We have completed our preliminary analysis of Governor Walker's 2015-2017 state budget recommendations. This review was based upon publicly available information from the Department of Administration (DOA), the Legislative Fiscal Bureau as well as testimony by Cabinet Secretaries during the state agency briefings before the Joint Finance Committee.
Governor Walker's budget plan addresses several priority issues of interest to WIB and its members. Outlined below is a brief summary of these initiatives.
Fiscal Policy Priorities
1. Property Tax Relief – School Levy Tax Credit Increase
The school levy credit is one of the three tax credit programs where credits are paid to municipalities and shown on property tax bills. School levy tax credits are distributed based on each municipality's share of statewide levies for school purposes.
The Governor's 2015-2017 state budget plan recommends increasing the distribution amount for the school levy tax credit by $105,600,000 beginning with property taxes levied in December, 2015. WIB supports the Governor's recommendation. Property taxes in Wisconsin are among the highest in the country and nearly 24% above the national average according to the most recent data from the United States Census Bureau. Although the amount of property tax relief is modest, it is relief nonetheless.
WIB favors broad-based tax relief by that we mean tax relief that is provided to the most taxpayers. The School Levy Tax Credit is a broad-based tax relief mechanism whereby all Wisconsin property owners benefit.
2. An Adequate, Equitable and Sustainable Transportation Funding Plan
Wisconsin's transportation network includes roads (114,800 miles), bridges (13,700), rail lines (3,600 miles), airports (131) and commercial ports (29). The cost of building and maintaining this integrated network exceeds $2.5 billion annually. Ongoing construction, repair and maintenance costs continue to rise but the revenues necessary to fund needed transportation projects have not.
Going into the next two-year budget cycle, the Wisconsin Department of Transportation faces a $974 million deficit. The perfect storm is now at our doorstep. The State of Wisconsin cannot borrow its way out of the problem, more aid for Washington is unrealistic and the primary revenue source to pay for transportation infrastructure improvements is not generating the necessary funds.
The Governor's 2015-2017 state budget plan recommends $1.3 billion in bonding for state highway construction projects. State aid for state highway maintenance and local transportation projects and services is held at current levels. WIB has concerns with the Governor's transportation funding recommendations. In particular, we are concerned with the proposed borrowing. It is the highest in 20 years. Transportation-related debt service is projected to reach 25% of state transportation revenues if the Governor's plan is approved. That's an unsustainable level of borrowing.
WIB is a member of the Transportation Investment Coalition (TIC) – a coalition that includes private sector employers, local units of government, chambers of commerce and economic development organizations. Along with our TIC partners, we are asking lawmakers to come up with a more adequate, equitable and sustainable transportation funding plan.
3. Increased Funding for Broadband Expansion Grants
Two years ago, lawmakers created the Broadband Expansion Grant Program administered by the Public Service Commission (PSC). This program provides reimbursement for equipment and construction expenses incurred to extend or improve broadband telecommunications service in underserved areas of the state.
The Governor's plan provides $6.0 million in new funding for Broadband Expansion Grants and creates an ongoing funding source for these grants. WIB supports the Governor's recommendation. Access to high-speed Internet service is a “must have” tool of commerce.
Unfortunately, for many small, independent businesses in northern Wisconsin (north of Highway 64) and western Wisconsin (Platteville northeast to Eau Claire), there are very few broadband service providers. Furthermore, we view investments in infrastructure as a wise use of taxpayer dollars.
Non-Fiscal Policy Priorities
1. Increased Penalties for Unemployment Insurance (UI) Fraud
State law imposes a civil penalty against UI claimants who commit fraud in connection with state or federal UI programs. The penalty is 15% of the amount of UI benefits obtained by fraud. State law also dictates that any person who knowingly makes a false statement or representation to obtain UI benefit payments may be fined not less than $100 and not more than $500 or imprisoned for not more than 90 days, or both. Each such false statement or representation constitutes a separate offense.
