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Jan. 31, 2003

Last night, Gov. Doyle laid out his general priorities for the upcoming session in his first state of the state address. As noted below, his clear focus is on balancing the budget with no tax increases. The Administration has, to date, held things close to the vest on how they expect to meet that formidable, $3.2 billion challenge. We still expect the 2003-05 Biennial Budget to be unveiled by the Governor on or about Feb. 18.

The pending 2003-05 budget challenges are being compounded with new projections showing a $452 million shortfall for the current fiscal year. In response, Gov. Doyle called a special session and presented the Legislature with a $161 million down payment in the form of Special Session Senate Bill 1. Among other targets, the bill, introduced yesterday, cuts the transportation fund by over $22 million. Republican legislative leaders, in turn, formally asked that the Governor submit specifics on how he intends to cover the remaining $291 million shortfall.

While the budget will dominate legislators’ time and efforts over the next months, it hasn’t stopped them from introducing and moving other legislation. Rep. Gundrum’s “pay-to-play” bill (AB 1) and Rep. Jeskewitz’s financial institutions modernization bill (AB 2) both passed the Assembly on Tuesday, while Sen. Cowles’ utility security bill (SB 8) passed the Senate on Thursday. The Senate also found time to confirm 66 Doyle appointments.

Wisconsin Politics

Doyle’s First State of the State Draws Bipartisan Praise
Gov. Doyle’s Jan. 30 State of the State address mixed conservative fiscal policies with traditional Democratic values. The reactions included broad, bipartisan support from the State Legislature, with the Republicans cheering his no-tax pledge, and Democrats stressing his emphasis on education, health care, and environment. With a looming $3.2 billion deficit, Doyle has little early opportunity to launch new policy initiatives, but instead touched on general priorities.

The highlights of the 2003 State of the State Address include:

• Taxes – “We should not – we must not – and I will not – raise taxes. Wisconsin’s problem is not that we tax tool little. It is that we spend too much.”
• Economic Development – Tying in his no-tax pledge, the Governor declared “there is probably nothing we can do to help economic growth more than to balance this budget without raising taxes.” He called on government, labor, and business to work together to “craft and implement a single, focused strategic plan to grow Wisconsin’s economy.”
• Education – The Governor highlighted the gap in funding between the richest and poorest schools and the need to reform the way Wisconsin funds education. He announced the formation of a Governor’s Task Force on Education Funding, suggesting education-funding reform will not be included in the Biennial Budget bill.
• Health Care – To address the rising cost of health care, Doyle proposed the development of a Health Insurance Purchasing Pool to allow small businesses and farmers to use state government buying power. A related initiative is aimed at finding ways to pool state prescription drug purchases with local government, and possibly other Midwestern states.
• Campaign Finance – The Governor challenged the Legislature to enact campaign-finance reform this session, and to pass the Impartial Justice Bill relating to financing Supreme Court races.

Overhaul at PSC Taking Place
Major changes were made at the Public Service Commission this week. Dave Gilles, formerly an Assistant AG at the Dept. of Justice has replaced Ed Marion as General Counsel. Marion will continue to serve at the PSC as a staff attorney. PSC Chair Burnie Bridge also asked for the resignations from the following division administrators: Kevin Cronin, Gas Division; David Albino, Telecommunications; Shiva Sathasivam, Administrative Services; and, Georgia Mulcahy, Water, Compliance and Consumer Affairs. The only division administrator who will stay on and continue to head up the Electric Division is Bob Norcross.

Other Appointments Noted
More appointments were made this week in the Departments of Corrections, Tourism, Commerce, and Agriculture, Trade & Consumer Protections (DATCP). They are:

• Cindy O’Donnell, Deputy Secretary, Dept. of Corrections;
• Genyne Edwards, Deputy Secretary, Dept. of Tourism;
• David Storey, Deputy Secretary, Dept. of Commerce;
• Aaron Olver, Executive Assistant, Dept. of Commerce;
• Judy Ziewacz, Deputy Secretary DATCP; and,
• Martin Henert, Executive Assistant, DATCP.

Agreement Reached on Caucus Legal Fees
Attorney General Peg Lautenschlager and legislative leaders reached an agreement on the payment of legal fees relating to the caucus investigation. In one of his first official actions as Governor, Doyle gave Lautenschlager authorization to take legal action to stop the payments of any legal fees and expenses for state employees involved in the ongoing caucus investigation.

