Political Tidbits

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July 11, 2007

On Tuesday, July 10, the State Assembly debated and passed its version of the 2007-09 biennial budget bill on a 51-44 vote. The Republican crafted budget differs substantially from the Senate passed version - setting up a lengthy and contentious list of issues that will have to be addressed in conference committee.

The primary points of difference continue to center on tax policy. The Assembly budget contains no new tax increases and did not contain the Senate universal health care plan (and associated $15.2 billion in payroll taxes).

The Governor’s proposed oil gross receipts tax, hospital gross receipts tax, cigarette and tobacco products tax increase, all contained in the Senate budget, are deleted by the Assembly.

The Assembly version contains a number of tax reductions - such as federal treatment of Health Savings Accounts (HSA’s), exclusions for retirement income, angel investment credits and workplace wellness tax credits - further widening the gap between the two houses on tax policy.

In Health Care, the Assembly version sets up a major battle with the Administration by deleting the Governor’s expansion of medical assistance to cover all children and certain farmers and childless adults known as BadgerCare plus. In this area of the budget the Assembly Republicans are flanked by the Senate Democrat universal health care plan. Funding the base MA program represents another substantial difference with the Governor and the Senate, relying on new taxes (hospital tax, tobacco taxes and Patients Comp Fund Transfer) to replace roughly $700 million in base GPR pulled out of the program and the Assembly restoring that base GPR in lieu of new tax revenue.

In Transportation, the Senate budget provides more funding for DOT programs but uses oil gross receipts tax and, indirectly, combined reporting to fund their plan. The Assembly version contains neither new tax. The Senate eliminates $90 million of the $165 million in GPR shifts to the segregated transportation fund, (first year only with zero the 2^nd year) while the Assembly deletes the transfers altogether. Both houses incorporated a heavy truck registration fee increase with the Senate at 10 percent and the Assembly at 15 percent. Conference committee negotiations in this area will continue to focus on the level of funding increase and the mix of various revenue sources to support that funding level.

In Education and Property Taxes, the Assembly reduced funding for general school aides, shared revenue and the UW system compared to the Senate. In addition, the Assembly deleted JFC provisions relating to a new first-dollar school levy credit and instead increased the current school levy credit distribution. Other major points of contention include Assembly levy limit provisions (limiting levy limit increases to the growth in value of new construction), deletion of the Governor’s proposed Wisconsin Covenant and maintaining the Qualified Economic Offer (QEO) per current law with regard to teacher compensation.

In addition to major differences, both houses have armed themselves with a number of separate policy items to leverage negotiations in conference committee. Many of these items have already been introduced in one house or the other as separate legislation and include issues ranging from insurance coverage mandates, to the timing of MA payments, to extending the timeline for implementing Smart Growth, to manufacturer’s product liability provisions and more.

Both the degree of difference and the number of differences point to a long summer of conference committee deliberations. The appointment of the conference committee members and the start of those deliberations are pending. Following action on the state budget, the Assembly passed AJR 59, establishing a conference committee of three majority and one minority member from each house. The Senate is expected to schedule that resolution soon.

We at HCG are working on a detailed, comprehensive Budget Update that will contain additional information and links to actual language/motions adopted. The document should also be an aid to following the deliberations of the soon-to-be established Senate/Assembly Conference Committee. We hope to have the Budget Update finished within the next few days.

Budget Amendment Documents

Budget Update

2007-09 Budget

The following is a continuation of our budget coverage of key items, including the status of major new funding sources proposed by Governor Doyle when he transmitted his proposed budget in February. As noted above, the most recent action is that of the Assembly from Tuesday, July 10. (NOTE: JFC refers to the Joint Finance Committee)

Major Proposed New Funding Sources:

(Please see June 1 issue of Tidbits for greater detail on the proposed new funding sources.)

Real Estate Transfer Fee
Governor - Increase the amount paid by sellers in all real estate transfers (personal dwellings and commercial buildings) from $3 to $6 per $1000 value transferred.

