What Happens First: State Budget or Foxconn?

It was a big week for Wisconsin with the announcement of Foxconn’s $10 billion investment in a new manufacturing facility in Wisconsin. The governor and Republican legislators were quick to deem the announcement as “transformational” and “historical”, praising the potential investment and job creation with palpable excitement. Meanwhile, some Democrats voiced concerns over the overall cost of the incentive plan, a perception of how Foxconn treats employees, and the speedy legislative push to push the incentive package through.

Trying to lock up the deal quickly, the governor announced a Special Session, and Assembly leaders immediately acted on the directive, scheduling a public hearing on August 3. Assembly Speaker Robin Vos (R – Rochester) has indicated that the Assembly may take the bill up on the floor by mid-August.

While the Republican Senate and Assembly legislators seem to be on the same page regarding the content of the Foxconn economic package, the houses remain at odds over prioritizing the Foxconn bill before the completion of the 2017-19 state budget, which was due on July 1.

The divide over process turned public this week when Senate Majority Leader Scott Fitzgerald (R – Juneau) told the press his caucus is focused on the state budget. In contrast, Speaker Vos stated that the Assembly is prioritizing the Foxconn bill. On Wednesday August 2, the governor weighed in suggesting the legislature could do both at the same time.

Even with the timing of Foxconn bill versus budget in dispute, it remains unclear even how close legislative leadership are on a budget deal. Before the Foxconn announcement, many thought the budget stalemate may have been close to over, with the governor offering up the $203.5 million he had proposed for income tax cuts for road projects. The Assembly Republicans accepted the offer, but the Senate Republicans have not accepted that plan and appear to have a narrower window for a budget that can pass their caucus.  Their likeliest path to passage includes elimination of the personal property tax as well as enough transportation bonding to finish a few select road projects.

Although separate bills, the Foxconn economic package and state 2017-19 budget are not entirely mutually exclusive. The Legislative Fiscal Bureau’s (LFB) full fiscal analysis has not been completed, but in their initial summary, LFB did highlight some, although not large, 2017-19 budget impacts.

For one, the Foxconn bill authorizes $252 million in general-fund-supported bonds for the I-94 North-South corridor project, contingent on if the state receives federal funds for the project. LFB estimates the additional bonding will increase debt service payments by $2.9 million General Purpose Revenue (GPR) in 2018-19. The bill also includes $10 million GPR in fiscal year 2017-18 (or rather the current fiscal year), for grants to local governments to create the enterprise information technology manufacturing (EITM) zone. Finally, although small potatoes, the bill includes $361,000 over the biennium for a state economic development liaison.

Originally many thought the Foxconn bill would be routed to the Joint Finance Committee, allowing the process to seamlessly run through both houses. But the Speaker sent it to the Assembly Committee on Jobs and Economy, thus leading the way before the Senate even introduced a companion bill. The procedural dispute over Foxconn seems to have widened the budget divide between the Senate and Assembly that has been ongoing for the last several months.

The stakes in the political stalemate between legislative leaders and the governor have been exponentially raised with Foxconn’s entry into Wisconsin.  The budget delay to this point has but little effect on the average Wisconsinite, and legislators aren’t hearing anything about it from their constituents back home.  If they get the budget done in a couple months the delay will be long forgotten in a few weeks’ time as the legislature moves into the fall calendar.  That all changed with Foxconn’s proposed substantial investment in Wisconsin and Senator Fitzgerald requiring budget action before the Senate moves on the Foxconn incentive package.  Now, the mere prospect that a political circus could cause Foxconn to rethink their decision puts legislators on the clock adding the urgency that didn’t previously exist.

As for that budget divide, Transportation funding remains the primary point of contention, but there are several other budget areas that the Joint Finance Committee has yet to take up – including K-12 education, general fund taxes, the Department of Agriculture Trade and Consumer Protection, several programs in the Department of Natural Resources, and the state’s Building Program.  So even when they decide to move quickly, they may not be able to move quickly.

Both houses are doing what they can to move the ball forward.  They both caucused this week, and the Assembly held a hearing on the Foxconn incentive package.  They’ll need another productive week next week or they should expect some heavy pressure from the governor and others.   Tick tock…