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Mar. 20, 2009

The Wisconsin Joint Finance Committee (JFC) began reviewing the Governor’s proposed $64.5 billion budget bill as it started hearings this week on Assembly Bill 75. The budget will dominate the Legislature’s agenda through the next few months before the bill is finally passed by both Houses and signed by the Governor. The JFC kicked off the process by holding briefings by major state agencies. After this week’s hearings in Madison, the JFC will then go on the road for two weeks holding public hearings throughout the state.

Republicans on the JFC, who are outnumbered 12-4 because the Democrats hold majorities in both houses, criticized specific provisions in the budget. Specifically, Republicans jumped on a report by the non-partisan Legislative Fiscal Bureau that revealed the budget will increase taxes and fees by $1.7 billion over the next two years.

An informal opinion issued by the Attorney General this week is a good faith effort to bring some clarity to whether an economic development corporation is a “quasi-governmental corporation” subject to open meetings and public records. The opinion, [see more below] will hopefully provide some roadmaps for EDC’s that wish to operate without the burdens of open meetings and public records. The Attorney General cannot, of course, overturn the Court’s decision and is limited to interpretation and, hopefully, some clarification.

Wisconsin Developments

Joint Finance Committee Begins Hearings on Budget

The Republicans wasted no time criticizing the Democrats over the size of the proposed tax and fee increases - totaling $1.7 billion over the biennium. According to a Legislative Reference Bureau memo, among other taxes and fees, the budget would include a 75 cent per pack increase in the state cigarette tax; a higher income tax bracket for married couples making more than $300,000 a year; and, a tax on oil companies.

One the more controversial provisions involved a proposal to expand prevailing wage to publicly funded private construction projects. The Republicans criticized the proposed application of prevailing wage, arguing that the term “publicly funded” is 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, Republicans argue that the 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.

The JFC will continue to hear these issues, with numerous others, over the next two weeks as it travels the state. Below is a schedule of the JFC hearings:

• March 23: Sparta

• March 30: Racine

• March 25: West Allis

• April 1: Appleton

• March 27: Eau Claire

• April 3: Cambridge

Joint Finance Committee Approves Road Spending Request

During its deliberations this week, the JFC voted unanimously to approve Gov. Doyle’s request to spend $42.5 million from the federal stimulus bill passed by Congress and signed into law by President Barack Obama.

The money will be used for 49 local road projects, including bridge and transportation projects across the state. These local projects are authorized in addition to the nearly $300 million in State road and bridge projects approved in the budget repair bill (Wis. Act 2). In total, Wisconsin expects to receive $529 million in federal stimulus funds for state/local roads and bridges.

Lawmaker Unveils Paint Tax Proposal for Lead Removal

Sen. Spencer Coggs (D-Milwaukee) announced this week that he is drafting legislation establishing “Rehab Loans for Lead-Safe Homes.” Although the bill has not been officially introduced, a draft proposal calls for a tax on paint (likely 50 cents per gallon) that would be used to provide loans to owners of residential property built before 1950 (owner occupied or rental). The funds would be used for window replacement and other capital improvements such as siding and porches.

There are currently in place several federally funded programs for the removal of lead-based paint from older homes. The state of Wisconsin is already slotted to receive $38 million (City of Milwaukee is receiving $9 million) in funding from HUD under the National Stabilization Program.

NSP provides grants to every state, and certain local communities, to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop the properties to help stem the decline of house values of neighboring homes. These homes must be lead-free once they are rehabilitated.

Wisconsin is also receiving $3 million from the American Recovery and Reinvestment Act of 2009 for Lead Hazard Reduction Grants. These grants assist urban jurisdictions with the greatest lead-based paint needs through programs for eligible privately owned rental or owner-occupied housing.

U.S. Energy Secretary Steven Chu joined Gov. Jim Doyle last week in Milwaukee to announce that Wisconsin is receiving $197 million in weatherization and energy efficiency funding as part of the American Recovery and Reinvestment Act. Some of this money will likely be used to replace old windows in homes that contain lead-based paint.

For more information on lead paint issues, see the
Hamilton Consulting Group's Update.

Senate Committee Hears Employment Discrimination Bill

The Senate Committee on Labor, Elections and Urban Affairs last week heard testimony on Senate Bill 20, which authorizes a court to order an employer to pay compensatory or punitive damages in instances where there is employment discrimination.

