Friday, January 31, 2014

Walker tries Keynesianism...but can't quite get it right

There are a couple of interesting sidelights to our Governor's plans for spending one-time surplus funds. Obviously the big deal is the tax cuts he's proposing (and at a later point I'll bring up just how dumb and irresponsible those are), but here I want to concentrate on two proposals that increase spending in two areas usually associated with liberalism- investing in technical colleges and road building. Direct investment is a classic example of Keynesianism-style economics, using direct investment to produce jobs and better economic outcomes. But as you'll see, the funding that pays for these Walker initiatives come from places other than the projected General Fund surplus, and leads to further issues in the next budget.

The first item to discuss is the increase is related to increasing the skill level of potential workers in certain technical industries. Basically this'll be a $35.4 million block grant to the state's Department of Workforce Development, which will then go to expand the number of students admitted to tech colleges, and for projects between businesses and high schools and other partners in certain "high-demand fields." It also includes funding that can go toward hiring people with disabilities, and extra administration costs that DWD would have to take on.

Not a bad strategy on its face, although I'd still like to see more when it comes to dealing with the real reason for Wisconsin's alleged skills gap- the low wages that it pays to these types of workers. But what's interesting to me is where the money is coming from.
On January 8, 2014, JFC retained $32,900,000 GPR in 2013-14 and $2,500,000 GPR in 2014-15 in the Committee's general program supplementation appropriation that were related to 2013-15 amounts reserved for WEDC programs and operations expenses. Joint Finance chose to retain these monies due to surplus segregated state and WEDC fund balances that existed during the 2013-15 biennium. The amount of GPR monies that would be transferred to DWD under these provisions reflects the same amount of money that the Committee chose to retain related to WEDC. As a result of these provisions and previous actions by Joint Finance, all of the funds that the Committee chose to retain related to WEDC's budget on January 8, 2014, would be reallocated for DWD grants, services, and administrative costs associated with these proposed provisions.
That's right, the Governor wants to use left-over WEDC money to pay for these grants, instead of using the surplus funds. If I didn't know better, I'd say the guys at the Capitol are realizing that WEDC's giveaway strategy isn't as effective a job-creator as improving the talent poll, which would be a good sign if I thought it would continue. Somehow, I don't think this connection will be made on right-wing talk radio.

Also, will this same level of investment be repeated for the next budget for 2015-'17, and/or will the $35.4 million of funding be restored to WEDC? If so, there has to be money found in the next budget for both of these items to pay - in a budget that is projected to have a deficit of more than $800 million if Walker's tax cuts go through.

The second item was revealed today, as both the Assembly and Senate introduced bills at Walker's request that'll increase road spending by $43 million in the next 5 months. This is a version of what I had called for since the surplus was revealed, and certainly would help fill in needs after this harsh winter. Jason Stein has a good rundown of the plans in the Journal-Sentinel, which would go to additional state highway maintenance between now and June 30.
The additional proposed spending would mean that the roads fund would end the budget on June 30, 2015, with $41.6 million instead of the $84.6 million that is currently projected.

The fiscal bureau report also warned that account faces a $336.2 million shortfall in the next two-year budget.

On top of that, another $775 million will be needed during that period to pay for the Zoo Interchange and Hoan Bridge, though the Department of Transportation will bond for part of those Milwaukee-area projects.
So as I've mentioned before, that's over $1 billion of needs that have to paid and/or borrowed for in the next budget. It is good that the one-time shot of road spending is set up in a way that doesn't add to this structural deficit, being a true Keynesian stimulus program. But just because it's the right thing to invest in doesn't mean that the Walker Administration is choosing the right way to pay for it.

Instead of paying down some of the hundreds of millions of dollars being borrowed for road building, the Walker plan just spends more Transportation Funds. That strikes me as an odd choice, as reducing the amount of borrowing would save more money in the future with no additional debt to pay back, and would clear up flexibility for future years. And to pay for the $1 billion in extra needs between 2015 and 2017, the revenues still have to be found, either through transfers from the General Fund (which drives up the General Fund deficit even more), even more borrowing (and even more debt costs) , gas tax increases (Walker and WisGOP have been insistent on not doing this), or.....installing tolls (good luck with that one!).

So while the DWD and DOT bills do seem to offer a good short-term benefit for our economy, and in areas that I believe are more productive than cutting taxes for people who might not reinvest the funds in useful places, it could be paid for in a more responsible manner for the long-term. And taking away the one-time boost in Workforce Development and highway funds after 2015 could reveal Walker's move as an empty pander instead of one that could sustainably expand Wisconsin's economy.

As mentioned before, this plan to spend more while not raising revenues and caring about long-term implications on the budget isn't just a hallmark of the Walker campaign of the last 2 years, but also sounds suspiciously like another Dubya whose fiscal policies should have thrown in the dustbin of history.

Wednesday, January 29, 2014

Dale's Koo-Koo for Koch whoring!

It takes a lot to go into the upcoming irresponsible tax giveaway that Gov Walker wants the State Legislature to sign onto, and I'll get into that over the next week or so. Instead, I want to discuss this budget-related press release from State Rep. Dale (Koo-Koo) Kooyenga, and show just ridiculous these supply-siders are.

Let's go with Koo-Koo's claims individually.
Opponents of the Governor’s plan argue that the structural deficit should be lower in order to make the state more fiscally solvent. However, the structural deficit is not necessarily a good measure of financial solvency. In fact, a transfer of money to the rainy day fund increases the structural deficit! Even if every single penny of the $976 million surplus is placed in the rainy day fund, the structural deficit would still increase.
This is mostly BS. The only way this is remotely true is that a deposit to the rainy day fund reduces the carryover amount that goes into the next budget. But it has NOTHING to do with how revenues vs. expenses match up for 2015-'17, as the LFB memo on the fiscal outlook with the projected surplus points out.

Table 4- LFB memo, Jan. 22, 2014, no rainy day fund transfer
2015-'16 Revenues- $15.503 billion
2015-'16 Expenses- $15.369 billion

Table 7, LFB memo, Jan. 22, 2014, w/ rainy day transfer
2015-'16 Revenues- $15.503 billion
2015-'16 Expenses- $15.369 billion

See, ZERO DIFFERENCE. So Strike 1 for Koo-Koo. Here's another doozy from Kooyenga.
$440 million of Governor Walker’s $976 million plan is going towards strengthening the financial health of Wisconsin’s State Government. $117 million will be deposited into the rainy day fund. Additionally, $323 million will facilitate adjusting the withholding income tax tables. Adjusting the withholding tables means less of your money is subject to an interest free loan to the state. Your loan to the state represents a state liability, very similar to a debt, and adjusting the withholding tables means Wisconsin is paying off $323 million in debt.
This is a whole lotta hope and spin. First of all, Walker's tax cut bill doesn't force a $117 million transfer to the Budget Stabilization (rainy day) Fund, it just assumes that the state will get a significant amount of revenues above what is budgeted, after the tax cuts goes into effect. And then 50% of that excess, or $117 million, goes into the rainy day fund. With 6 months yet to be measured in the 2013-'14 fiscal year and the full 2014-'15 year to come, along with NONE of the previous Koo-Koo tax cuts taking effect in the 6 months that we had above-trend revenues, that's quite a gamble.

Second, the $323 million "saved" from changing the withholding tables isn't "lower debt", as Koo-Koo tries to imply, but trades letting people take home more pay now, instead of having the same amount of money refunded to them later. In fact, it's a one-time revenue INCREASE in the next budget (as shown on Table 4 of the LFB analysis), because people won't get as high a tax refund from the state as they're used to for the 2014 and 2015 tax years. Koo-Koo is just hoping people spend their up-front money sooner than later, and that it leads to a multiplier effect that adds to job and income growth (HAH!). It's the equivalent of a one-year "tax rebate check" that gets paid back in later years. Ask George Bush how well that warded off the recession in 2008.