Joint Finance - No Change

Senate - No Change

Assembly-Reduce the real estate transfer fee from $3 per thousand to $2 per thousand and reduce the state’s share from 80 percent to 60 percent, until 2010-11, at which time the rate is reduced to $1 per thousand and the county gets 100 percent of the rate.

Vital Records Fees
Governor - Increase fees relating to vital records (includes birth, marriage, divorce and death certificates)

Joint Finance - Rejected the increases and agreed to maintain current law.

Senate - Same as Joint Finance.

Assembly-Same as JFC & Senate

Hospital Tax
Governor - Create a tax on the gross revenues of hospitals not to exceed 1 percent.

Joint Finance - No Change

Senate - Essentially no change; some language changes.

Assembly-Delete the tax on hospitals

Cigarette Excise Tax
Governor - Raise cigarette tax from $0.77 to $2.02 and raise tobacco products tax from 25 percent to 65.5 percent of the manufacturer’s established list price.

Joint Finance - No Change.

Senate - No Change.

Assembly-Delete the tax increase

Automobile and Light Truck Vehicle Registration Fees
Governor - 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

Joint Finance - No Change

Senate - Increase the fee schedule for trucks over 8,000 pounds by 10% netting an additional $26 million for the Transportation Fund.

Assembly-Adopt the increased fees and increase the heavy truck fee by 15% instead of 10% and increase the standard vehicle title fee to $38.50

Tipping Fees
Governor - 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.

Joint Finance - No Change

Senate - Would increase the fee by an additional $4 to $10 per ton.

Assembly-Delete the increase fees

Oil Company Tax
Governor - 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 that would mandate that the increased cost could not be passed on to the consumer subject to civil and/or criminal penalties.
And would convert $165 million in current general fund spending to be paid out of the Transportation Fund.

Joint Finance - No Change.

Senate - Would modify the oil company tax to create a graduated scale of rates at which gross receipts would be assessed from 0 percent to 3 percent, based on each supplier’s annual amount of gross receipts rather than a straight 2.5%.

Assembly-Delete the gross receipts tax on oil companies, including the anti-pass through; delete the $165 million transportation fund spending on general fund programs and place a restriction on the use of transportation fund dollars; and, require transfer of sales tax on vehicles and related products to the transportation fund.

Transfer from the Patients’ Compensation Fund

Governor - Proposes to transfer $175,000,000 from the Injured Patients and Families Compensation Fund.

Joint Finance - No Change

Senate - No Change

Assembly-Delete the transfer

Other Items:

Combined Reporting

Governor - No provision.

Joint Finance - Not included.

Senate - Includes imposition of combined reporting for corporate income taxation beginning in tax year 2008. This 10% corporate tax increase is estimated to raise approximately $90 million.

Assembly-Combined reporting is not included.

Universal Health Care

Governor - No provision

Joint Finance - No provision

Senate - Includes a universal health care plan that creates a payroll tax formula for Wisconsin businesses and employees. The estimated cost is $15.2 billion. (see attached Healthy Wisconsin Plan update for further information)

Assembly-The Senate’s Universal Health Care Plan is not included.

Kenosha-Racine-Milwaukee Commuter Rail

Governor - No provision

Joint Finance - No provision

Senate - Allows the Southeastern Wisconsin Regional Transit Authority to assess a $15 rental car tax on every car rental in the three-county area to fund the development and construction of the KRM commuter rail line.

Assembly-Senate authorization for increased tax on car rental companies in Southeastern Wisconsin is not included.

Domestic Partner Benefits

Governor - Provide health insurance coverage for domestic partners of state employees and state annuitants.

Joint Finance - Delete provision

Senate - Restores Governor’s recommendation and further allows local governmental employers to participate in the same group health insurance program for domestic partners.

Assembly-The provision is not included.