The Governor's 2015-2017 state budget plan recommends increasing the monetary penalty from 15% to 40% of UI benefits erroneously paid to a UI claimant as a result of one or more acts of concealment. Furthermore, his plan recommends increasing the criminal penalties for a person who knowingly makes a false statement or representation to obtain any UI benefit payment. The graduated fines and criminal penalties are based on the value of fraudulently UI benefits obtained.
WIB supports the Governor's recommendations. UI benefits are provided to workers who have lost their job through no fault of their own. To preserve and protect UI benefits for honest, law-abiding workers, stiffer penalties should be imposed on those individuals who seek to defraud the program. A 2013 study by the St. Louis Federal Reserve found that in 2011 $108 billion in UI benefits were paid nationally, of which $3.3 billion was obtained fraudulently. The largest share of fraudulently obtained benefits was attributed to individuals who continued to claim UI benefits after returning to work.
2. Suitable Work Definition for UI Claimants
Under current state law, a UI claimant may refuse work for good cause and maintain eligibility for UI benefits if the new work involved wages, hours, or other conditions that were significantly lower or less favorable than similar work in the locality, and the UI claimant had not had reasonable opportunity (up to six weeks) to find a new job substantially in line with the individual's prior job.
The Governor's 2015-2017 state budget plan recommends that the Wisconsin Department of Workforce Development (DWD) define, by administrative rule, what constitutes suitable work for UI claimants, including to specify different levels of suitable work based upon the number of weeks that a UI claimant has received benefits in a given benefit year.
WIB supports the Governor's budget recommendation. Over the past few years, state lawmakers have taken steps to provide greater clarity to the enforcement of existing UI laws and regulations. This is another step in the right direction.
3. Drug Testing for UI Benefits
States may test UI claimants who were terminated from employment because of the use of controlled substances. Under Wisconsin law, a UI claimant who is terminated for the use of controlled substances may be disqualified for UI benefits if the use of controlled substances is found to be misconduct. States may test a UI claimant for whom suitable work is only available in an occupation that regularly conducts drug testing. The United States Department of Labor will determine, by regulations that are not yet final, which occupations regularly conduct drug testing.
The Governor's 2015-2017 state budget plan recommends that DWD establish a program to require certain UI claimants to submit to tests for the unlawful use of controlled substances. Furthermore, the Governor's budget plan allows employers to voluntarily submit to the DWD the results of a test for controlled substances that was conducted as a pre-employment screening. If the prospective employee fails the drug test or refuses to take the drug test, the prospective employee may be ineligible for UI benefits.
WIB supports the Governor's budget recommendations. In order to receive UI benefits, a claimant must be ready and able to work. That's not possible when they are abusing drugs. Drug use in the workplace is inherently dangerous. An employee who is under the influence of a controlled substance can harm themselves, other employees as well as customers and clients. Responsible employers who want to minimize or mitigate this risk can take advantage of these programs to create and promote a safer workplace.
1. Office of Lean Government
In the private sector, companies use lean manufacturing to reduce costs by streamlining and\or eliminating those activities and processes that do not add to the value of the products and services sold. Executive Order 66, signed by Governor Scott Walker in July 2012, requires each of Wisconsin's cabinet agencies to participate in a Lean Government Initiative to improve customer satisfaction, reduce the cost of government, improve the working environments for our state employees and change government culture.
The Governor's 2015-2017 state budget plan recommends the creation of an Office of Lean Government to establish and administer programs for state agencies “to increase the value of goods and services that state agencies provide with the fewest possible resources.” The Office would also conduct research and analysis and develop policy and program proposals related to efficiency and continuous improvement practices in state government.
WIB supports the Governor's budget recommendations to create an Office of Lean Government. In January 2012, the Governor's Commission on Waste Fraud and Abuse recommended the creation of a Lean Enterprise Solutions Unit called the Center for Excellence within the Department of Administration staffed by trained Lean consultant(s). The Governor's proposal is wholly consistent with the recommendation of the Governor's Commission on Waste Fraud and Abuse. In fiscal year 2013, the Wisconsin Department of Transportation (DOT) saved more than $800,000 pursuant to the directives set forth in Executive Order 66. The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) utilized Lean Government principles to improve the processing of food safety lab samples which has resulted in better customer service and additional savings.