Oh, and speaking of Bush, here's Koo-Koo's next claim.
This is the third time that the Legislature is discussing tax cuts in Wisconsin in less than a year. Every time a tax cut is announced and therefore the previous projected deficit becomes a surplus, the same structural deficit chorus criticizes the plan. In February 2013, the Governor introduced the biannual budget. This budget received criticism for having a modest structural deficit. In May 2013, revised tax revenue numbers eliminated the structural deficit. Immediately, the Legislature introduced another round of tax cuts and reforms and once again, dissenters said we should not cut taxes because of structural deficits. The additional tax cuts were adopted in the budget despite the objections. In October 2013, Governor Walker advocated for another $100 million in property tax cuts. For the third time, dissenters raised concerns over structural deficits. In January 2014, the state announced that a projected structural deficit was now a structural surplus. Governor Walker announced another tax cut. Despite the detractors being incorrect on their previous three structural deficit warnings, the same group now warns tax cuts are irresponsible because of a projected structural deficit.
So Koo-Koo says because we've had a bunch of upside revenue surprises for the last year, there's nothing to worry about. I mean, the $5.6 trillion in projected federal surpluses from 2001-2011 that Dubya used to shove through his first round of tax cuts held up, right? There weren't two stock market crashes or two recessions or Middle Eastern wars that broke out in that time period to change those surplus numbers and make the tax cuts a fiscal hamstring, were there?

Lastly, Koo-Koo decides to appeal to authority.
A recent survey by George Mason University rated the financial solvency of states’ budgets. Of the ten most solvent states, five of the states do not have an income tax and the remaining five states have generally low tax burdens. The top ten most insolvent states all have an income tax and are generally high tax states. In conclusion, lowering taxes leads to economic growth and economic growth leads to financial solvency for the state’s government and its citizens. Wisconsin’s greatest obstacle is our reputation for being a high tax state. The evidence shows that states with low taxes, or no income taxes, are more likely to be solvent.
Koo-Koo is referencing a study from the Mercatus Center at George Mason. And he shouldn't. The Center for Media and Democracy's Sourcewatch tells you why.
The Mercatus Center was founded and is funded by the Koch Family Foundations. According to financial records, the Koch family has contributed more than thirty million dollars to George Mason, much of which has gone to the Mercatus Center, a nonprofit organization. Democratic strategist Rob Stein described the Mercatus Center as "ground zero for deregulation policy in Washington.”

The Mercatus Center has engaged in campaigns involving deregulation, especially environmental deregulation. It now fills the role once played by the economics department at Chicago University as the originator of extreme neoliberal ideas. Fourteen of the 23 regulations that George W Bush put on his hitlist were, according to the Wall Street Journal, first suggested by academics working at the Mercatus Centre.[1]...

The Mercatus Center was founded as the Center for Market Processes by former economist Rich Fink, executive vice president of Koch Industries and former president of the Koch Foundations, who went on to found Citizens for a Sound Economy. Fink heads Koch Industries’ lobbying operation in Washington. In addition, Fink is the president of the Charles G. Koch Charitable Foundation, the president of the Claude R. Lambe Charitable Foundation, a director of the Fred C. and Mary R. Koch Foundation, and a director and co-founder, with David Koch, of the Americans for Prosperity Foundation. In the early 1980s the center moved to George Mason University. It merged with the Center for the Study of Public Choice during 1998 to become the James M. Buchanan Center for Political Economy. The Mercatus Center brand was developed in 1999 from the JBC.....

In addition to being funded by the Charles G. Koch Foundation, the Mercatus Center also has ties to several prominent right-wing gropus, including the American Legislative Exchange Council (ALEC) and National Federation of Independent Business (NFIB).
In other words, Koo-Koo is Koch-whoring, quoting arbitrary measures designed to reach a certain right-wing, low-tax conclusion. Sorry Koo-Koo, but outside of the 262 bubble-world, you need a real source before I even consider buying your bullcrap.

But then again, Koo-Koo was also the main voice behind the failed expansion of charter schools in the state legislature at a hearing last month, sitting side-by-side with a voucher lobbyist who was a trusted advisor in putting together the bill.

I think this is being done because Rep. Kooyenga realizes that Paul Ryan has put together a great career in saying Koch lies with a straight, endearing face, and wants to follow in his footsteps. And while Purty Mouth Pau-LIE has done quite well, Rep. Kooyenga, it doesn't change the axiom that states "If you're lyin', you're losin'."

Supply-siders have nothing....other than billionaire greedheads padding their pockets.

Tuesday, January 28, 2014

Yes, this is a BAD, unaccountable voucher bill

Looks like Thursday is the day for a hearing on SB286, another attempt to funnel taxpayer dollars to school privatizers. Go click on Andy at the Wisconsin Soapbox to get the particulars for this one, but one of his key criticisms is that schools that are already in existence can be taken over and otherwise sanctioned based on current performance. As a result, Andy finds this bill to be a backdoor attempt to have Madison legislators be able to essentially sell off and close many Milwaukee Public Schools, while giving privatizers extra opportunities that public schools won't have.
...in other words, you have to have those first five years [for a charter school to be in existence] and be evaluated so that any type of sanctions from the state would come in the second go-round with the charter by the 10th year of operation. By that time, it would be exceedingly clear to the school and district however that the school isn't cutting it and would hopefully be shut down.

But you know what? This bill just lets operators come in and fly-by-night set up shop and take money, leaving when they see the writing on the wall that they aren't going to be renewed. Additionally, it's pretty clear to see that the data which would result from these new policies would show a bevy of public schools that have closed, but not anywhere near as many charter schools, further adding to the narrative of charter operators that they are better than the public schools.

This bill is horrible for public education in Wisconsin.

It completely circumvents local control, puts in exceedingly draconian measures for districts to follow should they have schools at the bottom of the DPI Report Card, and completely rips apart the Milwaukee Public Schools. Oh, not to mention, throws students who are in the public schools in these categories into a world of the unknown, not to mention completely screws the people who have sacrificed to work with the hardest to serve population.
And by the way, grading schools and giving sanctions and rewards based on tests hasn't exactly been cleanly doled out. Do you want me to remind you about the Atlanta cheating scandal, or Michelle Rhee's "Erase to the Top" strategy in Washington D.C.? In both instances, you had big-city school officials changing test answers and performing other types of fraud in order to avoid sanctions and reap rewards under high-stakes "accountability" measures.

Do you also recall Tony Bennett's routine when he was the State School Superintendent in Indiana? It was wracked with blatant favoritism, with this passage as an example.
Emails obtained by The Associated Press show Bennett and his staff scrambled last fall to ensure influential donor Christel DeHaan's [charter] school received an "A," despite poor test scores in algebra that initially earned it a "C."

"They need to understand that anything less than an A for Christel House compromises all of our accountability work," Bennett wrote in a Sept. 12 email to then-chief of staff Heather Neal, who is now Gov. Mike Pence's chief lobbyist.
And where did Tony Bennett go to when the Hoosiers blew him out of office in November 2012? He took the same gig for Rick Scott in Florida. And who was one of the charter school operators in Florida that Bennett sent taxpayer dollars to? Life Skills Academy. Who were just in the news this month after they closed their charter school in Milwaukee in the middle of the year, forcing 66 students to find a new school. And it's not like those kids were getting a quality education to begin with.
Vigue said Rodney Monroe was "a real good preacher," but that he and his wife were struggling with the new Florida school, which had only eight or nine children in 2013-'14, including some or all of the Monroes' own children.

LifeSkills Academy in Milwaukee also had troubles.

Save for one child who met the state benchmark one year in reading, no students could read or do math proficiently in 2011 or 2012, according to the most recent state test score results.

Before closing, the school collected more than $200,000 in taxpayer money this academic year. The school will not get its final two voucher payments from the state, according to the state.
So under SB 286, how many more instances of Life Skills Academy-like fraud and underperformance would happen, since they could just set up their school without any direct oversight from local voters and taxpayers? And how many of those potential operators have paid off Legislative Republicans as an advance payment on the profits they stand to get from pushing these kids through their substandard schools?

This is why this bill is scary, and must be exposed and put down. It has nothing to do with innovating and improving education, and everything to do with GETTING PAID. That's true for both the charter/ voucher operators, and the legislators that front for them in Madison.

Monday, January 27, 2014

Plow and fix the roads before cutting taxes

As we get sucked into another polar vortex, it's natural to look into how this severe cold is affecting our services, especially our roads and the ability to get from place to place.

