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Mar. 11, 2005

This past week, the Joint Finance Committee (JFC) launched its hearings around the state to offer citizens the opportunity to express opinions on state budget issues, prior to hearing from various state agencies, and ultimately crafting its own version of a state budget proposal. The co-chairs of this powerful and influential committee have announced that the committee will work from a base budget rather than from the Governor’s proposed budget. What that means in simple terms is that it will take a majority vote to “add’ anything to the 2003-05 budget, rather than a majority vote to “subtract” items from the Governor’s proposed 2005-07 budget proposal. (Motions fail on tie votes.) Much of what the Governor has proposed is still likely to be adopted in some form,  but the JFC-developed budget proposal will be built from the base up, requiring action on new items proposed by the Governor.

In other action this week: the Senate passed a TIF bill aimed at clarifying some issues from the landmark legislation passed last session and which are required to allow all communities to benefit from the new law;  the Governor’s Conference on Tourism drew another big crowd; the Legislative Fiscal Bureau released a report outlining tax and fee changes in the Governor’s proposed budget; and, the Republican-passed “tax freeze” proposal was delivered to the Governor’s desk where it faces an almost certain veto.

Policy Developments

Fiscal Bureau Addresses Budget Concerns
On March 9, 2005, the Legislative Fiscal Bureau issued a report to the Legislature outlining state tax and fee modifications in the Governor’s biennial budget bill (AB 100).  The report summarizes a total of $304 million in net tax and fee increases and $63.8 million in enhanced collection of taxes and fees.

With regard to general fund taxes, the LFB report identified three tax-increase provisions totaling $4.9 million over the two years.  The report also showed six tax-decrease provisions totaling $17.6 million -- for a net general fund tax decrease of $12.7 million.

With regard to fee increases, the report identified 39 fee-increase provisions and one minor fee decrease.  Major fee increase provisions include:

• Continuation of $2 land record fee ($8.5 million)

• Hunting and fishing license fee increases. ($20.4 million)

• Continuation of the $9 vehicle environmental impact fee.  ($20.3 million)

• Vehicle registration fee increases.  ($70.9 million)

• Vehicle title fee increases.  ($26 million)

• Gross revenue assessment on HMO’s that provide MA services.  ($88.2 million)

• Nursing home bed assessment increase.  ($52.2 million)

The HMO assessment and the nursing home bed tax increase constitute close to half of the net tax and fee increases identified in the LFB report. Under the Governor’s bill, these fee increases are proposed to generate federal matching funds and are partially used to fund an increase in reimbursement for services provided to MA enrollees.

The March 9 report follows the release of a March 4 LFB letter to the co-chairs of Joint Finance showing the condition of the general fund for the 2005-07 and 2007-09 biennia under the Governor’s budget bill.  In summary, the LFB estimated that the general fund structural deficit in the 2007-09 biennium would be $555 million in FY 08 and $707 million in FY 09, or $1.262 billion over the biennium.

The estimate represents current law commitments, the provisions of AB 100, and caseload and population estimates of the Governor’s budget.  The analysis shows that the state would continue to carry a structural budget deficit under the Governor’s plan.  It also shows that it would be the lowest such structural deficit in comparison to the last several biennia.

Starting with the 1997-99 biennium, the structural imbalance has exceeded $1.5 billion every biennium with the high water mark of $2.867 billion for the 2003-05 biennium.  The corresponding figure for the 2005-07 budget is $1.546 billion.  In presenting their analysis, the LFB noted that their estimates do not reflect any potential revenue growth.

Joint Finance Hears Testimony in Watertown/Cleveland
Members of the legislative Joint Finance Committee are on the road this week and next week for public hearings on Gov. Jim Doyle’s budget proposal. The first session was held March 9 in Watertown, which was attended by about 300 to 400 people and the second session was being held today at Lakeshore Technical College in Cleveland.

Next week’s Joint Finance Hearings:

• Monday, March 14 from 3:00 pm to 8:00 pm, UW Stout, Menomonie

• Tuesday, March 15 from Noon to 5:00 pm, Prairie River Middle School, Merrill

• Thursday, March 17 from 10:00 am to 5:00 pm, State Capitol, Madison (Last week’s Tidbits incorrectly listed this hearing for March 15.)