In a Jan. 31 Release, the Attorney General noted the following three points in the agreement with the Senate and Assembly leadership:

• Any person who receives payment of attorney fees in relation to a criminal investigation will be required to reimburse the Legislature if the person is ultimately charged and convicted of a crime. 
• The Legislature will cease payments upon a person being charged with a crime. If the person is ultimately exonerated, the person may request reimbursement after the fact.
• Any person who receives up-front payment of attorney fees must sign an agreement to pay back the fees in the event he or she is charged and convicted of a crime.

Lautenschlager also sent a letter to the District Attorneys involved in the caucus investigation asking for their assistance in recovering legal fees in the event that a person is convicted of crimes related to the investigation.

“Pay-to-Play” Bill Passes Assembly
On Jan. 28, the Assembly unanimously approved AB-1, Rep. Mark Gundrum’s legislation that would make it illegal to directly exchange official votes or actions for campaign contributions. The bill is an attempt to more directly address the so-called “pay-to-play” practices that surfaced as part of the ongoing caucus investigations.

Policy Developments 

Doyle Calls Special Session to Fix Current Deficit
Gov. Jim Doyle called a Special Session to address Wisconsin’s current fiscal year deficit, which is pegged at $452 million. According to his announcement last week, this number includes a deficit of $373 million, and additional shortfalls in medical assistance and BadgerCare of $64 million and an anticipated $15 million shortfall in the Department of Corrections.

The Special Session order calls for the consideration of legislation to decrease appropriations, lapse funds from certain program revenue appropriation accounts to the general fund, transfer certain segregated funds to the general fund, increase funding for out-of-state inmate contracts, increase funding for MA and BadgerCare programs and exempt the actions of the Legislature from the required general fund structural balance and the required general fund statutory balance.

Special Session Senate Bill 1 (SS SB 1) introduced by the Governor on Jan. 30, makes cuts to the transportation fund (over $22 million), recycling fund ($3 million), universal service fund ($3 million), utility public benefits fund ($4.7 million), Wisconsin development fund ($7 million), and provides an additional $64 million for Medical Assistance in FY 02-03 and $9.5 million for BadgerCare. Interest groups, such as the Transportation Development Association, have begun efforts to oppose cuts to the already strapped transportation budget. The bill will first go to the Joint Finance Committee.

In a Jan. 27 memorandum, DOA Secretary Marotta directed state agencies to immediately start planning to implement the reduction and lapses proposed in the FY03 Deficit Reduction Bill. He also highlighted the need to “synchronize” these budget cuts with the reductions to be included in the Governor’s 2003-05 Biennial Budget Bill, which has to plug a $3.2 billion budget hole.

Republican Response; Where’s the Beef?
In a shot across the bow, the Republican legislative leaders sent a Jan. 30 letter to the Governor that highlighted provisions in Wisconsin law that requires the Governor to correct any budget imbalance in excess of one half of one percent in any fiscal year. (See, Legislative Council Jan. 29 Memo on the related statutory provisions.) According to letter, the law requires the Governor to submit recommendations for an additional $291 million correction (on top of the $161 million in SS SB 1) to plug the $452 million hole in the current budget.

It is expected that floor action on the budget adjustment bill will not occur until at least Feb. 19, the day after the Governor unveils his 2003-05 Biennial Budget Bill. Regardless, Joint Finance should begin work, including conducting hearings, on the budget adjustment bill in the near future.

State & Local Government Task Force Submits Final Recommendations
The State & Local Government Task Force, chaired by MMAC President Tim Sheehy has submitted its final recommendations to Gov. Jim Doyle this week. The Task Force was initially created to make recommendations to strengthen the partnership between the state and local governments to ensure Wisconsin is fully prepared to meet the challenges of the 21st century.

• The Task Force’s major recommendations focus on the following:

• Authorizing regional tax-base growth sharing;

• Modernizing tax incremental financing (TIF) for metropolitan and rural use;

• Linking shared revenue growth to the percentage of state budget growth;

• Achieving greater shared revenue equity;

• Using shared revenue to reward service sharing;

• Delivering public services based on the best functional rather than political lines.

Audit Committee to Investigate DNR Air Program
On Feb. 5, the Joint Committee on Audit will hold a hearing on a proposed audit of the Department of Natural Resources’ (DNR) air management programs. The DNR air program initially came under fire when, on Dec. 16, 2002, environmental groups filed a petition with EPA alleging the program violated the Clean Air Act.

To counter the environmental groups’ claims that industry fees must be raised to fix noted deficiencies, Wisconsin Manufacturers & Commerce sent a Jan. 20, 2003 Letter to the Legislative Audit Committee asking for the audit of the Air Bureau. From industry’s perspective, the failure to issue timely permits relates to inefficiencies and misplaced resources rather than lack of funds.