Required Health Insurance Coverage for Autism Disorders

Governor - Require every health insurance policy and every self-insured health plan to provide coverage of treatment for autism disorders. Required coverage does not apply to a disability insurance policy that covers only certain diseases; a health care plan offered by a limited service health organization, or by a preferred provider plan that is not a defined network plan; a long-term care insurance policy; or a Medicare replacement policy or Medicare supplement policy.

Joint Finance - Delete provision.

Senate - Restores Governor’s recommendation.

Assembly-The provision is not included.

School Choice
Governor - Provide $10 million in 07-08 and $18.7 million on 08-09 over the base year funding of $108 million in the appropriation for payments for the Milwaukee parental choice program. Further modifies the funding split for the Milwaukee parental choice program beginning with the 07-08 school year (55% for the first 15,000 pupils).

Joint Finance - No change

Senate - Deletes the provision modifying the funding split for the program resulting in an increase in the JJPS choice levy by $8 million in 07-08 and $12 million in 08-09.

Assembly-Adopt senate position, and--provide for annual pupil increases beginning in 2008-09 and allows high schools in Milwaukee county to participate in the program.

Forward Wisconsin/ Commerce

Governor -

Maintain current $320,000 funding for Forward Wisconsin
Increase the Commerce budget by $590,000 per year for marketing and two positions

Joint Finance -

Maintain current funding for Forward
Remove the $590,000 annually for Commerce
Provide $50,000 to Forward and Commerce to develop an updated marketing plan for Wisconsin
Set aside $700,000 in a supplemental appropriation to be allocated by Joint Finance to Forward or Commerce or both after receipt of the updated marketing plan.

Senate - No Change from Joint Finance

Assembly-Delete the $50,000 plan money and the $750,000 set aside

Angel Investment & Early Stage Seed Investment Tax Credits

Governor -

Increase the total amount of angel investment tax credits that can be claimed for all tax years by $17,500,000.
Increase the aggregate amount of tax credits that could be claimed each year after 12/31/07 by $2,500,000.

Joint Finance - No change to the Governor’s proposal.

Senate - Delete the provisions.

Assembly - Include Governor/JFC but -- Specified that the state could not provide funding for a venture center, if a venture center was established, unless it was established as a non-governmental organization with a mission to facilitate access to venture capital for Wisconsin based businesses.

Wisconsin Development Fund—Renewable Energy Grants and Loans

Governor - Include $15 million in new annual revenues for grants and loans for renewable energy as part of the Wisconsin Development Fund.

Joint Finance - Deleted the provision.

Senate - Restores the Governor’s recommendations.

Assembly-The provision is not included.

TID Closure Under Levy Limits

Governor - Proposes changes to levy limit and TIF law, including “valuation factor” to alleviate problems associated with closure and levy limits in existing TIDs going forward and new TIDs that would be created.

Joint Finance - No change

Senate - No change

Assembly-Delete the provisions and substitute Assembly version re levy limits with exclusions, including TIF.

Manufacturing Extension Center Grants

Governor - No provision.

Joint Finance - Provides $350,000 GPR annually to increase funding for manufacturing extension center grants to $1.2 million annually

Senate - No change to Joint Finance.

Assembly-No change.

New Assembly Items:

Seller/Manufacturer Liability

Governor/Joint Finance/Senate- - - No provision

Assembly- Provide, with a very narrow exception, that the seller or manufacturer of a product may be held liable only after proof of actual causation, thereby limiting the Thomas “risk contribution” decision.

Health Savings Accounts

Governor/Joint Finance/Senate- No provision

Assembly-Provide a tax exclusion for health savings accounts.

Workforce Wellness Tax Credit

Governor/Joint Finance/Senate- No provision

Assembly- Create a workplace wellness tax credit for employers who provide employees with workplace wellness programs.

Retirement Income Tax Exclusion

Governor/Joint Finance/Senate- No provision

Assembly-Provide an individual income tax exclusion beginning at $500 in 2008 and increasing annually.

Political News

Assembly OKs its version of budget: Wisconsin State Journal, July 11, 2007.

Assembly approves pinching taxes: Milwaukee Journal Sentinel, July 10, 2007.