Wisconsin to see Additional Mandates for Ozone Violations
At a March 8 workshop, representatives from industry and Great Lakes regulatory agencies were told that existing and expected controls would be insufficient to bring Wisconsin and other Great Lakes states into compliance with the new ozone standard. Michael Koerber, with the Lake Michigan Air Directors Consortium (LADCO), presented modeling results that projected the effects of expected emission reductions from existing regulations and the new EPA interstate rule. (See related article below on the new interstate rule.)

LADCO was established in 1990 by the States of Illinois, Indiana, Michigan, and Wisconsin. (Ohio joined in 2004) It provides technical assistance to its member states on problems of air quality, including modeling and control assessments needed as part of the federal Clean Air Act ozone program. By June 2007, Wisconsin and other LADCO states must demonstrate to EPA how they will comply with the 2009/10 compliance deadline for the new ozone standard. LADCO’s current assessment appears to support Wisconsin DNR’s prior position that businesses in eastern Wisconsin will have to further reduce ozone forming emissions. These new mandates are called “local controls” because they target businesses within the nonattainment areas and are beyond regional controls such as EPA’s interstate rule.

Michigan & California Studies show Increased Emissions from Ethanol
Results from several studies on the ozone implications of ethanol in fuel were also presented at the March 8 LADCO workshop. Tom Darlington, with Air Improvement Resource, presented the findings from a Feb. 23, 2005 report by the Southeast Michigan Council of Governments (SEMCOG). That study evaluated fuel options that could help Southeastern Michigan meet federal ozone requirements and found that of the 11 fuels evaluated; only conventional gas with 10 percent ethanol (“E-10”) would increase both ozone forming NOx and VOCs emissions. SEMCOG membership includes over 140 local governments and plays a similar planning role to that performed by the Southeast Wisconsin Regional Planning Commission.

The E-10 assessed by SEMCOG is the same fuel that would be mandated by AB 15 and SB 15. Darlington, the author of the SEMCOG study, testified before the Assembly Agriculture Committee that AB 15 would jeopardize Wisconsin’s effort to meet the new ozone standard. WMC’s Jeff Schoepke told the committee that such additional emissions could translate into more controls on Wisconsin businesses.

In a related development, the California Air Resources Board also released a draft study showing use of ethanol-blended gasoline increases evaporative hydrocarbon emissions from motor vehicles by about 15 percent. Released for public comment March 1, the report supports CARB's long-held contention that ethanol-blended gasoline hampers the state's clean air effort. The Hamilton Consulting Group represents several clients opposing AB 15 and has compiled Ethanol Mandates - Summary of Environmental & Economic Development Implications: (March 7, 2005).

TIF Trailer Bill Passes Senate
As often happens with complex legislation and statutes that have been frequently and sporadically amended, the landmark TIF legislation that was passed and signed into law last session contained technical errors. Analysis of the 2003 Session TIF legislation discovered language that failed, in some respects, to capture the full intent of the Wisconsin Legislature. On Thursday, March 10, the State Senate unanimously passed Senate Bill 83 to rectify those issues.

Senate Bill 83 makes the following corrections/clarifications:

• Allows all TIDs to make expenditures for project costs up to five years before the TIDs mandatory termination date.

• Allows municipalities to take advantage of the longer expenditure period without having to amend the project plan.

• Eliminates the “vacant land test” for the new “mixed use districts” as was done for “industrial use districts” and intended to be accomplished for both.

• Clarifies DOR’s authority where there is non-compliance with the conditions specified for mixed use districts

• Eliminates applicability of the 12% test for project plan amendments unless they are for addition of territory to insure the ability to subtract territory which was authorized under the new law.

• Clarifies that a boundary amendment done at one time which simultaneously adds and subtracts territory will be considered as one boundary amendment counting toward the maximum limit of four allowed.

• Clarifies an issue relating to valuation on subtraction on city owned property.

Numerous communities throughout Wisconsin are awaiting adoption of these clarifications in order to take advantage of the TIF changes adopted last session. An Assembly public hearing is scheduled for next Wednesday and full Assembly action is expected the first week in April, the first floorperiod after next Wednesday.