1. Among the many items this snowy and cold winter is causing is salt shortages. Just in the last week, we had media stories from Dane County communities, or the Town of Waukesha, and Stevens Point, where the City's supplies and snow-plow budget were almost gone before this recent extra blast.
[Stevens Point Public Works Director Scott] Schatschneider’s manpower budget, which has a total of $38,390 set aside for overtime, also is taking a beating. Road crews in December worked a combined 900 hours of overtime at a cost of $27,350. In the first two weeks of January, the same crews worked 172 hours of overtime at a cost of $5,540. He said all of the snow removal needs have taken away from other jobs that would typically get done in preparation for spring, such as sign maintenance, painting and preventative maintenance throughout the city.

“If we’re constantly plowing snow or picking up snow, we only have X amount of folks, so there’s other things that don’t get done, whatever that may be,” he said. “If that’s all you’re doing, it’s all your doing. It becomes so intense and so inclusive that it’s constantly on your brain.”

In the village of Plover, the public works road crew of 10 also has plowed and maintained streets around the clock this winter. Plover Administrator Dan Mahoney said his crew is as worn down as the city [of Stevens Point]’s.
Services like snow and ice removal and the filling of the potholes that will inevitably result are mostly locally funded, and having to pay above the budgeted amount would likely have to take away from other services in the rest of 2014.

2. There are ways that our state helps to pay for these bills, both through shared revenues (which have been limited in the age of Fitzwalkerstan), and through specific aids for transportation-related duties. As Page 29 of this LFB report shows, the most recent state budget added $2.5 million for maintenance on "state highway maintenance and traffic operations" for 2013-'14, and $50 million for 2014-'15.

With this in mind, one way you could deal with the upcoming issues in road repairs in 2014 is to add $25 million of these added funds to this year, and keep the (now higher) 2013-'14 funding level at that same level in 2014-'15. Not only would this move provide needed relief for this year, but it would lower the $1 billion structural deficit for the next budget in the Transportation Fund, since the next budget would start off $25 million lower.

3. And this isn't the only area that we could move funds around to take care of our increased transportation needs. For example, we could use move some of the projected $1 billion surplus in the General Fund to the Transportation Fund, and accelerate some of our projects for the next 18 months, such as the Zoo Interchange. This would lessen the expenses needed to pay for this construction in future budgets, and/or could be used to reduce the $900+ million in borrowing for highways projects that this budget has, by paying in cash instead.

Taking care of these road needs would seem to be a much better strategy than Walker's proposed tax cuts, which the Wisconsin Budget Project says will disproportionately benefit the rich. Instead, using the one-time General Fund surplus to take care of road maintenance would give more stability to local government finances and taxes, reduce the amount of debt that has to be paid off in later years, and would be more likely to lower unemployment by putting people to work right away on these accelerated projects.

But that would be a responsible, long-term strategy that won't lead to budget crises and selling off of services to corporations. So of course, this administration isn't going for it.

Sunday, January 26, 2014

Frozen in Hoosierland

Been down in Indiana visiting friends, and seeing Bucky get a much-needed win at Purdue last night. Assuming I make it through the next polar vortex, I'll have thoughts on the tax plans and other interesting data as it comes along.

Thursday, January 23, 2014

This week in Walker Admin hackery

No, I didn't watch a minute of the State-of-the-State last night. Instead I got my quota of swearing in by watching the Badgers fail to play defense for the 3rd straight game and lose by 13 to the friggin' Gophs.

But I can't help but laugh at this story. "Welder lauded by Scott Walker in speech is sex offender." CLASSY! The story refers to Christopher Barber, singled out by Gov Walker at last night's speech, and here's more from Dan Bice.
"These are the faces of an improving economy in our state," Walker said Wednesday of Barber and others. "Wisconsin is going back to work."

But there is a reason that Barber -- a resident of Two Rivers -- has had trouble finding steady work in the past.

Records show that he is a registered sex offender with two felonies and three drunken-driving offenses. Because of his checkered past, Barber has been in and out of jail and prison for much of the past decade, with his probation having been revoked at least twice.
But as usual, Bice buries the real story behind the veneer of being a dirt-digger. This is the real story, as revealed below.
Tom Evenson, a spokesman for Walker, said the administration had contacted employers in the state to see if they could recommend workers hired since Walker took office in 2011 who would be interested in being mentioned in the annual speech.....

Ann Stilp, head of corporate communications for Ariens, acknowledged Thursday that the Brillion-based company -- which makes snowblowers and riding mowers -- had suggested Barber.

"We recommended him based on his performance on the job since he has been employed with Ariens Company beginning December of 2012," Stilp said. "As part of recommending him for the speech, we did not know the details of his record."...

Ariens company officials have long been Walker backers.

The governor attended the company's 80th anniversary celebration in the fall, and he has received nearly 40 donations from Ariens employees, even though the total income has been a rather modest $4,625. In 2011, Walker appointed company CEO Dan Ariens to the Wisconsin Economic Development Corp. board, where he is now the vice chairman.
And Dan Ariens has another big role, as he's the Number 2 guy at the right-wing Wisconsin Manufacturers and Commerce, and sits on WMC's board. You don't think that had anything to do with using Mr. Barber as a human prop at Walker's speech, do you?

In fact, it's quite reminiscent of another Republican who used the blue-collar workers at a big-time GOP donor's business as the backdrop for an election event.



First class indeed. Then again, competence has never exactly been the biggest reason Walker's staffers have gotten hired. After all, this is the same crew that told the Gov, "It's David Koch on line 1!"



See, Bice is under orders from saying this, but I'm not. A prior felon (who's trying to do the right thing) being put on display at the State of the State address is not the big deal. What's significant is that this Administration operates on a pay-for-play basis, with a bunch of dimwits behind the scenes at the Capitol.

Wednesday, January 22, 2014

The ghosts of January surpluses past

Just in time for tonight's State of the State address, the Legislative Fiscal Bureau projected what would happen in the next state budget with the new revenue figures that were released last week. And at first glance, it looks like every fiscal issue in this state is taken care of due to these projections.
Table 3 indicates that revenues exceed net appropriations by $145 million. Thus, the structure of the general fund shows a balance of $145 million. The $145 million becomes $1,042 million when the $897 million opening balance is considered. However, Table 3 focuses only on the revenues and net appropriations for the 12-month period (July, 2014, through June, 2015)....

...for 2015-16, the general fund would have $1,111 million to meet commitments under current law, maintain the required statutory balance, and balance the budget for that year. In 2016-17, the balance would be increased by an additional $141 million.
$1.25 billion surplus? We're set! We can follow Governor Walker's plans to add on to the Koo-Koo tax cuts as much as we want, or we can pay for the $1 billion in Transportation needs we haven't funded in the next budget, and not have to sacrifice anything else! No worries!

Or, maybe not. I direct you to the New York Times, article dated January 31, 2001. The headline? "Surplus estimate hits $5.6 trillion."
Despite growing concern about an economic downturn that could put a crimp on tax revenues this year, the Congressional Budget Office informed members of Congress late today that it expects the surplus to swell to $5.610 trillion over the next decade, in line with estimates that have been circulating on Capitol Hill for weeks.

The new projection, which is to be released officially on Wednesday, is $1 trillion higher than the budget office's previous estimate, in July, and about $600 billion more than the Clinton administration's final projection, which was released last month....

Even before the budget office disclosed the new surplus figures, administration officials said that President Bush's plan for a $1.6 trillion tax cut over the next decade and his calls for more spending on the military, health care and education could all be accommodated comfortably without any risk to the government's fiscal health.

''We are seeing a government that is awash in surplus money, even with an economy that is softening from where it used to be,'' Ari Fleischer, the White House spokesman, said.
Sound familiar? And how did that work out for us? Oh yeah, not well. We had record deficits within 8 years of this article.

So what happened to this $5.6 trillion in surpluses? This CBO report released in 2012 lays it out.
In January 2001, CBO’s baseline projections showed a cumulative surplus of $5.6 trillion for the 2002–2011 period. The actual results have differed from those projections because of subsequent policy changes, economic developments that differed from CBO’s forecast, and other factors. As a result, the federal government ran deficits from 2002 through 2011. The cumulative deficit over the 10-year period amounted to $6.1 trillion—a swing of $11.7 trillion from the January 2001 projections.
Oops? And what caused this $11.7 trillion turnaround?

