Wisconsin Budget

2007-09 Wisconsin Budget Update

The Hamilton Consulting Group

July 2007

Economic Development Summary

Economic Development Promotion
Governor – Proposed providing $590,000 annually to create 2.0 positions for advertising, marketing and promotional activities in the U.S. to contribute to economic development in and business recruitment to Wisconsin. ForwardWisconsin’s $320,000 annual funding is continued.

Joint Finance – Voted 16-0 under Motion 300 to delete the above provision. Motion 300 then set aside $50,000 in the first year of the budget which could be used by Forward Wisconsin or the Department of Commerce to develop a distribution plan. JFC set aside $700,000 available in the second year of the biennium for ForwardWisconsin and/or Commerce after receipt of the plan. ForwardWisconsin funding continued. [See Paper 213]

Senate – Left JFC recommendation unchanged.

Assembly – Voted to delete the JFC provision that would place $50,000 GPR in 2007-08 and $700,000 GPR in 2008-09 in the Joint Committee on Finance supplemental appropriation. Reduced funding by $32,000.. [See Assembly 122]

County Levy Restraint Program (Tax Relief – Direct Aid Payments)
Governor - Creates a county levy restraint program that sets the limit for the appropriation at $15 million annually and set bonus payments at 10 million annually. This proposal will not come into effect until the next budget cycle because the first payments are not until 2009.

Joint Finance – Voted 8-8 on alternative 4 (which deletes the provision) and alternative 1 (which alters the funding formula and changes the definition of taxable value to exclude value increments, rather than tax increments). Because none of the votes passed, this provision was included as originally stated in the Governor’s budget. [See Paper 708]

Senate – No Change.

Assembly – Deleted the provisions recommended by the Governor and adopted by Joint Finance to create a county levy restraint program.

Municipal Levy Restraint Program and Sunset Expenditure Restraint Program
Governor – Proposal sets the distribution level for the municipal levy restraint payment account appropriation at $58,145,700 annually and the distribution level for the municipal levy restraint bonus payment account appropriation at $5,000,000 annually, both beginning in 2009.

Joint Finance – Deleted the provision. [See Paper 709]

Senate – Exclude county special charges from the limitation on 2006 municipal property tax levies if the special charge is identified as being for the recovery of unlawful real estate taxes on a municipality’s statement of taxes for 2006 that was filed with the Department of Revenue and the special charge resulted from a 2005 tax amount that was rescinded due to an error, as defined under current law provisions. This provision would change the levy law limit for 2006-07 to cause the property tax levies for 12 municipalities to comply with the limitation. [See Senate 129]

Assembly – Deleted provision proposed by Governor and replaced it with a provision to prohibit any city, village, town or county from increasing its municipal or county tax levy by more than a maximum allowable amount determined through formula. [See Assembly 147]

TID Closure Under Levy Limits
Governor – proposed changes to levy limit and TIF law, including ‘valuatin factor’ to alleviate problems associated with closure and levy limits in existing TIDs going forward and new TIDs that would be created.

Joint Finance and Senate – No provisions.

Assembly – Amends the Governor’s definition of “valuation factor” to include both new construction and 50 percent of the increased value in a TID that terminates.

Angel Investment and Early Stage Seed Investment Tax Credits
Governor – Proposed to increase the total amount of angel investment tax credits that can be claimed for all tax years by $17,500,000. Also increase the aggregate amount of tax credits that can be claimed each year after December 31, 2007 by $2,500,000.

Joint Finance – Defaulted to the Governor’s proposal.

Senate – Deleted the provisions included in the bill that would increase the maximum annual and total amount of angel investment and early stage seed investment tax credits. This would increase state income and franchise tax revenues by an estimated $2,800,000 in 2007-08 and $5,000,000 in 2008-09. The Senate voted to allow angel investment tax credits to be claimed under the individual income tax and is equal to 12.5 percent of the claimant’s bonafide angel investment made directly in a qualified new business venture in a tax year. The 12.5 percent tax credit can be claimed for two years, beginning with the tax year as certified by the Department of Commerce. Consequently, the tax credit is 25 percent of the amount invested. Unused credit amounts can be carried forward up to 15 years to offset future tax liability. The maximum aggregate amount of angel investment tax credits that may be claimed for a tax year is $3,000,000. The total amount of tax credits that may be claimed for all tax years is $30,000,000.