Tax Freeze Bill Sent to Governor
Late Thursday afternoon, the tax freeze proposal, AB 58, which passed the Legislature two weeks ago, was delivered to Governor Jim Doyle’s office for the Governor’s action. The Governor, who returns from Mexico today, is expected to veto the bill early next week, likely setting the stage for further debate on the issue during budget deliberations.

Governor's Conference on Tourism
Members of the Wisconsin travel and tourism industry met Mar. 6-8 at the Monona Terrace Convention Center for the annual Governor’s Conference on Tourism. Since the first conference in 1987, Wisconsin's tourism conference has become one of the largest of its kind in the United States, growing in attendance to over 1200 participants.

The conference was sponsored by the Wisconsin Tourism Department, which recently released a report showing consumer spending within the tourism industry to have increased less than one percent last year. According to the Department, tourists poured just under $12 billion into Wisconsin's economy during 2004, such increase being tempered by an unseasonably cool and rainy summer. Department officials are hoping for a bigger spending increase in 2005. Governor Doyle has recommended a $3.8 million increase in the Department’s marketing budget over the next two years, to be funded by an increase in the state’s car rental tax which is proposed to go from three percent to five percent.

Wisconsin "Report Card" Grades Show Improvement
A new report card  measuring the state’s "competitiveness" relative to other states gives Wisconsin positive grades for self-improvement. The report was released Mar. 9 by Competitive Wisconsin, Inc. (CWI), a nonpartisan coalition of state leaders in agriculture, business, education and labor. The CWI report card uses 33 benchmarks to track Wisconsin’s progress and compare its competitive posture with surrounding states and the U.S.

Many quality of life measures were positive, such as health insurance coverage, crime rates, and cost of living. On per capita personal income, Wisconsin has made steady progress over the past five years, but Wisconsin’s per capita income still trails all of its neighbors, except Iowa. Fewer state residents lack health insurance coverage than nationwide and, among our neighbors, Wisconsin trails only Minnesota.

In a press release by Governor Doyle, he stated that “This report shows Wisconsin is making solid progress in growing our economy, and in continuing to create good, family-supporting jobs.”

Wisconsin Wins “Best Practices” Award
Governor Doyle recently announced that the Wisconsin Small Business Regulatory Reform Initiative has won the national "Best Practice" award by the United States Small Business Administration (SBA). The state Department of Commerce applied for this recognition by the SBA, and Wisconsin joined Maryland, Michigan, and Idaho as the only winners.

The programs were recognized at the Putting It Together: The Role of Entrepreneurship in Economic Development conference held in Washington, D.C. For more information on the conference, agenda, and proceedings visit www.sba.gov/advo.

Wisconsin Politics

Van Hollen Joins Race for AG
Former U.S. Attorney J. B. Van Hollen has formally entered the race to be state attorney general. He joins Waukesha County District Attorney Paul Bucher in the Republican primary for the chance to challenge Democratic incumbent Peg Lautenschlager. State Representative Mark Gundrum, Chair of the Assembly Judiciary Committee, is frequently mentioned as a likely third candidate.

President George W. Bush appointed Van Hollen as U.S. attorney for Wisconsin’s Western District in 2002, where he served for two years until resigning Jan. 31 to pursue the race for AG.

Federal Developments

EPA Issues Clean Air Interstate Rule
On March 10, EPA issued its Clean Air Interstate Rule (CAIR), a rule the agency anticipate will achieve the largest reduction in air pollution in more than a decade. It is expected to reduce sulfur dioxide by 70 percent and nitrogen oxide emissions by 60 percent from power plants in 28 eastern states and the District of Columbia. Under the rule, which takes effect 60 days after its publication in the Federal Register, emissions are capped in states such as Wisconsin. The states then allocate tradeable allowances to utilities, which can buy or sell allowances depending upon their ability to reduce emissions to target levels. (For more information, go to EPA’s Clean Air Interstate Rule Web Page.)