Changes from 2001 CBO predicted budget picture through 2011
Economic weakness/ recession- $3.34 trillion
War, other extra spending- $2.95 trillion
Bush tax cuts- $1.75 trillion
Interest on debt- $1.38 trillion
ARRA stimulus- $514 billion
Other mandatory spending increases- $477 billion
2010 budget deal/ Soc. Security tax cut- $391 billion
Medicare Part D- $272 billion
TARP- $189 billion
2008 stimulus measures- $148 billion
Other reasons- $112 billion

So one economic downturn or one stupid tax or spending decision can send those surpluses spiraling downward really fast. And given that this country has been in an expansion and stock market boom for nearly 5 years, history indicates that a recession will be coming some time in the next 3 1/2 years. So why are basing policy on assumptions that there won't be any type of blip on the state's or country's economy between now and the middle of 2017? This is what makes Walker's apparent plans to blow the projected surplus on tax cuts very foolish and dangerous. It's like the Walker folks have totally ignored the lessons of the 2000s and the Bush Administration.

Oh wait a minute, that's the answer! The Bush era doesn't exist in the right-wing bubble, so to them, Obama and Clinton caused both recessions and the millions of jobs lost from 2001-2003 and 2007-2009, and cutting taxes can magically cause economic growth and larger revenues! Sorry, I forgot.

Tuesday, January 21, 2014

Housing boom? Not in most Wisconsin places

The Wisconsin Realtors Association just had their December and year-end home sales reports, and we had a bit of a rebound in the home market for 2013.
2013 was a robust year for Wisconsin’s housing market, with both sales and prices increasing by solid margins, according to the year-end housing report released by the Wisconsin REALTORS® Association (WRA). Existing home sales were up 10.8 percent compared to 2012, and median prices increased 7.2 percent to $143,000 over that same time frame.

“Strong sales dominated 2013, which is remarkable given that this is compared to 2012, which was also a very good year for the housing market,” said Steve Lane, chairman of the WRA board of directors.According to Lane, existing home sales were up in every region of the state in 2013 relative to the previous year....

Lane noted housing sales were strong despite raising interest rates and prices. “Mortgage rates have increased a full percentage point since January, and median prices have grown consistently throughout the year,” Lane said. “Yet the entire state posted genuine gains in 2013, a trend we hope and believe will continue into the new year,” Lane said.
State newspapers ran with these numbers, trying to show that the state's economy was rolling in the right direction. However, what's not being said is that the home sales increase isn't evenly-distributed around the state.

In particular, Dane, St. Croix, Pierce Counties have had housing growth that outpaces the rest of the state. Those 3 counties have the 3 lowest unemployment rate in the state, and include the Madison area (Dane County) and the two Wisconsin counties closest to the Twin Cities (St. Croix and Pierce Counties). Both of those metro areas are noticeably more progressive and stronger economically than much of the rest of Wisconsin (gee, think that might attract potential homeowners?), and once you take out these three counties, the state no longer has double-digit growth for 2013.

Total home sales, 2013 vs. 2012
Dane County- 7,618 vs. 6,156 (+23.75%)
St. Croix Co.- 1,418 vs. 1,263 (+12.27%)
Pierce County- 486 vs. 435 (+11.72%)
Rest of Wisconsin- 60,081 vs. 54,918 (+9.40%)

The same pattern repeats when we look at home prices, and the Twin Cities-area counties in particular are having a boom. While Dane County's growth is less than the state as a whole, the prices of Dane County homes are significantly higher than those in the rest of the state, which drives up the median price statewide. This relationship is compounded when you realize Dane County is taking up an increasing amount of total sales in the state.

Median home sales price, 2013 vs. 2012
St. Croix Co.- $175,000 vs. $147,500 (+18.64%)
Pierce County- $150,000 vs. $135,000 (+11.11%)
Dane County- $210,746 vs. $200,000 (+5.37%)
Wisconsin Statewide- $143,500 vs. $133,900 (+7.17%)

By contrast, Northern and Northeastern Wisconsin are especially lagging other parts of the state. Northern Wisconsin had sales up 5.7% with prices up a paltry 1.7%, and Northeastern Wisconsin had home sales up 7.4% and prices up 4.2%. So the wire story about home sales and prices showing strong growth in Wisconsin might come as news to those in the 920 and 715 area codes, and is one of several economic indicators that show many of those areas being left behind in the Age of Fitzwalkerstan.

Lastly, the end of 2013 wasn't as strong as the start of it, as the Realtors' numbers showed that things may have slowed down in the 4th Quarter. Sales only increased to 15,115 to 15,013 compared to the 4th Quarter of 2012, the smallest year-over-year gain in 3 1/2 years, with half of the state's regions suffering declines. Maybe that's a one-quarter blip, but with interest rates creeping up and the weather being colder than normal, we could see things slow down at least for a little bit, and if that leads into a slight change in consumer sentiment, the cycle could reverse.

Bottom line- let's cool out before we officially call it a housing boom in Wisconsin, especially given the evidence that the gains in home sales and prices are heavily concentrated into a few, growing areas, with much of the rest of the state showing relatively small growth levels.

Monday, January 20, 2014

You want it raw? DO YA?

Put me in the camp as loving the Richard Sherman post-game interview with Erin Andrews after the Seahawks won yesterday's NFC Title game. Not only because Sherman can back all of his talk up as an All-Pro who won on the game-deciding play, but because it was strangely coherent, and 100% entertaining. Also watch how EA thinks it's going to be a generic athlete interview, and is thinking of her next question, and then realizes after about 5 seconds that it's not.



Look, we have these postgame interviews because we want to capture the emotion of the moment. Well, we got it! And now some people are complaining (and often on a racist tip) because Richard Sherman is saying what was on his mind? C'mon man! It beats lame clich├ęs.

But that's not my favorite NFL playoffs postseason interview. That's still when Bart Scott talked to ESPN's Sal Paolantonio after the Jets upset the Patriots 3 years ago. In addition to it being an awesome "No one believed in us!" kind of rant, punctuated by Scott saying he "CAN'T WAIT!" for next week's AFC title game, watch how Sal just rolls with it when Scott gets started, and he keeps the interview entertaining and informative.



But both Bart Scott and Richard Sherman have a ways to go to top the man with the best mic presence- the late, great "Macho Man" Randy Savage. Here's him at his (coked-up?) finest, and watch how masterful Mean Gene Okerlund is at working his way through it. "But the beat goes on...."



Now if Richard Sherman was cutting a WWE promo, we wouldn't think a thing about what he said. Come to think of it, at 6'3" and put together, he's definitely got a future in the field after the NFL life ends.

Wisconsin's two-tier society on race- not MLK's dream

As we honor Dr. Martin Luther King today, it's also worth noting that his work in making for an improved and more equal society is far from done. And this is especially true here in Wisconsin.

The Center On Wisconsin Strategy (COWS) released a report last month that showed Wisconsin has significantly larger racial disparities in outcomes than much of the rest of the country.
Wisconsin’s racial inequality is generally the result of both the relatively good outcomes for Wisconsin’s white population and worse-than national outcomes for the African American population. The disparity is not inevitable. Indeed, thirty years ago the state generated much better economic outcomes for African Americans, a population group that did better in the state than the national average. Opportunities and outcomes have diverged however to the disturbing chasm that now confronts the state.

The vitality of our economy, the prosperity of our state, and the health and well-being of all our communities are threatened by the racial disparity that plagues Wisconsin. We hope that this litany of outcomes can contribute to a sense of context and urgency, and help promote attention to these issues.
And the racial disparities are striking, with COWS saying each of these disparities are among the 10 largest in the nation.

Wisconsin stats- White vs. African-American
Unemployment rate- 5.9% white, 19.3% African-American
Labor force participation rate- 68.7% white, 60.7% African-American
Median Household income- $53,499 white, $26,222 African-American
Poverty rate, all families- 6.1% white, 35.0% African-American
Poverty rate, children- 11.4% white, 50.3% African-American
People without health insurance- 7.4% white, 14.0% African-American

So when you have a state (and/or federal) government that chooses not to expand health insurance to the poor, or offer aid to the unemployed, or increase the quality and opportunity of education in poor communities, you are disproportionately hurting African-Americans in Wisconsin. I'm not going to say that this neglect is intentional, but I will say the fact that these bad things are more likely to hit non-whites makes a white majority group of legislators less likely to care about the issue.

