Hamilton Political Tidbits – Budget Alert – September 6, 2017

BUDGET ALERT - JFC Passes Budget Bill
Hamilton Consulting Group
 September 6, 2017
Wisconsin political news for clients and colleagues.
 
Just before 9 P.M. on Sept. 6, the Joint Finance Committee (JFC) completed its work on the 2017-19 state budget. JFC spent long days on Tuesday and Wednesday taking votes on Foxconn and the remaining budget issues: transportation, taxes, and the "wrap up" motion.
 
Statutory language of the budget bill will be finalized in the next few days, and the JFC-approved version will next week go first to the Assembly, then the Senate, for votes on the floor with likely no amendments of any substance. 
 
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Foxconn

On Tuesday, Sept. 6, JFC first took up the Foxconn bill that the Assembly had passed in August. JFC added a GOP Senate amendment that, among other provisions, would allow for the direct review of circuit court decisions relating to the manufacturing zone by the Wisconsin Supreme Court. The Foxconn bill as amended passed JFC in a 12-4 vote and will head to the full Senate next week while the Assembly works on the budget. The Foxconn legislation will then head back to the Assembly for a vote on the finalized Senate version of the bill.
 
Transportation Funding

After the Foxconn vote, JFC adopted 12-4 an omnibus transportation motion. Overall, the motion contains provisions to help reduce the cost of road building and maintenance in Wisconsin, but long-term funding issues are largely unaddressed. Below are highlights of the transportation package:

  • Makes no changes to the gas tax or standard vehicle registration fees, as requested by Gov. Scott Walker.
  • Establishes a $75 fee for hybrid-electric vehicles and a $100 fee for electric vehicles, effective 1/1/2018 (this would be in addition to existing annual registration fees). The hybrid-electric and electric fee would provide $8.4 million in new revenue over the biennium.
  • Includes an overall bonding level of $402 million over the biennium. This is down from the governor's proposed bonding level of $500 million. This bonding includes $252.4 million in general purpose revenue (GPR) supported bonds for the I-94 north-south project, a provision included in the Foxconn legislation. This bonding is contingent on the receipt of federal funds.
  • Reduces the Major Highway Development Program by 15.8 percent, compared to the proposed funding level in the governor's budget.
  • Eliminates bonding to support the State Highway Rehabilitation Program and reduces overall funding for the program by 4.8 percent compared to the governor's budget.
  • Requires the Department of Transportation to eliminate 100 positions in each year of the biennium and lapse $13 million annually to the transportation fund. 
State Preemption of Local Ordinances

Also included in the omnibus transportation motion is a provision in Chapter 66 (municipal law) that prohibits local government enforcement of any ordinance that conflicts with state law. This provision codifies case law, as articulated by the Wisconsin Supreme Court in Lake Beulah Management District v. The Village of East Troy. That case and the motion sets forth four instances that would invalidate local ordinances:
  1. 1.     A statutory provision expressly prohibits the ordinance.
  2. 2.     The ordinance logically conflicts with a statutory provision.
  3. 3.     The ordinance defeats the purpose of the statutory provision.
  4. 4.     The ordinance violates the spirit of the statutory provision.
In Lake Beulah, the court struck down a local ordinance requiring a permit for high-capacity wells. The court found the ordinance invalid because it conflicts with, defeats the purpose of, and violates the spirit of the legislature's delegation of authority to the Department of Natural Resources to regulate high capacity wells.
 
State Preemption of Local Regulation of Quarries

Another provision of the omnibus transportation motion limits the authority of local governments to regulate quarries. Quarries are limited to those operations that extract nonmetallic minerals, generally, sand and gravel, that are used for public transportation or other infrastructure projects.
 
The limits on local regulations relate to noise, quantity of minerals, number of truckloads, hours of operation, blasting, water and air quality standards, and related permits. There is a grandfather clause for existing local ordinances.
 
Special Education Scholarship Program

After voting on transportation around 10:00 p.m. on Tuesday, JFC recessed until 2:00 p.m. Wednesday when they took up a motion under the Department of Public Instruction (DPI) that expands the Special Education Scholarship Program to private schools.
 
Shared Revenue, Tax Relief, Local Government, and Budget Management

Immediately following the DPI motion, JFC took up an omnibus motion in shared revenue, tax relief, local government and budget management. Below are highlights of the shared revenue package:
  • Creates a personal property tax exemption on non-manufacturing machinery, tools, and patterns. The cost of the exemptions is estimated at $74 million GPR annually beginning in 2018-19.
  • Requires lodging marketplaces, such as Airbnb, to register with the Department of Revenue for a license to collect taxes related to short-term rentals and to collect room taxes imposed by the municipality.
  • Eliminates local authority to require a license for a retailer or restaurant to sell soda.
  • Provides an additional $100,000 GPR for the Monroe Arts Center in Green County.  
General Fund Taxes

After a short recess, JFC took up a general fund taxes omnibus motion. Below are highlights of the tax package:
  • Deletes the income tax reductions proposed in Walker's budget, adding increased tax revenues of $104.4 million in 2017-18 and $99.1 million in 2018-19 back into the bill.
  • Eliminates the state alternative minimum tax. The cost of the elimination is estimated at $1.75 million in 2018-19 and $7 million annually after.
  • Clarifies that manufacturers may choose to claim either the Manufacturing and Agriculture Credit or the credit for taxes paid to another state, not both.
  • Includes a re-estimate of the Illinois income tax reciprocity payment due to Illinois's recently enacted tax increases.
  • Deletes the governor's recommendation for a sales tax holiday.
  • Creates a sales and use tax exemption for building materials for construction for technical colleges and the University of Wisconsin.
Increases the cigarette tax stamp discount from 0.7 percent to 0.8 percent. 
 
Wrap-Up Motion

JFC Republicans offered a pared-down version of the infamous "999 motion" that included several readjustments and provisions including:
  • Specifies the definition of "public utility" to exclude, among other entities, a state agency that may provide water or sewer services for residential users and replace services currently provided by a non-public utility.
  • Requires the Department of Health Services and the Office of the Inspector General to conduct an audit of family planning service reimbursements paid to entities under the medical assistance (MA) program.
  • Incorporates AB 462/SB 381 that would establish complex rehabilitation technology as a covered MA service.
  • Repeals the sales tax on internet access services in accordance with federal law.
  • Repeals the surgery center assessment, as Walker requested in his budget proposal. 


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News Clips
Budget
Legislative panel set to finally wrap up state budget work: Wisconsin State Journal, September 6, 2017.
Foxconn

State budget committee approves $3B Foxconn incentive package: Wisconsin Public Radio, September 5, 2017.
Joint Finance passes Foxconn bill with more amendments: Milwaukee Business News, September 5, 2017.
Panel changes court rules for Foxconn plant: Daily Reporter, September 5, 2017.
Walker cabinet member touts Foxconn proposal: Baraboo News Republic, September 5, 2017.

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