Clear Skies Suffers Setback in Senate
EPA’s release of the final CAIR rule came a day after the Senate Environment Committee failed to approve Clear Skies legislation (S. 131) by a 9-9 vote. The law would reduce power plant emissions nationwide of sulfur dioxide, nitrogen oxides, and mercury by about 70 percent by 2018. While the CAIR interstate rule was based on Clear Skies, the legislation also would have exempted power plants from certain Clean Air Act requirements. The Bush Administration and industry groups are advocating Clear Skies as preferred over traditional command and control mandates in the Act. Opponents of Clear Skies want it expanded to include greenhouse gases and object to any rollbacks in the Clean Air Act.

EPA Mercury Rule on Deck
A closely related action to EPA’s CAIR rule is its Clean Air Mercury Rule. The rule would be the first ever federally-mandated that coal-fired electric utilities reduce their emissions of mercury. The mercury rule is expected to be finalized by March 15 and upon its promulgation will trigger a requirement in Wisconsin’s mercury rule that DNR revise its rule to assure consistency with the federal program. (See Hamilton Consulting’s Mercury Rule Update).

Political News

New rules call for cleaner air: Milwaukee Journal Sentinel, Mar. 11, 2005.

At hearing, citizens dig into Doyle's budget: Milwaukee Journal Sentinel, Mar. 10, 2005.

Report: Doyle's fee increases would raise $317 million: Janesville Gazette, Mar. 10, 2005.

Annual progress 'report card' for the state released: Janesville Gazette, Mar. 10, 2005.

For law firm and accounting firm, Thompson is the coming attraction: Milwaukee Journal Sentinel, Mar. 9, 2005.

Wisconsin economy receives passing grade on annual report: Milwaukee Journal Sentinel, Mar. 9, 2005.

Ethanol plant opponents dig in: Sheboygan Press, Mar. 9, 2005.

Airlines anticipate $60-a-barrel oil: Wausau Daily Herald, Mar. 9, 2005.

Lawmakers push for ethanol bill: Stevens Point Journal, Mar. 8, 2005.

Bill targets young drivers on cell phones: Racine Journal times, Mar. 8, 2005.

It’s up to drivers to avoid distraction (opinion): Appleton Post-Crescent, Mar. 8, 2005.

Business Formula Easy As 10-5-3: Wisconsin State Journal, Mar. 8, 2005.

Job market offers improved outlook for college grads: Milwaukee Journal Sentinel, Mar. 8, 2005.

Worker shortage in the making? Milwaukee Journal Sentinel, Mar. 8, 2005.

Tourism releases revamped tourism commercials with new music: Janesville Gazette, Mar. 8, 2005.

Van Hollen seeking top law job: Milwaukee Journal Sentinel, Mar. 8, 2005.

Doyle proposes sales tax on Internet downloads: Milwaukee Journal Sentinel, Mar. 8, 2005.

Doyle signs forestry pact in Mexico: Appleton Post-Crescent, Mar. 8, 2005.

Campaign finance reform effort resumes: Portage Daily Register, Mar. 7, 2005.

Meeting puts ethanol plant plans on table: Sheboygan Press, Mar. 7, 2005.

Lawmakers push for 'conscience clauses': Milwaukee Journal Sentinel, Mar. 6, 2005.

Lawmakers may restrict ingredient: Milwaukee Journal Sentinel, Mar. 6, 2005.

Nightmarish meth spills into state: Milwaukee Journal Sentinel, Mar. 6, 2005.

Budget cuts would hurt kids' therapy, agencies say: Milwaukee Journal Sentinel, Mar. 6, 2005.

Assembly Panel Scales Back Ethanol Proposal: Madison Capital Times, Mar. 5, 2005.

Attorney General Field Grows To 3: Wisconsin State Journal, Mar. 5, 2005.

Doyle To Lead Trade Delegation To Mexico: Wisconsin State Journal, Mar. 5, 2005.

Upcoming Fundraisers

Sunday, March 13

• U.S. Senator Russ Feingold (D), Madison

Monday, March 14

• Rep. Curt Gielow, Mequon

Wednesday, March 16

• State Superintendent Elizabeth Burmaster, Milwaukee

Thursday, March 17

• Governor Jim Doyle, Madison

• Sen. Judy Robson (D-Beloit), Beloit