status and locate a registered contractor. By early September, households will be able to submit rebate requests through the online portal on the Focus on Energy website. More information about HOMES rebates and eligibility is available here.

According to DOE, residents will first complete a home energy assessment provided by a licensed energy auditor to determine the home’s upgrade needs and establish the estimated energy savings each upgrade would provide. Low-income households are eligible for a rebate to help cover the cost of the home energy assessment. Rebate amounts are based on household income and the amount of estimated energy savings.

For single-family homes, rebates will range between:

  • Up to $10,000 for those making less than 80 percent of their area median income (AMI).
  • Up to $4,000 for those making between 80 percent to 150 percent AMI.
  • Up to $3,000 for those making at or above 150 percent AMI.

DOE states that multifamily properties are also eligible. Rental units with low-income tenants are eligible for up to $10,000 in rebates, depending on estimated energy reductions.

U.S. Job Growth Slows in July

The Labor Department reported Friday that employers added 114,000 jobs in July, and the unemployment rate inched higher to 4.3%. It marked the highest level for the jobless rate since October 2021.’

Health care continued to lead the way in job creation, onboarding 55,000 new workers in July. Other sectors showing notable growth included construction (25,000), the government (17,000) and transportation and warehousing (14,000).  However, there were some notable job losses last month. Information employment declined by 20,000 while financial activities shed 4,000 employees.

The report also showed modest revisions. Job gains for June were revised down by a total of 27,000 jobs to 179,000, the government said, while May’s gain also came in slightly lower at 216,000 jobs.

“The latest snapshot of the labor market is consistent with a slowdown, not necessarily a recession,” said Jeffrey Roach, chief economist at LPL Financial. “However, early warning signs suggest further weakness.”

The weaker-than-expected data also raises questions about whether the Federal Reserve has waited too long to cut interest rates. Policymakers voted at the conclusion of their two-day meeting on Wednesday to hold rates steady at a 23-year high, but signaled that they could start loosening policy as soon as September.

Investors are now increasingly betting on the odds of a 50-basis point cut in September amid signs that job growth is deteriorating.

 

 

Department of Workforce Development: Insurance Premiums for Worker’s Compensation Continue to Decline

Wisconsin companies on average will pay 10.5% less in worker’s compensation insurance rates starting October 1, 2024, saving businesses around the state roughly $206 million on policies over the coming year, the Wisconsin Department of Workforce Development (DWD) announced today with the Wisconsin Office of the Commissioner of Insurance (OCI).

The lower rates reflect Wisconsin employers’ attention to workplace safety for the benefit of workers and employers alike. The 2024 rate decrease, approved by OCI, marks the ninth year in a row worker’s compensation insurance premiums have declined in Wisconsin. The actual rates that inform premium amounts vary by employers based on factors such as injury risk exposure.

“The continued decreases in worker’s compensation rates reflect the workplace safety practices that support a strong workforce in our state,” said Insurance Commissioner Nathan Houdek. “Employers doing business in Wisconsin can count on our competitive insurance marketplace for affordable, high-quality coverage for their business and employees.”

Worker’s compensation insurance rates are adjusted annually by a committee of actuaries from members of the Wisconsin Compensation Rating Bureau. This independent body examines and selects the methodology and trends that produce the proposed rate adjustment, which is then reviewed and approved by the Wisconsin Commissioner of Insurance. While the overall rate level will decrease by 10.5%, the impact to policyholders will vary based on specific circumstances.

 

Spending Federal Funds in Wisconsin: What Voters Need to Know About the August 13 Referendums

A pair of questions on Wisconsin’s August 13 ballot would give state legislators more control over how federal money is spent in the state.

If approved by a majority of voters statewide, the Republican-backed proposals would amend the Wisconsin Constitution to limit the governor’s power to spend federal funds unilaterally in specific instances. The proposals would work in tandem. One would require legislative approval before Wisconsin’s governor could expend federal money earmarked for the state. The other would bar future Legislatures from giving that power away.

Question 1 on statewide ballots reads, “Shall section 35 (1) of article IV of the constitution be created to provide that the legislature may not delegate its sole power to determine how moneys shall be appropriated?”

Question 2 asks voters, “Shall section 35 (2) of article IV of the constitution be created to prohibit the governor from allocating any federal moneys the governor accepts on behalf of the state without the approval of the legislature by joint resolution or as provided by legislative rule?”

Wisconsin’s Constitution gives lawmakers control over the state’s purse strings. But there are exceptions. Under state law, a governor can accept and distribute federal money without the Legislature’s involvement, as long as those allocations comply with the federal laws which made the money available.

Wisconsin’s governor has held that discretion over federal funding since the 1930s, according to an analysis from the nonpartisan Legislative Reference Bureau.

The proposed changes to the state constitution would strip Wisconsin’s governor of that unilateral authority by requiring legislative sign-off.

