Political Tidbits

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June 1, 2007

The Assembly floor session which had been scheduled for next Wednesday, June 6, has been canceled to allow the Joint Committee on Finance to continue work on the budget bill. The Finance Committee is expected to meet on Tuesday, Wednesday and Friday, June 5, 6 and 8, in an attempt to complete committee work on the bill by Friday.

To date, actions by the Committee on the Governor’s proposed major funding sources, with the exception of the increase in vital records fees, have, on a straight party-line tie vote, survived efforts at removal by the Republican members.

As previously reported, both houses are expected to adopt independent, competing budget proposals with the resolution ultimately in the hands of a conference committee.

The Governor signed a handful of bills this week, bringing the number to only 14 thus far this session that have passed both houses and received the Governor’s approval. This pace is not unusual during a budget session and a flurry of activity on individual bills is expected in the fall and early next year.

Policy Developments

Wisconsin State Budget - Proposed “New” Revenue Sources
In the May 15, 2007 edition of Tidbits, we presented a preview of the state budget process that is occupying the majority of time of the Legislature, Administration and lobbying corps. Among other items, we listed the eight primary “new” (including increases in existing fees) funding sources proposed by the Governor when he presented his proposed budget in February. Below is an expanded discussion of the revenue source proposals, including any action taken by the Joint Committee on Finance (JFC) to date.

All of the proposed revenue sources are controversial and include well organized proponents and opponents of the increases of existing fees, new taxes or transfer of funds. The information presented in this document does not address the pros and cons of the respective sources but, hopefully, helps to illustrate the proposed funding side of the budget equation.

Real Estate Transfer Fee
The proposed legislation would:

Increase the amount paid by sellers in all real estate transfers (personal dwellings and commercial buildings) from $3 to $6 per $1000 value transferred.
Increase the amount of the fee that the state keeps from 80 percent to 90 percent and reduce the amount the county receives from 20 percent to 10 percent.
Of the $6 paid, the state would keep $5.40 (per $1000) which is up from $2.40 and the county would keep $0.60 which is the same amount it currently receives.

The entire amount collected by the state would go into a new fund, the County Aid Fund, rather than the general fund.

The increase in the real estate transfer fee would increase state revenues by:

64.5 million in 07-08 (for a total of 126.6 million)
77.5 million in 08-09 (for a total of 139.5 million)

[JFC, on an 8-8 vote, left the increased funding in the bill.]

Vital Records Fees
Vital records include birth, marriage, divorce and death certificates.

The proposed legislation would increase costs relating to vital records, including acquiring, amending, searching and expediting. The increased revenue collected would be split with 60 percent going to the state and 40 percent going to the local registrar.

The estimated total increase in revenues to the locality would be:

$2,925,200 in 2007-08
$3,524,300 in 2008-09

The estimated total increase in revenues to the state would be:

$7,111,100 in 2007-08
$8,581,300 in 2008-09

[JFC rejected the increases and agreed to maintain current law on a 14-2 vote.]

Hospital Tax
The proposed legislation would create an assessment on the gross revenues of hospitals not to exceed 1 percent of the gross revenue. (The Administration has recently announced its intention to support .8 of 1 percent in lieu of 1 percent.) All of the revenue from the assessment would be deposited in to the Health Care Quality Fund to increase medical assistance (MA) rates for hospitals, and replace base General Purpose Revenue (GPR) funding for MA benefits with segregated revenues from the Health Care Quality Fund.

Provide $57,909,600 in segregated revenue in 2007-08 to replace the same amount that would come from the GPR
Provide $61,750,200 in 2008-09

The estimated revenue to be generated from the assessment is:

$205,532,800 in 2007-08
$212,726,500 in 2008-09

The estimated rate increase for services provided to MA and BadgerCare recipients:

$345,967,600 in 2007-08
$358,756,900 in 2008-09

The rate increase will include:

An increase in fee-for-service rates to approximately 100 percent of cost
An increase in disproportionate share hospital payments to critical access hospitals, and
An increase in the managed care rate to approximately 80 percent of cost

The bill would also repeal the current hospital assessment and delete the base MA benefits funding supported by the assessment. The current assessment totals $1,500,000.