Senate Bill 20 creates unlimited compensatory and punitive damages for claims of workplace discrimination under the Wisconsin Fair Employment Act. If an employer is found guilty of discrimination, the bill requires the employer to pay an additional 10 percent “surcharge” that would be deposited into the state’s general fund for DWD to use to administer the state’s fair employment law.

The bill makes changes from the current law under which DWD may reinstate the employee and file a complaint against the employer. The employee can receive back pay up to two years and receive costs and attorney fees associated with the lawsuit. Currently, an employee is not allowed to seek compensatory or punitive damages.

Numerous business groups opposed the bill, while the Wisconsin Association for Justice and the Individual Rights and Responsibilities section of the Wisconsin Bar supported the bill.

AG Issues Informal Opinion Clarifying Scope of Open Meetings Law

Responding to a request for clarification and guidance from the Wisconsin Economic Development Association, Attorney General J.B. Van Hollen issued an informal opinion addressing when a privately organized local economic development corporation must be considered a “quasi-governmental corporation” that is subject to Wisconsin’s open meetings and public records laws.

Van Hollen noted that there is inherent uncertainty in the case-by-case, totality-of-the-circumstances approach to this issue taken by the Wisconsin Supreme Court in its recent decision in State v. Beaver Dam Development Corp., but concluded that a close examination of that decision in light of the basic policy of the open government laws can provide meaningful guidance for privately organized entities that wish to partner with local governments in the field of economic development.

For more on the Beaver Dam case, see the Hamilton Consulting Group's Update.

Federal Developments

EPA Proposes First National Reporting on Greenhouse Gases

The EPA last week announced its intention to issue rulemaking under the Clean Air Act that would impose federal reporting requirements on industrial facilities that emit more than 25,000 tons of carbon dioxide per year.

The reporting requirements would apply to a number of industrial facilities, such as suppliers of fossil fuel and industrial chemicals, automobile manufacturers, as well cement production, iron and steel production, and electricity generation.

Most small businesses would be exempt from the reporting requirements, along with most of the agriculture sector. According to EPA, to comply with the reporting requirements would cost the private sector $160 million for the first year, and in subsequent years the annualized costs would be $127 million. The proposed rule will be open for public comments for 60 days after it is published in the Federal Register.

EPA Holds Hearing Regarding California’s Waiver Request

The EPA earlier this month held hearings on California’s request to waive set strict automobile emission and fuel efficiency standards.

Under Section 209 the Clean Air Act, California has special authority to enact stricter air-pollution standards for motor vehicles than the federal government’s standards. However, California must file a petition with the EPA and meet certain criteria. Other states may adopt California’s standards, but those states’ emissions standards only become effective when California’s petition is granted by EPA.

If the EPA grants California’s waiver request, auto makers in states that have adopted California’s air-pollution standards would need to boost average mileage of their new fleets to 35 miles per gallon by 2017 and over 40 mpg by 2020. It is expected the EPA will reverse itself and grant California’s petition.

For more information on these and related issues, go to MidwestEnergySecurity.org.

News

Republicans criticize Doyle for raising taxes: St. Paul Pioneer Press, Mar. 17, 2009.

Oil company fee faces possible lawsuits: The Daily Reporter, Mar. 17, 2009.

Medical Society appeals fund case: Milwaukee Business Journal, Mar. 17, 2009.

All the markings of political payoff (opinion): Beloit Daily News, Mar. 16, 2009.

Public invited to buy bonds to help state budget: Milwaukee Journal Sentinel, Mar. 16, 2009.

Time for uniform ballast rules (opinion): Ashland Daily Press, Mar. 16, 2009.

Doyle proposes tougher controls on Great Lakes water quality: Madison capital Times, Mar. 16, 2009.

Pocan's status rising at Capitol: Wisconsin State Journal, Mar. 15, 2009.

Recession spurs rise in county property tax delinquencies: Kenosha News, Mar. 15, 2009.

Markup no more (opinion): Racine Journal Times, Mar. 15, 2009.

Loss of front car plates, stickers stir police debate: Eau Claire Leader-Telegram, Mar. 14, 2009.

A bad state mandate (opinion): Milwaukee Journal Sentinel, Mar. 12, 2009.

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