Wisconsin is one of 40 states that allow their executive branch to spend “unanticipated” federal funds without special legislative approval, according to a 2022 Legislative Reference Bureau analysis. But nearly three-quarters of those states have some type of restriction on that authority, according to the LRB, which cited the National Association of State Budget Officers.

New Report Finds Housing Permitting in Wisconsin Lagging Behind Pre-2008 Levels

new report from the Wisconsin Policy Forum finds that while permitting rates for building new housing have increased since the onset of the COVID-19 pandemic, they still trail permitting levels in the early 2000s.

Mark Sommerhauser, policy researcher and communications director for the Wisconsin Policy Forum, told WPR’s “Wisconsin Today” that building levels stayed relatively low for years after the 2008 financial collapse.

The forum’s report looked at the rates of both single and multifamily housing permitting statewide. They found that the state’s peak permit activity was between 2002 and 2004. Over the past three years, both types of permitting were down, with single-family permitting rates being nearly half of 2002-2004 levels.

Since 2021, data show a stark divergence in the types of housing projects that are receiving permits.

“There’s just very little question that statewide, in virtually every metro area, we’ve seen a really significant uptick in multifamily housing permitting,” Sommerhauser said. “What we have not necessarily seen is a corresponding increase in single-family (permitting).”

Single-family permitting increased by around 21 percent in recent years. But that’s compared to a greater-than 60 percent increase in multifamily permitting.

Sommerhauser said certain factors like the cost of building materials and mortgage interest rates are out of the control of state or local policymakers. At the state level, he said policymakers can focus on tax cuts or regulatory changes to make construction cheaper.

 

Governor’s AI Task Force Issues Action Plan

The Governor’s Task Force on Workforce and Artificial Intelligence has issued its final action plan, covering a wide array of policy proposals across education, government, workforce and economic development.

Within the education section of the report, the task force is recommending: new investments in AI research at the Universities of Wisconsin; integrating AI into curriculum development; supporting faculty recruitment and retention in AI fields at UW schools and in the Wisconsin Technical College System; offering new “stackable” credentials in AI that build on prior learning, and more.

The task force recommends efforts to modernize state government infrastructure with AI, as well as considering its deployment for energy management, traffic control and wastewater treatment. It also suggests the creation of a unit within the Department of Administration to create an “enterprise-wide data governance framework” to ensure proper use of data, particularly in AI applications.

On the workforce development side, recommendations include: expanding apprenticeship programs to incorporate AI; providing training to workers displaced by AI adoption; funding employer-led AI training programs for their workers; creating an AI “layoff aversion program” and an AI workforce talent pipeline; launching a digital literacy campaign and more.

Economic development policy proposals in the report include offering help to small businesses looking to use AI, creating “AI Innovation Hubs” for startups using the technology in manufacturing and agriculture, and holding forums to lay out an “AI roadmap” for companies in the state.

U.S. Economy Grew at a 2.8% Pace in the Second Quarter

Economic activity in the U.S. was considerably stronger than expected during the second quarter, according to an initial estimate Thursday from the Commerce Department.

Real gross domestic product, a measure of all the goods and services produced during the April-through-June period, increased at a 2.8% annualized pace adjusted for seasonality and inflation. Economists surveyed by Dow Jones had been looking for growth of 2.1% following a 1.4% rise in the first quarter.

Consumer spending helped propel the growth number higher, as did contributions from private inventory investment and nonresidential fixed investment.

Personal consumption expenditures, the main proxy in the Bureau of Economic Analysis report for consumer activity, increased 2.3% for the quarter, up from the 1.5% acceleration in Q1. Both services and goods spending saw solid increases for the quarter.

On the downside, imports, which subtract from GDP, jumped 6.9%, the biggest quarterly rise since Q1 of 2022.

UW-Madison Fusion Energy Project Hits ‘Major Milestone’ by Producing Plasma

For the first time, a fusion device at the University of Wisconsin in Madison has generated plasma, inching one step closer toward using nuclear fusion as a a new source of carbon-free energy.

The university’s physicists and engineers have been building and testing the device at a lab in Stoughton for the last four years, which is referred to as the Wisconsin HTS Axisymmetric Mirror or WHAM. The magnetic mirror device became operational on July 15. Researchers worldwide have been working for decades to harness energy from nuclear fusion reactions that power the sun and the stars. That reaction relies on heated plasma, which is a gas of hot ions and free-moving electrons.

Cary Forest, a UW-Madison physics professor, said generating plasma is an exciting step.

Until now, nuclear power has come from fission reactors that split atoms. Fusion reactors would join atoms together.

Unlike current nuclear plants, Forest said fusion would not produce radioactive waste, adding it’s also safer. Forest said the university lab’s success in generating plasma is an important development toward harnessing fusion as a new carbon-free energy source.

“In addition to wind and solar, we’re going to need these hard, intense, always-on systems for making things and heating houses in the dead of winter,” Forest said.  “There really isn’t an alternative to either this or something like nuclear fission if we really want to get rid of carbon in our energy supply. It’s fission or fusion.”