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Dec. 1, 2006

This has been a very exciting year for The Hamilton Consulting Group. We recently announced a joint enterprise (hamilton.gsp) with GSP Consulting, Pittsburgh, PA. (See Press Release). Today we are pleased and honored to announce the addition of Henry Sanders to the Hamilton team. Henry brings an varied background and policy perspectives on economic development, a focus of Hamilton Consulting for over 25 years. The addition of Henry to our firm will enhance services to our existing clients and contribute to our new hamilton.gsp venture.

Sanders to Join Hamilton Consulting Group: Press Release, Nov. 30, 2006. Public policy, economic development leader will focus on hamilton.gsp services.

Sanders to head venture to attract funding: Wisconsin State Journal, Dec. 1, 2006.Henry Sanders Jr. will lead hamilton.gsp, a joint venture that says it will bring more government dollars to Wisconsin's bioscience and technology companies.

During the past week, leaders in both houses of the Legislature announced the members who will serve on the budget-writing Joint Committee on Finance (JFC). Thought to be the most powerful state legislative committee in the country, the newly designated members have begun reviewing agency “requests” which are now in the hands of the Department of Administration and Governor, who will review those requests and submit the next biennial budget proposal to the Legislature  in February 2007.

Wisconsin’s Joint Finance Committee’s power ranking is based on the fact that its budget writing authority includes revenue raising and spending (appropriations), “powers” that are split between two committees in other legislatures, including Congress. The ultimate power of final adoption of the budget, of course, resides in the full Legislature - Assembly and Senate.

While development of a state budget is never easy, JFC will face additional challenges this year since the make-up of the committee is split evenly (8 and 8) between the two political parties. Also, as noted below, there is an estimated $1.6 million gap between state agency requests and estimated revenues, something that the Governor will get first crack at.

Policy Developments

Budget Challenge Faces the Governor and the New Joint Finance Committee
A report issued by the Wisconsin Dept. of Administration (DOA) shows a projected 1.6 billion deficit at the end of FY 09 based on state agency budget requests and anticipated tax collections for the next biennium.

The major GPR spending increases requested by agencies include the following:

• DPI - $662 million GPR; including $422 million in general equalization aids to fund approximately 2/3 of school funding.

• DHFS - $343 million GPR over the biennium for increasing costs of Medicaid ($305 million) BadgerCare ($16.6 million) and SeniorCare ($21.3 million).

• UW System - $85 million GPR to go along with an additional $35 million in tuition fee increases for a total GPR/Fee request of $120 million.

• Corrections - $247 million GPR (13.2% increase) to meet current operations and commitments; including the addition of 311 positions by the end of the biennium.

In total, these four agency requests alone represent a GPR increase of $1.337 billion over the current budget.

On the revenue side, growth in tax collection over the next biennium is projected to increase by $450 million in FY 08 (3.6%) and by $522 million in FY 09 (4.0%).  Revenue growth has been heavily relied upon in past budgets to address structural imbalances and use of one-time funding fixes. The balancing impact of revenue growth is tempered this coming biennium by the ongoing implementation of phased-in tax cuts enacted over the last four years. The growth estimates above reflect over $600 million in such tax reductions in the next biennium.

The use of transfers from segregated funds, such as the transportation fund, to help balance the general fund will also be constrained this coming budget. Over the course of the last two budgets more than $1.1 billion has been shifted from the transportation fund to the general fund. Reliance upon such transfers in the upcoming budget should be discouraged given the current condition of the transportation fund, which is showing a projected $88 million deficit by the end of the current fiscal year. (See related Tidbits article on DOT Budget Deficit, below).

Governor Doyle and the incoming Speaker of the Assembly, Rep. Mike Huebsch, have made it clear that they do not support tax increases to balance the next budget. What is presently not clear, and what will evolve over the course of the next several months, is precisely how the Governor and the new budget-writing committee propose to meet the considerable budget challenges they now face.

DOT Budget Deficit to Result in Project Delays
A report by the Legislative Fiscal Bureau regarding transportation issues has confirmed earlier projections of a Department of Transportation (DOT) budget deficit of $88.6 million at the end of 2005-07 biennium. Due primarily to a reduction in the consumption of motor fuel, this review projects a transportation fund deficit of $34.3 million at the end of 2005-06 and an additional imbalance of $54.3 million in 2006-07, resulting in a cumulative deficit of $88.6 million at the end of 2005-07 biennium.