In a related development, Rep Julie Lassa (D-Stevens Point) announced she will re-introduce legislation that would require the Legislative Audit Bureau conduct performance and management audits of state agencies and their programs on an ongoing basis.

Federal Developments

Johnson Offers FDIC Reform Bill
Senate Banking & Financial Institutions Subcommittee ranking member Tim Johnson, D-S.D., is proposing a deposit-insurance reform bill that would increase and index deposit-insurance coverage levels, as well as merge the Bank Insurance Fund and the Savings Association Insurance Fund to insure all banks and savings and loan institutions. According to Johnson, the goal of the legislation is to strengthen local banks and reassure investors.

In addition to providing an increase in general deposit coverage, the bill would raise the coverage of retirement accounts. The bill also provides partial coverage on a risk-sharing basis for in-state public deposits.

Federal Bill Introduced to Fund “Do-Not-Call” List
House Energy and Commerce Chairman Tauzin introduced a bill to fund a national "do-not-call" list. The FTC believes the do-not-call registry will cost about $16 million in its first year. It would be funded with fees collected from telemarketers, but congressional approval is required to collect the fees.

Sensenbrenner Wants Sweeping Bankruptcy Measure
House Judiciary Chairman Sensenbrenner is supporting a comprehensive bankruptcy bill as one of the committee’s top priorities.  The bill contains a "netting" provision that is designed to enable quick resolution to complex financial contracts in the event a party in the deal goes bankrupt. Another provision is a proposal to make permanent the Chapter 12 bankruptcy protection for farmers.

Class Action Reform Bill To Be Introduced
A Senate class action reform bill will be introduced by early February. The Senate bill, which is expected to be sponsored by Sen. Herb Kohl, D-Wis., Finance Chairman Grassley and Senate Judiciary Chairman Hatch, will reflect a preference for federal court adjudication of class actions. The initial legislation is expected to be substantially unchanged from past years' reform bills.

Political News

Doyle warns of ‘steep’ cuts in spending: Milwaukee Journal Sentinel, Jan. 31, 2003. Governor says he won’t raise taxes, will create jobs.

Area Republicans see Doyle as an ally: Appleton Post-Crescent, Jan. 31, 2003. He said Democrats and Republicans created the problem and must work together to fix the problem.

Local leaders seek more details from Doyle’s plan: Oshkosh Northwestern, Jan. 31, 2003. Feb. 18 budget could bring specifics.

Former sheriff Raemisch among appointees: Wisconsin State Journal, Jan. 31, 2003. Appointed administrator of the Division of Community Corrections.

Doyle says he won't raise taxes: Wisconsin State Journal, Jan. 30, 2003. “Wisconsin should not be taxing job creation," the governor told the Business Day in Madison conference.

Assembly passes bill toughening ethics standards for lawmakers: Milwaukee Journal Sentinel, Jan. 29, 2003. Lawmakers voted 97-0 for the bill; sent to Senate with a tougher penalty.

Republicans confirm 57 appointees: Wisconsin State Journal, Jan. 29, 2003. Sen. Chuck Chvala ended the last session without acting on more than 200 Republican appointments.

Senators confirm Shibilski as Doyle's tourism secretary: Milwaukee Journal Sentinel, Jan. 29, 2003. Still, several are upset because former colleague didn't make courtesy calls to them.

Capitol agenda familiar for WMC: Milwaukee Journal Sentinel, Jan. 29, 2003. Legislative goals feature items from past.

Bill introduced for national list: Wisconsin State Journal, Jan. 29, 2003. Bill to fund a national do-not-call list.

MCI suspected of ignoring no-call list: Milwaukee Journal Sentinel, Jan. 29, 2003. 36% of written complaints involve phone firm.

Chvala fails in attempt to get McCann out of caucus case: Milwaukee Journal Sentinel, Jan. 28, 2003. Arguments described as "preposterous" and "absurd" that McCann targeted Chvala.

Officials predict layoffs if budget cuts approved: Milwaukee Journal Sentinel, Jan. 28, 2003. State agencies get recommendations for potential dollar cuts.

State agencies told to prepare to make cuts: Wisconsin State Journal, Jan. 28, 2003. Part of Gov. Jim Doyle's proposal to eliminate $161 million of the state's deficit.

Unpaid sales taxes cost state millions: Milwaukee Journal Sentinel, Jan. 27, 2003. Up to $255 million per year goes unpaid on Internet, catalog sales.

'Rising star' is state's new salesman: Milwaukee Business Journal, Jan. 17, 2003. Nettles brings energy to Department of Commerce post.

Upcoming Fundraisers

Sunday, Feb. 2:

·         Paul Higgenbotham (Supreme Court candidate), Madison, 2:00 p.m.