[JFC has not addressed this issue to date.]

Cigarette Excise Tax
The proposed legislation would:

Raise cigarette tax from $0.77 to $2.02. (An increase of $1.25 per pack)
Raise tobacco products tax from 25 percent to 65.5 percent of the manufacturer’s established list price. (Tobacco products are defined as cigars, cheroots, granulated; plug cuts, snuff, chewing tobacco, clippings, and other forms of tobacco.)

The amount of the tax that distributors are rebated for administration costs would be reduced from 1.6 percent to 0.7 percent and the amount of time a distributor has to pay the floor tax (a onetime payment on current cigarette inventories) would be reduced to 30 days from 15 days. The proposal would also reduce the refund to tribes for the excise tax on cigarettes sold on tribal lands to non-tribal members from 70 percent to 50 percent

The estimated revenue from the proposed Cigarette Tax is:

257,500,000 in 2007-08
249,000,000 in 2008-09

The estimated revenue from the proposed tobacco products tax is:

18,200,000 in 2007-08
21,500,000 in 2008-09

The estimated increase from the tribal refund is:

$10,300,000 in 2007-08
$10,200,000 in 2008-09

The resulting increase in tax revenue would be deposited into a new fund, “The Health Care Quality Fund,” which would be a source of funding for Badger Care and Medical Assistance (MA).

[JFC has not addressed the cigarette tax increase proposal to date.]

Automobile and Light Truck Vehicle Registration Fees
The proposal would increase:

passenger registration from $55 to $75
light trucks not more than 4,500 pounds from $48.50 up to $75
trucks not more than 6,000 pounds from $61.50 up to $84
trucks not more than 8,000 pounds from $77.50 to $106

The estimated increase in transportation fund revenue would be:

$71,054,800 in 2007-08
$96,894,500 in 2008-09

The amount of that revenue attributable to the increase in passenger vehicle registration would be:

$52,906,900 in 2007-08
$71,782,700 in 2008-09

The amount of revenue attributable to the increase in light truck vehicle registration would be:

$18,147,900 in 2007-08
$25,111,800 in 2008-09

[JFC left the registration fee increases in the bill as proposed by the Governor.]

Tipping Fees
A tipping fee is the amount charged for disposing either waste at a landfill or waste processing facility.

The proposal would double the recycling tipping fee for waste disposed of in Wisconsin landfills on or after July 1, 2007 from $3 to $6 per ton. The fee is assessed on waste other than high volume industrial waste, but there are a few exceptions.

The fees are deposited in the segregated recycling fund. The total tipping fee paid for most municipal and industrial waste would increase from $3.80 to $7.90 per ton. Estimated increase in revenue is $18,000,000 in 2007-08 and $24,000,000 in 2008-09.

The following programs are funded from the segregated recycling fund:

Commerce Renewable Energy Grants and Loans
DNR Waste Reduction and Recycling Demonstration Grants
DATCP Clean Sweep Grants
DATCP Anaerobic Digester Research and Development

Gov. Doyle’s proposed transfer from the segregated recycling fund:

$13,000,000 transfer to the general fund in 2007-08
$20,000,000 transfer to the general fund in 2008-09

The proposed legislation would increase the environmental repair solid waste tipping fee imposed on municipal and non high-volume industrial waste by $1.10, which would take the current price of $0.50 to $1.60 per ton for waste disposed of in Wisconsin landfills on or after July 1, 2007.

0.75 cents of the increase would be deposited in the non-point account of the segregated environmental fund;
0.35 cents of the increase would be deposited in the environmental management account of the environmental fund

The 0.50 currently imposed also goes to the environmental management account, so this would result in a total of 0.85 cnets being deposited for every ton of waste.

Total tipping fees under the proposal:

Solid waste tipping fees for waste that is not high-volume industrial waste would be $1.74 per ton
High volume industrial waste fees would be 0.34 cents per ton

Estimated increase in revenue from the additional tipping fee:

$16.94 million in the biennium

Amount generated to the environmental management account:

$2,310,800 in 2007-08

$3,080,000 in 2008-09

[JFC on an 8-8 vote left the tipping fee increases in the bill.]

