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Feb. 27, 2009

The economy and budget deficits continue to dominate the news. Governor Jim Doyle last week unveiled his two-year budget, seeking to fill a $5.7 billion budget deficit. President Barack Obama this week introduced his budget, which seeks to raise taxes and expand healthcare. The federal budget deficit is estimated at $1.75 trillion for 2009.

More than a week after Governor Doyle unveiled his budget proposal (Assembly Bill 75), numerous provisions are still coming to light, including proposals to significantly alter the state’s litigation atmosphere and expand the application of prevailing wage. See further discussion in the articles below.

At the federal level, President Obama unveiled his $3.6 trillion budget which would raise taxes and significantly increase spending on healthcare. Also included are levies on oil and gas companies, including an excise tax on Gulf of Mexico production and fees for drilling on federal lands.

Wisconsin Developments

Doyle Budget Would Undo Joint and Several Liability Policies
Enacted in 1995
Provisions in Gov. Doyle’s budget would abolish joint and several liability policies enacted by the Legislature in 1995 and significantly impact the outcomes of civil cases.

Under current law, a plaintiff may recover damages only if he or she is not more at fault than the person against whom recovery is sought. Furthermore, under current law, a defendant may be jointly and severally liable for all of the damages only if that person’s negligence is 51 percent or more of the total negligence.

The budget provision would change existing law by striking the 51 percent requirement and allowing an injured person to recover damages if that person’s negligence is not greater than the combined negligence of all the persons against whom recovery is sought.

In addition, the new provision would provide that any person whose negligence is equal to or greater than the negligence of the person seeking recovery is jointly and severally liable. This means that a person as little as one percent at fault could be liable for 100 percent of the entire damages.

Budget Provision to Change Law on Civil Jury Instructions
A significant change to Wisconsin’s civil procedure laws is also included in the budget bill. The change to long-established law would require that juries be told what effect their awards of fault would have on each party.

Under current law, a court is required to instruct the jury on the law involved in the case before the jury. In addition, the court is required to provide the jury with a complete set of written instructions that provides the burden of proof and the substantial law to be applied to the case.

For nearly 100 years, courts have followed the principle that the duty of juries is to resolve questions of fact and that the jury should not be instructed on how its findings of fact will be impacted by the application of existing law.

Opponents claim that changing the law would allow the jury to control the outcome of civil litigation simply by modifying their responses to create the desired result. Critics further claim that rather than considering all of the evidence and reaching a reasoned result, the jury would be encouraged to consider the intended result and only look for evidence to support that result.

The Wisconsin Civil Justice Council, an organization made up of a variety of statewide associations and large and small businesses who are concerned about lawsuit abuse, issued a press release last week criticizing both budget proposals as simply a stimulus for plaintiff attorneys and a drag on Wisconsin’s ailing economy.

Prevailing Wage Provisions Impact Economic Development
Assembly Bill 75 contains provisions that substantially expand the application of prevailing wage. The most dramatic policy expansion relates to the proposed application of prevailing wage to publicly funded private construction projects. Publicly funded is very broadly defined to mean virtually any project in which a municipality provides funding, grants, loans, or transfer of real estate at less than fair market value.

The budget bill would also substantially expand the scope of prevailing wage on traditional public works projects (state and local) by reducing the contract threshold from $48,000 (single-trade project)  and $234,000 (multi-trade project) to a set $2,000 for any project.  Under the bill, state and local government would have to apply prevailing wage to any contract in excess of the $2,000 threshold. This same $2,000 threshold would apply to the newly created application of prevailing wage to private construction projects.

In addition, the bill calls for a new weekly reporting requirement on all prevailing wage jobs and diminishes current law protections against frivolous complaints.

Taken together, these changes will present disincentives for community economic development and diminish the effectiveness of the very tools that have been adopted to promote local economic development.

Senate Expands Liability for Home Sellers
The Wisconsin Senate this week passed Senate Bill 9  (SB-9), which adds a tort cause of action for an intentional misrepresentation made by the seller of real estate. SB-9 would give purchasers the ability to recoup not only the economic value of the home, but also punitive damages. (Statutory and contractual remedies do not allow punitive damages, but as mentioned above, do provide for attorneys’ fees and costs.)

The bill has been sent to the Assembly Committee on Consumer Protection. The Assembly companion bill, Assembly Bill 6, received a public hearing and was voted out of committee, 7-2.

The bills are in response to a Wisconsin Supreme Court decision, Below v. Norton, where the court held (4-3) that the economic loss doctrine bars common-law tort claims for intentional misrepresentation in real estate transactions.

In reaching its decision in the Below case, however, the majority expressly stated that buyers still have both statutory and contractual remedies. In reaching its decision, the majority clarified that the purpose of the economic loss doctrine is to preserve the distinction between a contract and a tort.

Joint Finance Plans Budget Hearings
The Joint Finance Committee is expected to schedule at least six public hearings and a listening session starting as early as Saturday, March 21.