A cycle of hopelessness can result as part of this two-tier society. I found this excellent blog post from an African-American who grew up in Milwaukee and later moved to be especially poignant. Here's a sample passage.
Teutonia and Locust is where I remember playing on the playground before bullets rang out. When I think of Milwaukee, I think of it as the physical place where my brothers failed to escape its destructible trajectory. It is in Milwaukee where I’ve experienced some of my scariest moments. I remember waking up in the middle of the night to a burning house. It was in Milwaukee where several men beat me as a young woman with bats and the hardiness of the concrete. It was right there in that city, where I slugged on public transportation to get minimum wage just to buy basic necessities. When I think of Milwaukee I think of the food stamps, the hours of waiting for healthcare, the roaches on the wall, the desperate competition for school clothes, the long lines at Aldi, the boys who got shot, the men that went to prison, the girls who became mothers, the babies who were left alone. It is there, in Milwaukee, where I learned the instant gratification of sex, drugs, and money. It is there where I learned the disillusion of basketball dreams and rapping careers.

It didn’t build my character, as people say poverty does, it built angst, dejection, and posttraumatic stress. It harbored in me, for years after going down south for college, a deep sense of inadequacy and eventually survivor’s guilt. I began to feel guilty that all of my greatest memories-falling in love, meeting lifelong friends, traveling the world, finding amazing mentors, becoming engulfed in life altering projects, getting married, graduating, starting a family-were not in Milwaukee. Even driving, learning to pay bills, becoming independent, discovering how to control my emotions, turning away from a culture of violence, and other basic life changes happened to me away from my family and surely outside of the small city I grew up in. I grew further and further away from the people whom I considered my family and visiting became much more of a chore and far less of a comfort.

Every time I returned to Milwaukee, I was forced to be 15 again. I was forced to remember people I had long forgotten about. I was forced to remember restaurants I could never afford to eat in. I was forced to remember neighbors who had long gone to prison. I was forced to remember the playground I was beat up at, the Goodwill store my mother shopped at, and the welfare line so many of us used to stand in. I was forced to have unnatural conversations with old friends I was disappointed in, who gained so much weight I barely recognized, who lived lives I was unacquainted with. I was forced to hear old stories that were glossed up as if they were amazing ones. I was forced to remember all the people we never got to see become whole again.
This should remind us that simple, one-size-fits-all solutions that might make sense to white people in the suburbs with a pathway to success might not have much relevance to minorities living in impoverished communities where hard work often does not go rewarded. It helps explain why Dr. King's focus took on more of an economic shade in his later years, because he recognized that a two-tier society goes well past Jim Crow laws limiting the right to vote and separating the races in lunch counters and movie theaters.

Salon.com writer (and former UW student) Joan Walsh mentions that the radical, economic-based MLK is a voice that we need to heed today more than ever. She quotes Dr. King's 1967 "Where Do We Go From Here?" speech as a call to recommit to expanding the opportunities that seem to be shrinking by the day for many Americans. It is scary how much Dr. King's words ring true in 2014.
Now, in order to answer the question, "Where do we go from here?" which is our theme, we must first honestly recognize where we are now. When the Constitution was written, a strange formula to determine taxes and representation declared that the Negro was sixty percent of a person. Today another curious formula seems to declare he is fifty percent of a person. Of the good things in life, the Negro has approximately one half those of whites. Of the bad things of life, he has twice those of whites. Thus, half of all Negroes live in substandard housing. And Negroes have half the income of whites. When we turn to the negative experiences of life, the Negro has a double share: There are twice as many unemployed; the rate of infant mortality among Negroes is double that of whites; and there are twice as many Negroes dying in Vietnam as whites in proportion to their size in the population.

In other spheres, the figures are equally alarming. In elementary schools, Negroes lag one to three years behind whites, and their segregated schools receive substantially less money per student than the white schools. One-twentieth as many Negroes as whites attend college. Of employed Negroes, seventy-five percent hold menial jobs. This is where we are.


Where do we go from here? First, we must massively assert our dignity and worth. We must stand up amid a system that still oppresses us and develop an unassailable and majestic sense of values. We must no longer be ashamed of being black. The job of arousing manhood within a people that have been taught for so many centuries that they are nobody is not easy.
And while we may have improved in some of these metrics in the last 47 years, it's still nowhere near where our country and our state needs to be in order to become that "More Perfect Union."

So on this MLK Day, it's worthy to realize that a two-tier society with severely unequal levels of opportunity flies in the face of what that amazing man would accept. And we have to keep trying to fix it, as doing so will improve the quality and vibrancy of life for all of us.

Saturday, January 18, 2014

Low wages = retail woes and store closings

January is a big month in the retail industry, as final Holiday sales figures start to come in, which can make or break a number of stores. It also gives a big indication on where the consumer stands as we go into the New Year. With that in mind, we got December's retail sales figures for this U.S., and they weren't that hot.
Retail sales ticked up 0.2% in December, according to a report from the Census Bureau. Economists were expecting sales to be flat from November.

November sales, however, were revised lower. The government said sales grew by 0.4% in November from October, down from the 0.7% it had originally reported last month.

The number was lifted by strong sales in food, clothing and accessories and gasoline -- necessities or gifts on the lower end of the price spectrum. Sales at nonstore retailers, which includes online shopping, increased by 1.4%.

But big-ticket items that are generally considered staples of the holiday season weighed on the number. Sales at electronic and appliance stores fell by 2.5%, and auto dealers saw a 1.9% drop.
Among those electronic stores suffering was Best Buy, which suffered a drop in overall Holiday-season revenue compared to last year, leading to its stock being hammered on Wall Street this week. Another retailer that struggled was J.C. Penney, who announced plans to close 33 stores nationwide, causing approximately 2,000 employees to lose their jobs in the coming months.

And the state being hit hardest by the J.C. Penney closings? Wisconsin, with 5 stores closing here, while no other state has more than 3. Why are Penney's closings hitting so hard in Wisconsin? That was a question that Sara Morrison tried to answer in this nationwide story.
J.C. Penney said the stores were "underperforming." The Chicago Tribune blamed it on the dominance of Penney "archrival" Kohl's, which is headquartered in the state.

Or perhaps Wisconsinites just like their businesses independent. The Wausau Center mall will be especially hard hit: it's also losing a Gap and a Hollister this month. Janke Book Store co-owner Jane Janke Johnson told the Wisconsin Rapids Tribune that she "gasped" when she heard the news, but "there are still some very strong, viable and unique businesses in downtown Wausau, and I feel those businesses and anchors will continue to draw customers." I have a feeling she's talking about a certain book store.
Indeed, the evidence from Wall Street does indicate that some people have outgrown the concept of going to crowded malls in general, and would rather shop online and in stand-alone stores, as the improved online sales from the Holidays would indicate. But that could be quite a rough structural change for plenty of communities that have relied on the old way of shopping as a commercial anchor, as the image of a Wausau mall with three empty stores sure isn't evidence of a vibrant economy, as well as being an eyesore that drives down property values in the area.

Or maybe there's something bigger going on. Maybe it's an indication that the average consumer doesn't have the money to buy that much these days, and that a lot of people still have yet to feel the economic growth that we keep hearing about in the Wall Street-Centric media. Take a look at the real wages and earnings information that came out this week, and you can see that the average worker isn't any better off than they were this time last year.
Real average hourly earnings for all employees fell 0.3 percent from November to December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decrease stems from a 0.1 percent increase in average hourly earnings being more than offset by a 0.3 percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings fell 0.5 percent over the month due to the decrease in real average hourly earnings combined with a 0.3 percent decrease in the average workweek.

Real average hourly earnings rose 0.2 percent, seasonally adjusted, from December 2012 to December 2013. The increase in real average hourly earnings, combined with a 0.3 percent decrease in the average workweek, resulted in no net change in real average weekly earnings over this period.
And in Wisconsin, we know that take home pay for public employees has been slashed with Act 10, and that Wisconsin has the lowest average manufacturing wage in the Midwest. Maybe, just maybe, demand matters, and if people aren't getting paid much, they don't spend so much. And you can bet the 300 or so J.C. Penney workers in Wisconsin that are now facing layoffs in 5 cities won't be willing to shell out any time in the near future either.

So these gloomy retail reports prove again that low wages and the resulting inequality in our two-tier society are the biggest economic problem we face. And until Main Street starts to get the same share of growth that Wall Street and Corporate CEOs are getting, the amount of growth we have will be limited. The oligarchs may like that, but it sucks for the vast majority of us in the real world.

Thursday, January 16, 2014

It's a $1 billion surplus....AND a $1 billion deficit!