Oil Company Tax
The Governor’s proposed tax on oil companies would create:

A 2.5 percent tax on the gross receipts of an oil company but would not include the sales of bio-diesel fuel or 85 percent ethanol fuel.

An anti-pass through provision. The tax would be assessed at the point of the first sale in the state but the legislation would mandate that the increased cost could not be passed on to the consumer. Under the proposal, oil companies could be assessed civil and/or criminal penalties.

The estimated increase to the transportation fund would be $116,710,000 in 2007-08 and $158,460,000 in 2008-09. This money would be deposited in the Transportation Fund. The budget proposal also converts $165 million in current general fund spending to be paid out of the Transportation Fund.

[JFC, on an 8-8 vote, left the oil company gross receipts tax and the shift of CPR costs onto the Transportation Fund, as proposed by the Governor, in the bill.]

Transfer from the Patients’ Compensation Fund
The Governor’s budget bill proposes to transfer $175,000,000 from the Injured Patients and Families Compensation Fund (“fund”). The fund was developed to provide excess medical malpractice coverage to participating health care providers for medical malpractice claims that would exceed the primary malpractice insurance that Wisconsin health care providers are required to maintain by law.

Revenue is generated for the fund by annual assessment paid by participating health care providers, and investment income generated by the assets in the fund. The proposed bill would transfer the $175,000,000 to the Health Care Quality Fund.

Total Proposed Amount:

One time transfer of $175,000,000

[JFC has not addressed the issue to date.]

Joint Finance Action on Transportation Finance
As predicted, the Joint Committee on Finance voted eight to eight to leave the Governor’s proposal to impose a gross receipts tax on oil companies in the current budget document. Under the proposal, the tax could not be passed on to the consumers. All eight Republicans supported a motion to remove the provisions and all eight Democrats opposed removal.

The action came after a flurry of activity that included three separate memoranda questioning the constitutionality of the Governor’s proposal. One memorandum, addressed to a labor organization, was written by former Democrat Attorney General Peg Lautenschlager and her former Deputy, Dan Bach, both of whom are practicing law with Lawton and Cates, a prominent Madison firm that has represented labor unions for years.

The second memorandum was written by Attorney David Crass of Michael Best & Friedrich and addressed to Wisconsin Manufacturers & Commerce (WMC).

The final memorandum was written by Bill Ford, Senior Staff Attorney for the nonpartisan Wisconsin Legislative Council, and was prepared at the request of Assembly Speaker Mike Huebsch.

All three memoranda place serious doubt on the constitutionality of the anti-pass through provision in the bill.

Ballast Water Debate Heats Up
On Thursday, May 23, the Senate Committee on Environment & Natural Resources held a public hearing on Senate Bill 119 that would prohibit oceangoing ships from using ports in this state without obtaining a permit from DNR to ensure DNR that its ballast water does not hold invasive species. The day before the hearing a coalition of 90 environmental groups issued a statement calling for all oceangoing/saltwater vessels to be locked out of the Great Lakes until Congress requires their ships to sterilize their ballast water.

The Wisconsin legislation would, of course, apply only to ports in Wisconsin. Proponents and opponents alike agree that aquatic invasive species are a problem and that federal action would be desirable. Proponents of the legislation believe that Wisconsin should move forward even if Congress and other states do not follow on the basis that the situation has reached crisis proportions.

Business and economic development groups oppose Wisconsin creating its own ban since it would put Wisconsin industries and port communities at a competitive disadvantage. These groups also suggest that the legislation ignores other vectors that have been ways of introducing invasive species in our lakes and the Great Lakes. These groups do support action at the federal level to avoid a patchwork of state laws that put their respective states and ports at a competitive disadvantage.

Rental Car Fee Increase Deadlocks in Committee
A motion to include a $13 car rental fee increase in the state budget lost on a tie vote--along party lines--in the Legislature's Joint Finance Committee this week. The proposed increase was directed at helping to finance a commuter rail line connecting Milwaukee, Racine and Kenosha in the proposed 2007-09 state budget.