The DOT has indicated that highway program expenditures will be reduced by $50 million in 2006-07. The remaining required savings would have to be generated from lapses from annual and biennial appropriations. The total reduction in the state highway rehabilitation program is $25.5 million.

Gov. Jim Doyle and most lawmakers oppose raising the 32.9-cent-a-gallon gas tax, one of the highest in the nation. A recent proposal by the Department of Transportation to raise the vehicle registration fee from $55 to $80 a year has also been met with disapproval. Doyle has said he would support a fee increase of about $10 but that $25 was too much.

The Committee on Transportation Needs and Financing, also known as the Road to the Future Committee, was formed this year to find ways to save money on highways and transit projects and come up with new ways to fund them. The Committee has scheduled a public hearing on Phase Three, financing of roads, for 1 pm, Tuesday, December 5.

Report: Wisconsin Expected to Show Moderate Growth in Next Biennium
The Wisconsin Economic Outlook report [Full Report, pdf doc, 33 pgs] [Wisconsin Report] released recently by the Wisconsin Department of Revenue suggests that Wisconsin will follow national trends and experience moderate growth through 2007.

According to the report, the Wisconsin economy is expected to maintain relatively strong income and employment growth, contributing to expected revenue increases of 3.6 percent in Fiscal Year 2008 (FY08) and 4.0 percent in FY09. Total personal income is expected to grow 5.4 percent in 2006, followed by slower but healthy growth in 2007 of 4.8 percent and 4.7 percent in 2008.

Employment growth is projected to be 1.0 percent in 2006, slowing to 0.6 percent in 2007. The return to more normal growth trends should produce employment growth of 1.1 percent in 2008 and 1.2 percent in 2009. A downturn in the housing market and a more cautious consumer has contributed to the national slowdown. However, business capital spending and exports are expected to support further growth.

“The Wisconsin Economy is feeling the impact of a slower national housing market, but our economy is well-positioned to reverse that trend and continue to show solid growth in the next biennium, “said Revenue Secretary Michael L. Morgan.

Insurance Commissioner Resigns
The state Insurance Commissioner, Jorge Gomez, has resigned from the position to return to the private sector. Governor Doyle’s office as said he will be leaving in mid-December and that a replacement will be named soon.

Gov. Doyle appointed Jorge Gomez in 2003. The Office of the Commissioner of Insurance is responsible for examining industry financial practices and market conduct, licensing agents, reviewing policy forms for compliance with state legislation, investigating consumer complaints and providing consumer information.

Gomez is a 1979 graduate of Pitzer College and received a law degree from the UW Law School in 1986.

Erpenbach Proposes Elimination of Sales Tax Exemptions
Sen. Jon Erpenbach (D-Middleton) announced plans to introduce a measure in the next session that would cancel many sales tax exemptions while continuing to exempt “necessities of life,” such as food, drugs and health care services, shelter and agricultural products.

Although it would still cause consumers to pay more for some goods and services that are now exempt, Erpenbach said that he hopes it would raise enough new money to remove the financing of public schools from the property tax - a tax shift of more than $3 billion.

The Wisconsin Counties Association announced its support for a modified version of the elimination of sales tax exemptions on services.

Rep. Michael Huebsch (R-West Salem), Speaker-elect of the Assembly, stated that he and the Assembly Republicans are more than willing to work on fixing the deficit, but not by raising taxes, which the Erpenbach proposal would do. Wisconsin Manufacturers & Commerce (WMC) said it would fight moves to repeal sales tax exemptions.

Governor Doyle’s reaction was also unenthusiastic, noting that consumers ultimately pay for sales tax exemptions that are lifted. He stated that he is open to proposals that will relieve the burden on property taxpayers but he would like to see a guarantee of direct property tax relief.

Wisconsin Politics

Joint Finance Members Appointed
Assembly Speaker-elect Mike Huebsch (R-West Salem) has named Rep. Kitty Rhoades (R-Hudson) to co-chair the Joint Committee on Finance. Rhoades is the first Assembly Republican woman to chair the powerful budget writing committee. Huebsch named Rep. Dan Meyer (R-Eagle River) as vice-chair.

Additional Assembly Republicans named to the committee are Reps. Jeff Stone (R-Greendale), Steve Kestell (R-Elkhart Lake), Scott Suder (R-Abbotsford) and Robin Vos (R-Caledonia).