The big Wisconsin fiscal news of the day is that the Legislative Fiscal Bureau said that strong state revenue numbers from the last 6 months and a good economic outlook for the US meant that they were upping their revenue forecasts for the state's General Fund by nearly $912 million through the middle of 2015. The end of 2013 generally shown strong increases in revenues compared to the same time in 2012, and it explains part of the reason behind the state's surplus, even with income taxes being reduced in the 2013-14 fiscal year as the Koo-Koo tax cuts take effect..
...total general fund taxes are estimated at $14,399.9 million in 2013-14 and $15,017.2 million in 2014-15. These amounts are higher than the previous estimates by $387.7 million in the first year and $505.0 million in the second year. The biennial increase is $892.7 million, or 3.1%. The estimates for each of the three major taxes, and the cigarette tax, have been increased significantly, primarily based on strong year-to-date collections data. Smaller adjustments have been made to the estimates for the other taxes.

Individual Income Tax. State individual income tax revenues were $7,496.9 million in 2012-13 and are currently estimated at $7,410.0 million in 2013-14 and $7,800.0 million in 2014-15. Relative to the previous figures, the current estimates are higher by $115.2 million in the first year and $149.9 million in the second year. On a year-to-year basis, the current estimates reflect a decrease of 1.2% for 2013-14 and an increase of 5.3% for 2014-15. The revised estimates incorporate a number of law changes estimated to reduce revenues by approximately $350 million in 2013-14 and $385 million in 2014-15. The most significant law change is the income tax rate reductions and bracket reconfiguration enacted as part of 2013 Wisconsin Act 20. Those changes are estimated to reduce collections by $328 million in 2013-14 and $320 million in 2014-15. Act 20 contained a number of other provisions intended to simplify the state's income tax system, but they have a less significant fiscal impact.

General Sales and Use Tax. In 2012-13, state sales and use tax collections were $4,410.1 million, which was 2.8% higher than the prior year. Sales tax collections through December, 2013, are 7.9% higher than the same period in 2012-13. Accounting for law changes and a one-time tax refund paid in August of 2012, adjusted year-to-date sales tax collections are 6.8% above the same period in 2012-13. State sales and use tax revenues are currently estimated at $4,640.0 million in 2013-14 and $4,815.0 million in 2014-15, which represents increased revenue of 5.2% in the first year and 3.8% in the second year. These estimates are $142.4 million higher in the first year and $207.8 million higher in the second year than the previous estimates.
The LFB also notes that Amazon.com's agreement to collect Wisconsin sales taxes is giving an estimated boost of $28 million a year (since people weren't reporting the sales tax they should have been paying earlier). Also noted is a surprising increase of cigarette taxes, which the LFB says is due to Minnesota raising cigarette taxes past the Wisconsin rate, which encouraged Minnesotans to cross the border to get their smokes (and should be a cautionary tale about what may happen if Wisconsin has a large rise in sales taxes).

First of all, an option would be to ride things out and see what holds through the end of June 2015, and if the revenues hold out, $443 million would be banked into the state's Budget Stabilization Fund, giving solid protection against future economic donturns. Not surprisingly, with an election coming up in 9 1/2 months, the Republicans running the Legislature and living in the Governor's Mansion don't want to do that, and being Republicans, they'd rather follow in the ways of George Bush and blow this surplus revenue on tax cuts. Governor Walker even sounded like Bush today with his reasoning.
When we took office in 2011, we pledged to do away with the failed policies of the past and confront the fiscal and economic crises we faced. We made tough, but prudent, decisions over the last three years, and now our bold reforms are producing bold results for the people of Wisconsin. The additional revenue should be returned to taxpayers because it’s their money, and my administration will work with the Legislature to determine the most prudent course of action.
Actually, a decent amount of that excess money was taken from public employees and low-income Wisconsinites, but we'll let that obvious point go. What'll be interesting to watch for is to see if the proposed tax cuts that Walker will propose in the State of the State address will be income-tax based, property-tax based (through shared revenue increases and/or rebates), or some other type of reduction.

Of course, I have strong confidence that whatever Walker and the Legislature chooses to do will be the wrong thing, and not only because trickle-down economics is a total failure when it comes to creating jobs and raising living standards. It's also because other Wisconsin services and funds have serious funding needs that go past the $912 million in extra revenues.

The first involves the human services deficits that I have touched on the past. Because of increased poverty and Walker's silly pose on Obamacare, the state has to either come up with more funds for the state's low-income individuals, or subject them to serious cuts. Even the LFB mentioned the $92.6 million shortfall in Medicaid for this biennium in this revenue update, and the surplus announced today makes the decision to kick off 89,000 Wisconsin adults and children onto the Obamacare exchanges instead of spending $43 million to cover them for 3 months especially cruel.

And there are other needs that are gaping in the state, which makes this piece of Walker bragging especially dishonest.
The days of billion-dollar deficits and double digit tax increases are over, and we have led ourselves into a new era of financial responsibility and continued investment in Wisconsin’s priorities. Our state is heading in the right direction, and together, we are moving Wisconsin forward.
Well, being last in the Midwest for job growth and bottom 10 in the nation isn't exactly "moving forward" over your 3 years, Governor. And the days of billion dollar deficits are most certainly NOT over, because we have one in Transportation.

That's right, the Transportation Fund is even worse off than DOT Secretary Mark Gottlieb revealed last weekend (here's the link to my analysis of that issue). The LFB goes into that issue in the revenue estimates, and says that despite the Transportation Fund having an $84.6 million cushion for this biennium, the extra needs put them heavily in the red for the next budget.
...while the transportation fund is projected to have a positive, biennium-ending budgetary balance, the fund faces a structural imbalance heading into the 2015-17 biennium. In 2014-15 (the base year), total revenues, net of revenue bond debt service, are $11.4 million above total transportation fund expenditures. However, of the 2014-15 revenue total, $123.5 million is provided with one-time transfers from other funds ($107.5 million from the general fund and $16.0 million from the petroleum inspection fund). Without the one-time transfer revenues, base expenditures exceed base revenues by $112.0 million annually. Therefore, over the 2015-17 biennium revenues would have to grow by $224.0 million to fund expenditures at the 2014-15, base-year level.

In addition, other factors will increase current law expenditure commitments in the 2015-17 biennium. First, Act 20 provided a 4% increase in calendar year 2015 for the mass transit assistance and general transportation aid programs. Since only a portion of the 2015 aid increase, in both programs, is funded in 2014-15, an additional funding increase would be required in subsequent fiscal years to fully fund the increase. For the general transportation aid program, an additional increase of $9.0 million will be required in 2015-16 (or $18.0 million over the biennium if the 2015 aid level is continued), while in the mass transit assistance program, an additional increase of $3.2 million will be required in 2015-16 (or $6.4 million over the biennium). Assuming that the 2015 aid level is fully funded and that level is maintained, these commitments add $24.4 million to the structural imbalance.

Further, growth in transportation fund debt service, on currently-authorized bonds, will further increase 2015-17 expenditures. Typically, the full, annualized debt service on bonds authorized in one biennium is not paid until the following biennium. Based on current bond issuance assumptions, the Department of Transportation estimates that debt service on currently-authorized bonds will grow by $41.9 million in 2015-16 and by $45.9 million in 2016-17, above the 2014-15 base, for a biennial total of $87.8 million. Finally, the calculations described above do not include the impact of any other costs that the state may incur in the 2015-17 biennium in excess of the 2014-15 appropriation base. Notably, the Department of Transportation estimates that continuing work on the Zoo Interchange and Hoan Bridge projects in Milwaukee County will cost $957 million in the 2015-17 biennium. By comparison, the 2014-15 base appropriation for the southeast Wisconsin freeway megaprojects program is $86 million.
So over the two years of the biennium, the extra cost for the Milwaukee-area projects vs. this budget will be $785 million!

Let's add this up, shall we?

2015-17 start: +$84.6 million
Excess expenditures 2015-'17: -$224.0 million
Keep GTA and Transit aids level: -$24.4 million
Higher debt service due to borrowing: -$87.8 million
Extra costs for Milwaukee-area freeways: -$785.0 million

TOTAL STRUCTURAL DEFICIT FOR TRANSPORTATION FUND 2015-'17: $1,036.6 million...or $1.04 BILLION.