Assembly – Voted to modify the angel investment tax credit provisions to allow qualified investments in businesses engaged in the construction of power plants that derive energy from renewable resources to be eligible for the credit if the business meets all of the other eligibility requirements. The maximum annual limit on total angel investment tax credits ($3 million under current law, $5.5 million under the bill) would not be changed, so there would be no fiscal effect.

Wisconsin Development Fund
Governor – Provided $1,250,000 and $2,000,000 respectively to increase GPR funding for the Wisconsin Development Fund (Total funding $8,348,400 and $9,098,400). The Governor’s proposal would authorize Commerce to make manufacturing technology grants from the WDF of up to $1.5 million to assist manufacturers in adopting process improvements. The bill would increase the maximum grant to $600,000. The administration also indicates Commerce would provide $100,000 annually from the WDF to support a minority business development.

Joint Finance – Reduced the WDF increase by $250,000 and $2,000,000 each year and deleted the manufacturing technology grants earmark of up to $1.5 million annually. [See Paper 211 and JFC 132]

Senate – No change.

Assembly – Deleted the Joint Finance provision that would provide an additional $1,000,000 GPR to the Wisconsin Development fund in 2007-08. Also reduced the WDF by additional $209,800 GPR annually. [See Assembly 111]

Restructure Wisconsin Development Fund
Governor – Eliminated the current Wisconsin Development Fund (WDF) grant and loan programs, and established more general program criteria for distributing money. Under this program Commerce would be eligible to make grants and loans.

Joint Finance – Included the above provisions and also expanded the WDF Finance Board to include two legislative members (one from the Assembly and one from the Senate).[See Paper 214 and JFC 139]

Senate – No change.

Assembly – No change.

Wisconsin Venture Center
Governor – Required Commerce to organize an emerging industries development corporation as a nonprofit, for the purpose of promoting and supporting emerging industries. Commerce would be provided $1.0 million GPR annually for grants to the emerging industries development corporation. The Department would be required to make a one-time grant of $700,000 for start-up capital and administrative expenses. Beginning in 2008-09, the Department would be required to make an annual grant of $500,000 for operating expenses.

Joint Finance – Deleted the provision. [See Paper 212]

Senate – No change.

Assembly – 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. [See Assembly 123]

Manufacturing Extension Credit Grants
Governor – This provision was not in the Governor’s budget.

Joint Finance – Provided $350,000 GRP annually to increase funding for manufacturing extension center grants (total funding $1,200,000).[See Paper 214 and JFC 133

Senate – No change.

Assembly – No change.

Sales and Use Tax Exemptions for Biotechnology
Governor – Created five sales and use tax exemptions related to biotechnology. Three of the exemptions would apply directly to biotechnology businesses, while the other two would apply with respect to businesses raising laboratory animals to be sold primarily to biotechnology businesses or higher education institutions or governmental units for use in qualified research or manufacturing.

Joint Finance – Adopted the Governor’s provision with some recommended technical changes and estimated the loss in sales and use tax revenue. [See Paper 331 JFC 242]

Senate – No change

Assembly – Voted to delete the provisions. This would increase sales and use tax revenues by $3,300,000 in 2007-08 and $4,500,000 in 2008-09.

Training Program Grants (Wisconsin Technical College System)
Governor – Provided $2,000,000 in 2007-08 and $4,000,000 in 2008-09 respectively in GPR for training program grants, which would fund skills training or other education related to the needs of business. Annual base level funding for the program, also known as jobs advantage training grants, is $1,000,000.

Joint Finance – Deleted $1,000,000 in 2007-08 and $2,000,000 in 2008-09. Also earmarked 50% of the remaining increase with a series of Grant eligibility requirements. In order to be eligible for the grant, the employer that would receive skills training or education from a technical college district once the business is located in this state must satisfy either of the following criteria: (a) has no more than 100 employees; or (b) had no more than $10,000,000 in gross annual income in the prior year. [See Paper 871 and JFC 715]

Senate – No change

Assembly – Deleted the Joint Finance provision that would increase funding which leaves the base level funding of $1,000,000 intact. Further requires that 2/3 of the amount awarded each year must be used for small businesses employing less than 100 persons. [See Assembly 27]

Beloit Development Opportunity Zone Extension
Governor – Increased the term of designation of the Beloit development opportunity zone from seven to nine years. As a result, the Beloit zone would expire on September 1, 2010. In addition, the total amount of tax credits that could be claimed by businesses in the zone went from $4,700,000 to $6,700,000.