Incoming State Senate Majority Leader Judy Robson named five Democratic Senators as members of the Joint Finance Committee. Robson appointed State Sens. Dave Hansen (D-Green Bay), Bob Jauch (D-Poplar), Mark Miller (D-Monona), Lena Taylor (D-Milwaukee), and Senator-elect John Lehman (D-Racine). Senator Russ Decker (D-Schofiel) was previously selected to serve as the Senate Co-Chair.

In addition to handling the budget every two years, the Joint Committee on Finance works on all legislation that deals with state income and spending. By law, any bill introduced in the legislature that appropriates money, provides for revenue or relates to taxation must be referred to the joint committee. Eight members from the State Senate and eight members from the State Assembly make up the committee.

Representative Rhoades Profile
(The last issue of Tidbits contained leadership profiles, including the Senate co-chair of Joint Finance. Rep. Rhoades was just appointed Assembly co-chair this week. Her profile follows.)

As noted, Speaker-elect Mike Huebsch selected Kitty Rhoades (R-Hudson) to serve as the Assembly Co-Chair of the powerful Joint Committee on Finance for the 2007-08 legislative session. Rep. Rhoades, who is currently serving as a member of Joint Finance, was first elected to the Assembly in 1998.

Among other legislative assignments, Rhoades is a member of the Board of Forward Wisconsin. Kitty has a Bachelor’s degree from UW-River Falls and a Master’s degree from Illinois State University. She has served professionally as a consultant, educator, small business owner and Chamber of Commerce president.

Ray Taffora Named Deputy Attorney General
On Nov. 21, Attorney General-Elect J.B. Van Hollen named Michael, Best and Friedrich attorney, Raymond P. Taffora, to serve as his Deputy Attorney General. Taffora, who has been in private practice since 1991, served four years as Legal Counsel to Gov. Tommy Thompson. Among his duties as legal counsel, Ray served as the Governor’s liaison to the Department of Justice.

Taffora has an undergraduate degree from UW-Madison and a J.D. from the University of Wisconsin Law School where he is currently a member of the Board of Visitors. His private practice has had an emphasis on government and public policy and his government experience included chairing the Pardon Advisory Board and work with the Judicial Selection Advisory Council.

Doyle Names Transition Team
Gov. Jim Doyle has announced the transition team for his second term and appointed Michael Morgan, Secretary of the Department of Revenue, chairman of the team. Morgan also served as co-chair of Doyle's transition team in 2003 where he helped form the current Cabinet.

In addition to Morgan, the transition team includes:

• Jennifer Donnelly, Division Administrator at the Department of Administration. In addition to 16 years of private sector experience, Jenny previously served as executive assistant in the Department of Health and Social Services and chief of staff to the Senate Majority Leader.

• Jason Helgerson, Executive Assistant at the Department of Health and Family Services. Helgerson has held the same position at Revenue and worked for the mayors of Milwaukee and San Jose, California.

• Aaron Olver, Senior Advisor for the Office of the Governor. Aaron most recently served on Governor Doyle’s re-election campaign and previously served as executive assistant at Commerce. He is a senior advisor to the Governor.

The transition team will assess agency challenges and opportunities as well as find and recruit individuals to fill vacancies within the administration.

Van Hollen Names Transition Team
Wisconsin Attorney General-Elect J.B. Van Hollen has named his own transition team as he prepares to assume the office of Attorney General in January 2007.

Co-chairing the transition team will be former DOJ Special Prosecutor Doug Haag and DeWitt Ross & Stevens attorney and former Governor Thompson cabinet official and Legal Counsel Don Bach.

Doug Haag is a career special prosecutor who has been with the AG’s office since 1972. His concentration has been in criminal law, including the entire spectrum of criminal law cases, from drugs to business executives to terrorists.

Don Bach has significant private practice and government experience, both in the Governor’s office and the Administration.

Joining Haag and Bach are the following transition team members:

• Ave M. Bie - attorney, Quarles and Brady and former Chair of the Public service Commission.

• Gary Hamblin - Dane County Sheriff.

• Carrie Schneider - Outagamie County District Attorney.

The committee will be assisted by Deputy-Designate, Ray Taffora.