Hmmm, $1 billion up on one hand, but $1 billion down on the other. Sounds like we're basically even, aren't we? It also means any income or property tax cut that Walker may propose has to be made up with higher gas taxes, registration fees, or even more borrowing for Transportation in the other one.

Seems to be a straightforward solution to me- take care of our needs, move some funds from the General Fund into the Transportation Fund, and save some of the rest until we can see just what effect the Koo-Koo tax cuts will really have on revenue. Of course, this answer is far too pragmatic for this crew, so get ready for the exploding deficit come 2015!

Wednesday, January 15, 2014

Wisconsin pension solvency demands vigilance


Another piece of information came out this week that showed Wisconsin's public employee pension system is one that every other state can (and probably does) envy. The State of Wisconsin Investment Board (SWIB) reported strong returns for its pension fund in 2013, reflecting the booming stock market, and a continued successful strategy.
The Core Fund, the larger of the two WRS [Wisconsin Retirement System] trust funds with diversified holdings in domestic and international stocks, bonds, loans, real estate and private equity, ended the year with a preliminary return of 13.5 percent. The preliminary market value of the Core Fund on December 31, 2013, was approximately $86.5 billion. The Variable Fund, an optional, U.S. and international stock fund, ended the year with a preliminary return of 29.0 percent. The Variable Fund’s preliminary market value was approximately $7.2 billion on December 31, 2013.

SWIB’s U.S stock investments, which saw a return of 35.4 percent, had a significant effect on performance. The Variable Fund has 70 percent invested in the U.S. stock market and the remaining 30 percent of the fund is in international stocks that earned 13.9 percent. The Core Fund is 50 percent stocks split almost evenly between international and U.S. The Core Fund includes other types of investments used to help provide diversification.

Both funds surpassed their preliminary one-year benchmarks of 12.9 percent and 28.0 percent, respectively.
This keeps the pension fund at its 100% fully-funded status, and with 2013 ending, there was a second assist to the WRS fund, because of the "smoothing period." The smoothing actuarily averages funds over a 5-year period to keep the fund amounts from jumping around too much year-to-year, and causing large changes in taxpayer and employee contributions, which would create unnecessary stress and uncertainty. With the WRS fund having a 5-year smoothing period, it means the stock market crash of 2008 is finally off the books, and the 5 years of gains under President Obama are now the only stretch recognized. This should mean help for retirees, current public workers and other taxpayers going forward.
“This is great news for WRS members and all of Wisconsin,” said Robert J. Conlin, secretary of the Department of Employee Trust Funds. “These strong returns generated by SWIB, coupled with the fact that all of the losses from the 2008 financial crisis have been fully recognized, should mean a pay increase for annuitants in the spring of 2014. That’s money that will be spent in nearly every community in this state. It will also mean a reduction in contribution rates in 2015, which should help public employees and government employers throughout the state.”
The reduced contribution rates means that less taxpayer and state employee funding will be needed for 2015, helping the bottom lines for both the state budget and public employees, since they now split those contributions 50-50 (thanks to Act 10).

The concern you should have is that the full funding and reduced contributions for the pension fund makes for a juicy target for Republican officials for stealing in the name of more tax cuts. State Rep. Duey Stroebel said as much after the report came out.
“Secretary Conlin has already stated these great returns should mean increases in pension payouts. He declared, ‘That’s money that will be spent in nearly every community in this state.’ I encourage Secretary Conlin and the ETF Board to also focus on relieving the recent spike in contribution rates, not just raising annuitant payments above the core level. These markedly higher pension contribution rates to maintain solvency are paid by current public employees and by every Wisconsinite in the form of higher taxes. WRS contributions are taxed out of the private sector. That’s money that will not be spent in every community in this state.”
Apparently public employees like me who are double-paying into this system (both as an employee and taxpayer) aren't so much of a concern for the guy from the 262. Thanks, Duey.

We know that Walker had his eyes on messing with the WRS previously, before a state report in 2012 told him and everyone else in the state just how stupid an idea that was (Mike Ivey has a good rundown of this today in the Cap Times). But one thing we've learned with these guys is that they and their puppetmasters don't give up, regardless of what reality tells them. So the excess pension funds could be the real target, both to fill budget holes and offer up "tax relief" in the short term, and possibly depleting the fund to endanger it with the next economic downturn. At which time the Kochs, Bradleys, and their GOP front men can claim a "Detroit-style fiscal crisis," leading to radical, pro-corporate changes, with the premise being as false as the one which led to Act 10.

So as Gov. Walker tries to claim some sort of "upside revenue surprise" will give room for more tax cuts in one hand, take a look at the WRS pension fund that he may be reaching for with the other hand. Keep watching the WRS, cause you bet these guys would love to take some of it for them and their buddies if they can.

Monday, January 13, 2014

United Sportsmen scandal keeps dripping, and look who's feeding the funnel

It'd been a while since we heard from the United Sportsmen of Wisconsin scandal (click here for some of the backstory if you need to catch up). I feared the Journal-Sentinel had taken Jason Stein off the story because it was getting a bit too close to the (big-money) source. But Stein's back today with another update, and in a shocker, United Sportsmen still can't get their act together and be honest about where they get their money, and now they want to claim they merely misplaced a few things, and said an odd circumstance caused the delay.
Initially, the group presented itself as a nonprofit and then, when it was revealed it hadn't yet received federal nonprofit status, said it was a for-profit company. When the Journal Sentinel reported the group hadn't filed any state tax filing required for for-profit firms, United Sportsmen reversed itself again and said it was a nonprofit and had hired the law firm of Foley & Lardner to help get its state and federal filings in order.

In its unsigned letter, the group said the tax mistakes had largely been made by board member Scott Maves, who was in charge of its finances and who died in June.

"Prior to (September), the other board members of the United Sportsmen believed everything was being filed properly and had been taken care of," the letter reads.
Suuure, blame it on the dead guy.

So after lots of delay and other excuses for why they couldn't provide their information to try to get tax-exempt status, United Sportsmen have apparently finally gotten the paperwork in....AS REQUIRED BY LAW. And to the surprise of hopefully no one, they don't do a lot of the Sportsmen stuff, but they sure do a lot of politicking and collecting of money from other political groups.
The group last week turned over its filings to the newspaper as required by federal tax rules — some four months after they were first requested. The filings show that the group paid $118,400 in 2011 to an out-of-state Republican consultant, had only one donor in 2011 and ran a $29,000 deficit in 2012 just before seeking the taxpayer-funded grant for teaching state residents to hunt and fish.....

As previously reported, the political group Citizens for a Strong America Inc. gave $235,000 to United Sportsmen in 2011. The newly released filings show that single donation made up United Sportsmen's entire revenue for that year. The group spent most, but not all, of that donation and finished the year with $39,044.

The bulk of the money spent, $118,400, went to Arena Communications of Salt Lake City, Utah, a firm that helps design and send out mailings to voters. Arena has high-profile GOP clients around the country, including Walker; U.S. Rep. Paul Ryan, a Janesville Republican; the state GOP; and the committee representing Republican state senators.

United Sportsmen sent out a mailing in the 2011 state Senate recall elections.
And who is Citizens for a Strong America? The Center for Media and Democracy's Sourcewatch says they
...operate out of a UPS mail drop box, but spent $836,000 on ads in the 2011 Wisconsin Supreme Court race, and additional undisclosed amounts on state Senate recall races that year. Wisconsin Club for Growth provided CSA's entire $4.62 million operating budget in 2011; CSA's Treasurer is Valerie Johnson, wife of Wisconsin Club for Growth's RJ Johnson. CSA also funneled money to other groups active in the recall elections, as well as the controversial "United Sportsmen" group that was the beneficiary of a $500,000 taxpayer-funded "sweetheart deal" cut by the outgoing Assembly Majority Speaker.