The fee currently is $2 and the proposed $13 increase would have represented a 650 percent increase. The Democrats on the panel supported the fee increase, while the Republicans opposed it. The plan would have identified a “local” funding source that the transit authority would have used to apply for up to $50 million in bonds for the commuter rail project.

Doyle Signs Bills into Law
The following bills were recently signed into law by Gov. Jim Doyle:

Assembly Bill 36 allows the DNR to expedite urban forest grants to communities following catastrophic damage in an urban area for which the Governor has declared a state of emergency. Act 13
Assembly Bill 227 changes the minimum continuing education requirement for obtaining a building permit from six hours per year, to twelve hours every two years. Act 14
Senate Bill 7 cleans up technical language to clarify terminology affecting mobile homes, manufactured homes, modular homes, manufactured buildings, recreational vehicles, and mobile and manufactured home communities. It also makes minor changes to regulation and monthly fees. Act 11
Senate Bill 110 authorizes Department of Natural Resources to refuse to reveal the electronic mail addresses of persons who subscriber to its periodicals and other publications. Act 12
Senate Bill 180 exempts Tax Incremental District 3 in the city of Altoona from a 2001 statute requiring that a joint review board approve an amendment to a project plan not less than ten days nor more than 30 days after receiving the resolution to amend the plan from the common council for village board. Act 10

Wisconsin Supreme Court Rules on Worker’s Compensation Exception
Exceptions provided in the worker’s compensation statutes allowing one employee to sue another employee should be given a narrow interpretation according to a recent opinion handed down by the Wisconsin Supreme Court.

The court determined that Statute 102.03 provides the exclusive remedy for an employee against an employer, but provides exceptions for suits against co-employees in a few situations. The exception in front of the court was the right to bring a suit “against a co-employee for negligent operation of a motor vehicle not owned or leased by the employer.”

The court held that when an action is undertaken to provide maintenance or repair to a motor vehicle, while the condition of the motor vehicle is such that it could not be driven on a public roadway, the action does not constitute “operation of a motor vehicle.”

The court held that the purpose of the Worker’s Compensation Act is to 1) allocate the cost of workers’ injuries to the industry in which they occur and 2) to protect workers from the financial burdens of co-employee suits.

Wisconsin Women in Government Host Annual Banquet
Elizabeth Edwards spoke at Wisconsin Women in Government's annual fund-raising dinner last week, saying her husband, John Edwards, is the best presidential candidate for women. Despite a recurrence of her breast cancer, Edwards said she’s still campaigning, not, she says, for her husband, as much as for the uninsured and impoverished women in this country.

WWIG holds the annual dinner each year to fund a scholarship program for women interested in pursuing careers in government. Amy Boyer, of the Hamilton Consulting Group, has been a member of the board since 2004.

Hamiltonians in the News

Pat Osborne on River Alliance Board
Pat Osborne was recently made a member of the board of directors for The River Alliance of Wisconsin. Pat represents clients on various state legislative and regulatory issues including health, insurance, environmental, construction and general business matters.

The River Alliance is a non-profit, non-partisan group of citizens, organizations and businesses dedicated to advocating for the protection, enhancement and restoration of our rivers and watersheds.

Political News

Oil tax will only cost us at the pump (opinion): Green Bay Press-Gazette, June 1, 2007.

Oil profits tax advances: Milwaukee Journal Sentinel, May 31, 2007.

Proposed oil-profit tax slips up state budget process: Milwaukee Journal Sentinel, May 31, 2007.

The complicated oil tax argument (opinion): Beloit Daily News, May 31, 2007.

Former AG: Doyle's Oil Tax Won't Fly: Madison Capital Times, May 30, 2007.

State offers biofuel production guide: Green Bay Press-Gazette, May 29, 2007

Doyle versus the oil firms (opinion): Madison Capital Times, May 25, 2007.

Lock the lakes, groups say: Milwaukee Journal Sentinel, May 24, 2007

Oil tax seen as raising gas 7 cents: Milwaukee Journal Sentinel, May 23, 2007.

Prediction: Pumped-up gas price: Eau Claire Leader-Telegram, May 23, 2007.

Business group: Oil tax would raise gas prices: Appleton Post-Crescent, May 23, 2007.