Lawmakers to Re-introduce Campaign Finance Reform Legislation
Rep. Mark Pocan (D-Madison) and Sen. Fred Risser (D-Madison) have announced they will introduce a bill that will provide for full public funding of elections.

Patterned after laws in Maine and Arizona, the Clean Elections Fund would provide 100 percent public financing for state political campaigns for the State Assembly, Senate, and other state elections including the governor’s office. Under the bill, a candidate would have to gather a certain amount of $5 donations from residents in their districts and then be approved. Different positions would have spending limits.

Doyle Announces Inauguration Team
Gov. Jim Doyle recently announced his inauguration 2007 team, and appointed Katie Boyce as director of the Inaugural Committee. Governor Doyle’s inauguration is set for Jan. 3, 2007 in Madison.

Following the tradition set four years ago by Gov. Doyle, the Boys & Girls Club of Kenosha is sponsoring this year’s inaugural events. The Inaugural Committee will once again raise money to help cover expenses of the events and will donate all remaining money to the Boys & Girls Clubs of Wisconsin for statewide distribution to all their clubs.

In addition to Boyce, the Inaugural Committee includes:

• Teresa Clegg

• Melanie Fonder

• Katie Genereux

• Ben Nuckels

• Shannon Loredo

• Molly Walsh

Falk/Voight Formally Concede – Recounts Confirm Seats in Assembly Races
Attorney General candidate Kathleen Falk and State Treasurer candidate Jack Voight, who each trailed their opponents by relatively small margins in initial election counts, have conceded and have chosen not to seek recounts.

Recounts were ordered in the 43rd, 47th, 88th, and 96th Assembly District races. The preliminary results in these districts were:

• 43^rd: Kim Hixson (D) 10,287 v. Debra Towns (R) (Incumbent) 10,278 (revised)

• 47^th: Eugene Hahn (R) (Incumbent) 12,088 v. Meagan Yost (D) 11,934

• 88^th: James Soletski (D) 8,927 v. Judy Krawczyk (R) (Incumbent) 8,840

• 96^th: Lee Nerison (R) (Incumbent) 9,782 v. Gail Frie (D) 9,352

Rep. Krawczyk has since conceded.

On Monday, Nov. 27, Democratic candidate Meagan Yost of Poynette called off the recount. District wide, Hahn earned 12,104 votes to Yost's 11,938, a difference of 166 votes. Before the recount, the two had been separated by 154 votes.

After a day-long recount on Nov. 20, Kim Hixson picked up eight additional votes for a total of 496 ballots and Debra Towns garnered two more to earn 359 total.

The recount in the 96^th District has confirmed that Lee Nerison will retain his seat.

If one of the candidates is not satisfied after the recount, an appeal can be made to the circuit court. On December 1, the State Elections Board will certify the election results and make them available on their Web site.

Political News

Elections Board moves toward more disclosure: Milwaukee Journal Sentinel, Nov. 30, 2006.

Doyle wants to keep sick leave perk: Milwaukee Journal Sentinel, Nov. 30, 2006.

A plum pick for Lehman: Racine Journal Times, Nov. 28, 2006.

Jauch appointed to Joint Finance Committee: Ashland Daily Press, Nov. 28, 2006.

Let's close political No Call loophole (opinion): Green Bay Press-Gazette Nov. 28, 2006.

Let’s identify problem before treating symptom (opinion): Ashland Daily Press, Nov. 27, 2006.

Hraychuck eyes Madison: Burnett County Sentinel, Nov. 27, 2006.

State lawmakers accrue sick leave instead of claiming it: Janesville Gazette, Nov. 27, 2006.

State formula for roads needs repairs (opinion): Wisconsin Rapids Tribune, Nov 27, 2006.

Fund reaches out to firms run by women: Milwaukee Journal Sentinel, Nov. 27, 2006.

Sales tax exemptions come under scrutiny: Milwaukee Journal Sentinel, Nov. 27, 2006.

Legislator calls for eliminating many sales tax exemptions: Janesville Gazette, Nov. 27, 2006.

Mr. Speaker: Huebsch has new responsibilities: La Crosse Tribune, Nov. 26, 2006.

Upcoming Fundraisers

Dec. 8

• Scott Walker, Milwaukee Co. Exec, Milwaukee

Dec. 13

• Sen. Bob Wirch (D-Kenosha), Madison

For details, go to Hamilton Consulting Fundraiser Calendar.