No specific dates or locations have been announced, but it is expected the hearings will be held in the Racine area, western Milwaukee County, eastern Dane County, the Appleton-Green Bay area, La Crosse and Eau Claire. A listening session, where not all committee members will be expected to attend, is under consideration for Ashland. It is expected the hearings will be completed by the end of March.

That schedule would put the committee on track to begin executive sessions on the bill in early April and to complete committee action by the end of May.

Budget Adjustment Bill Signed
On February 19, Governor Doyle signed the Budget Adjustment Bill (2009 Senate Bill 62), creating 2009 Wisconsin Act 2.

The bill passed swiftly through the Senate and Assembly (18-15 and 51-48, respectively). Items of interest in the bill include a provision for combined reporting for corporations, a new hospital gross receipts tax to leverage federal funding for the MA program, and the introduction of the streamlined sales tax which will require sales and use taxes to be collected on purchases of specified digital goods like music downloads.

The Legislative Fiscal Bureau released a summary of the bill's provisions.

New Bills Introduced in Senate
A number of new bills affecting healthcare have been introduced in the Senate.

• SB-70: Coverage of dependents under health plans.

• SB-71: Changes affecting pre-existing condition exclusions, modifications at renewal; establishes standard application for health benefit plans.

• SB-72: Portability under group health benefit plans; independent review of insurance policy rescissions; pre-existing exclusion denials.

• SB-73: Lifetime limit under HIRSP.

• SB-74: Coverage denials under HIRSP.

• SB-80: Requires state to pay legal fees and damages in certain claims against volunteer health providers.

Federal Developments

Federal Court strikes down Federal Fine Particulate (Soot) Rules
On February 24, the U.S. Circuit Court of Appeals for the District of Columbia struck down the EPA’s 2006 standards for fine particulate matter.  In the 2006 rule, the EPA had kept the primary standard for annual fine particulate matter at 15 micrograms per cubic meter, even though EPA’s staff and scientific advisers had recommended a standard between 13 and 14 micrograms.

A number of environmental, states, and public health groups challenged the EPA’s rule last September. The groups argued that the EPA’s standard was not backed by science and failed to protect the health of vulnerable people.  The EPA argued that former Administrator Stephen Johnson did not have enough evidence to change the annual standard.

In siding with the environmentalists, the court ruled that EPA failed to adequately explain why an annual level of 15 micrograms per cubic meter is sufficient to protect the public health.  As a result, the court sent the annual soot standard back to the EPA for reconsideration. The court did not, however, vacate the annual standard during the pendency of the rulemaking period.  As such, the current standard of 15 micrograms per cubic meter stands during the EPA’s reconsideration.

EPA to Regulate Greenhouse Gases; Toughen Auto Emission Standards
President Barack Obama’s special adviser on climate change and energy, Carol Browner, announced this week that the EPA plans to make a determination whether carbon dioxide endangers public health and welfare. Such a finding would trigger the EPA to regulate greenhouse gases under the Clean Air Act.

In addition, Ms. Browner expressed the Obama administration’s intent to impose tougher fuel efficiency standards of automakers. To read more about Ms. Browner’s comments, please see Hamilton Consulting Group’s blog.

News

Portage County group backs alcohol-tax increase: Stevens Point Journal, Feb. 27, 2009.

Beware of feds bearing gifts -- $89 million of stimulus money for Wisconsin unemployment benefits has strings attached (opinion): Wisconsin State Journal, Feb. 26, 2009.

Line item in Doyle’s budget would raise liabilities for businesses: BizTimes, Feb. 24, 2009. Doyle’s budget would change the state’s provision for joint and several liability, if it is signed into law.

Encouraging words on nuclear power from top Wisconsin regulator (opinion): Wisconsin State Journal, Feb. 24, 2009.

2 top legislators oppose repeal of contract cost-analysis law: Milwaukee Journal Sentinel, Feb. 23, 2009.

Doyle says domestic partner proposal does not violate marriage amendment: Milwaukee Journal Sentinel, Feb. 23, 2009.

Gov. Doyle proposes switch to 1 license plate: Racine Journal Times, Feb. 23, 2009.

State's stimulus to top $9 billion: Milwaukee Journal Sentinel, Feb. 23, 2009.

State to start charging sales tax on online digital purchases Oct. 1: Milwaukee Journal Sentinel, Feb. 23, 2009.

Bad-news budget a mixed bag so far (opinion): Appleton Post-Crescent, Feb. 22, 2009.

Doyle’s budget cuts could shift funding for state, federal mandates to property taxes: La Crosse Tribune, Feb. 22, 2009.

Strike out the minimum markup (opinion): Racine Journal Times, Feb. 22, 2009. Keep the prohibition on selling below cost, but don’t make everyone pay extra.

Increasing business taxes was bad move on lawmakers' part: Milwaukee Journal Sentinel, Feb. 21, 2009.

Upcoming Fundraisers

March 1

• US Sen. Russ Feingold (D), Madison

• US Sen. Russ Feingold (D), Milwaukee

For details, go to Hamilton Consulting Fundraiser Calendar.