Joint Finance – Adopted the Governor’s provision. [See Paper 327]

Senate – No change

Assembly – Deleted the governor’s provision.

Enterprise Zone Jobs Credit Modifications
Governor – Modified a number of the provisions including changing the method of calculating the jobs tax credit, eliminating the supplemental payroll and property credit, and altering definitional and administrative provisions.

Joint Finance – Approved Governor’s proposal. [See Paper 322]

Senate – No change

Assembly – Modified enterprise zone provisions to require that the enterprise zone program be named the “rural enterprise zone program” and the tax credit the “rural enterprise zone tax credit”, and to specify that a rural enterprise zone could not include any city of the first class, or a city with a population greater than 200,000. [See Assembly 40]

Dairy Manufacturing Facility Investment Tax Credit
Governor – Create a dairy manufacturing facility investment tax credit equal to 10% of the amount paid for dairy manufacturing modernization or expansion. The tax credit could be claimed for tax years 2004 through 2014, with a $200,000 cap and 15 year carry-forward for unused credits.

Joint Finance – Adopted the provision with a technical clarification that stated the credit was for manufacturing facilities. [See Paper 326 and JFC 236]

Senate – No change

Assembly – Increased the tax credits to $600,000 for 2007 tax year and to $700,000 for tax years 2008-2014 and made the tax credits refundable. [See Assembly 40]

Streamlined Sales and Use Tax
Governor – Modify Wisconsin's sales and use tax laws to conform to the provisions of the Streamlined Sales and Use Tax Agreement (SSUTA) and create a sum sufficient PR appropriation for the purpose of paying associated annual fees and provide funding of $20,000 and $40,000.

Joint Finance – Approved the Governor's proposal with technical modifications requested by the administration. [See Paper 332 and JFC 245]

Senate – No change.

Assembly – Deleted the Joint Finance provisions.

Sales Tax on Digital Products
Governor – Imposed the state's 5% sales and use tax on the privilege of selling, licensing, leasing, or renting specified digital goods or additional digital goods at retail. The bill also imposed the 5 percent use tax on the storage, use, or other consumption of specified digital goods or additional digital goods purchased from any retailer, regardless of whether the purchaser has the right to permanently use such goods or whether the purchaser's right to access or retain such goods is not permanent. The bill contains exemptions.

Joint Finance – Approved the Governor's proposal, including a number of technical corrections requested by the administration. Reduced the estimated sales and use tax revenues to reflect more conservative estimates. [See Paper 330 and JFC 239]

Senate – No change

Assembly – Deleted the Joint Finance provision.

Financial Assistance Program and Report Consolidation
Governor – No provision.

Joint Finance – No provision.

Senate – No provision.

Assembly – Eliminated and consolidated a number of Department of Commerce and other agency financial and technical assistance programs and reports. Eliminated the Department of Agricultural and Consumer Protection -- Sustainable agriculture grants, the Wisconsin Housing and Economic Development Authority -- Beginning farmer program, some of the Department of Commerce -- Minority nonprofit corporation grants and loans. In addition, authority, to retain WDF funding for administrative costs would be deleted and current law economic development reporting requirements would be consolidated. In addition, all state agencies were required to develop clear, measurable goals tied to the grant and loan programs administered. [See Assembly 123]

Youth Apprenticeship Program
Governor – Provided $412,600 and $1,216,800, to increase funding for the youth apprenticeship program which is a two-year program that combines academic and technical instruction with mentored on-the-job learning for high school students.

Joint Finance – Adopted the Governor's recommendation, but place $87,600 and $116,800 by year in the workforce development general program operations appropriation and place the remaining $325,000 and $1,100,000 in the local youth apprenticeship grants appropriation. [See Paper 338 and JFC 728]

Senate – No change

Assembly – Voted to maintain the base funding of $1,100,000 annually for the youth apprenticeship program. This decreases the Joint Finance funding by $412,600 in 2007-08 and $1,216,000 in 2008-09, and 2.0 positions would be eliminated each year. [See Assembly 50]