The President of CSA is John W Connors, the "Director of Special Operations" at the Franklin Center for Government and Public Integrity, which operates Watchdog.org and Wisconsin Reporter. Connors is elsewhere listed as an employee of David Koch's Americans for Prosperity, and his consulting firm is at the same street address and building in Milwaukee, Wisconsin as AFP-Wisconsin. Connors registered CSA's web domain.
Hmmm, RJ Johnson, Watchdog.org, and Wisconsin Reporter, why have I been hearing those names recently? Oh yeah, because they're trying to stonewall John Doe Deux, which is looking into exactly this kind of money-laundering and tax evasion. PR Watch has a great rundown of how these sleaze merchants have been working together in defense of their "free speech," and illegally leaking details of the investigation.
The Wall Street Journal editorial board wrote on Friday that subpoenas issued to Citizens for a Strong America, Friends of Scott Walker, Wisconsin Manufacturers & Commerce Inc., and the Wisconsin Club for Growth were quashed by retired Appeals Judge Gregory A. Peterson, because they "do not show probable cause that the moving parties committed any violations of the campaign finance laws." (gee, wonder who leaked that info, and do you think the Murdoch Journal checked to see if this was actually what happened?)

This was the first time Citizens for a Strong America has been named as involved in the probe.

Since 2011, CMD has reported extensively on the activities of this group in the state, and revealed exclusively that the president of Citizens for a Strong America, John Connors, is “Director of Special Projects” for the Franklin Center for Government & Public Integrity/Wisconsin Reporter.

This helps explain the Franklin Center’s eighteen-part series attacking the John Doe as well as some of its unique insights into the case. The Franklin Center has failed to disclose Connors' connection to the issue and fails to regularly note that the Franklin Center's founder Eric O'Keefe (Director of Wisconsin Club for Growth) was subpoenaed in the investigation. On January 10, when Franklin Center / Wisconsin Reporter wrote about the quashed subpoenas for Citizens for a Strong America and other organizations, it did not mention its close ties to the group.
Lots of interesting timing with all of this. For the first time, we have it reported that Citizens for a Strong America (and United Sportsmen of Wisconsin as a result) was indeed part of this coordination of message and money. And there are connections feeding back to all parts of the Wisconsin Republican Party and the Koch empire from these groups, including Scott Walker's campaign. It's a remarkably incestuous group, and unlike what the Bradley Foundation's Charlie Sykes may say on the radio, John Doe Deux is far from over. In fact, it may be getting deeper, because even without subpoenas, there's still plenty of evidence to connect these groups to illegal coordination, evading tax laws (especially the right's "non-political" 501-c-3 and 501-c-4 orgs), and funneling money like the $500,000 of taxpayer funds that was steered to United Sportsmen by Koch-connected State Rep. Scott Suder, which is the act that kicked the United Sportsmen scandal into gear 5 months ago.

It's never the act itself, it's the things that lead up to the act and the cover-up that follows that always does these guys in.

Sunday, January 12, 2014

Walker plans to fill Transportation Fund with...$200 registration fee?

Good to see a discussion of Transportation funding find its way into an in-depth article from the Journal-Sentinel's Patrick Marley. And while it's buried near the end of the article, I'm going to bring this bit of news up to the front.
The transportation fund will start the next two-year budget cycle with a deficit of about $750 million. That is because the governor and lawmakers relied on one-time funding — much of it borrowed — to help pay for the Zoo Interchange and the north-south portion of I-94 in southeastern Wisconsin.

About $600 million more will be needed from mid-2015 to mid-2017 to pay for those two projects alone.
When you combine it to the $725 million structural deficit we're in for the General Fund, it now means the state is facing overall budget deficits near $1.5 billion with the next budget that have to be filled. So much for the idea that the budget is "balanced" under Walker and WisGOP.

So how did we get here? A look at the LFB's rundown of the Transportation Fund shows that there is over $250 million being transferred from the General Fund and Petroleum Inspection Fund for this current budget, and that can't be counted on to continue. And of course, if this transfer from the General Fund DOES continue, then it blows up the General Fund deficit even higher, so good luck trying to do further income tax cuts when the budget already isn't balanced, Governor.

In addition, the 2013-'15 Walker/WisGOP budget borrows nearly $1 billion for transportation projects, with those debts having to be repaid in future years. $200 million of that will be on the Zoo Interchange project, and it's not like that project will go away on July 1, 2015, so that'll have to continue to be paid for. It's nice that this administration believes in paying for some infrastructure needs (who says they're not Keynesian? The Road Builders sure don't), but you do have to pay for these things in some way.

Well, how do we close this Transportation Fund deficit? Marley talked with DOT Secretary Mark Gottlieb, and the Secretary fleshed out some trial balloons that discuss how a second Walker term might finance some of these projects, including some of the ideas mentioned in the State's Transportation Finance and Policy Commission.
Lawmakers have rejected new funding sources for roads in recent years, but Gottlieb said they are becoming more aware of the need to invest in infrastructure.

"I detect much more willingness in general to discuss this issue because there's a growing recognition of what those needs are (for transportation)," he said....

Funding roads with new revenue would face steep challenges. In a recent interview, Assembly Speaker Robin Vos (R-Rochester) was cool to the idea of raising the gas tax or implementing new vehicle fees, even if they were part of a measure that reduced the overall tax burden.

Instead, Vos wants the state to start tolling on highways.

"I have consistently been a supporter of tolling," Vos said. "As people drive, they should pay. It makes perfect sense."
So the Assembly's GOP leader wants us to be like the FIBs and toll, eh? Of course, to do so, you'd need to build new lanes on the highways (aka "HOT" lanes, where you pay to get access to them), because current federal law doesn't allow a toll-free state like Wisconsin to put tolls on existing lanes (we'd have to give back a lot of federal highway funds, and because it's not passenger rail, the Walker folks won't dare do that).

So what do you think about the issue, Governor? Gottlieb is quoted in the article as saying he'll ask Walker for the TFPC's request of $6.8 billion in additional funds over the next 10 years. But the way they plan to pay for it appears to mostly involve trust in the magical thinking of most supply-siders that somehow the revenue will just be there.
Walker in the past has embraced hot lanes, but Gottlieb ruled the idea out for now because he said there are no road projects under consideration where they would be feasible. Installing the infrastructure for the tolled lanes would be costly and traffic levels would not be at a level where enough drivers would choose to use them, Gottlieb said.

Gottlieb declined to weigh in on other specific funding ideas. In its report, the commission backed raising the gas tax by 5 cents, to 37.9 cents per gallon; charging drivers 1.02 cents per mile they drive; and increasing registration fees for commercial vehicles by 73%.

The Department of Transportation will host forums around the state this spring to get the public's input on transportation revenue to help him refine his recommendations to Walker, he said.
And don't count on increased driving to raise gas tax revenues for the fund, especially when US PIRG's recent reports show the Madison and Milwaukee areas to have the 2nd and 3rd largest DECLINES in vehicle miles driven per capita.

So with gas usage not going up, the only option outside of tolling hot lanes and raising the gas tax becomes raising registration fees for vehicles to nearly $200 (using the Marley's article's estimate of $120 per typical driver to bring in the $680 million a year in revenue). Good luck selling that one, guys.

If Sec. Gottlieb and Gov. Walker's staff are searching for ideas that won't be DOA with rational voters, they are more than welcome to read what I had to say on the subject a couple of weeks ago. Not that I think they'll follow any of these suggestions (too realistic to sell on talk radio), but maybe someone whose administration doesn't want the state to go bankrupt could give it a listen.

Keep your eyes peeled on this issue, it's probably more important to our state's economic future than any ALEC-based "tax reform". And if the Burke and Vinehout campaigns are smart, they'll hammer Walker for putting this state deeper in the hole for its many transportation needs.

Saturday, January 11, 2014

The swinging Kleefisches! And other GOP corruptions

Couldn't help but notice this strong bit of investigative reporting by the State Journal's Dee Hall, who discovered State Rep. Joel Kleefisch (aka the husband of Lieutenant Governor Rebecca Kleefisch) and Wisconsin GOP megadonor Robert Eisenga teaming up to try to limit the amount of child support that could be paid by rich people. And I'm sure this will shock you, but they aren't doing this for the greater good.
...the bill would require judges to lower child-support payments if they are 10 percent or more above the amount that would have been ordered using the new requirement. That requirement caps incomes subject to child-support payments at $150,000 a year.

Kleefisch’s bill also would prohibit judges from taking into account a parent’s assets in determining the level of child support.

Court documents show Eisenga, a Columbus developer, owner of American Lending Solutions and the former mayor of Columbus, was ordered to pay a minimum of $15,000 a month for his three children based on his 2010 income of $1.2 million and assets of $30 million.

The bill drafting records, which include emails, letters and handwritten notes, show Eisenga and his attorney, William Smiley of Portage, made numerous suggestions for changes to the bill aimed at helping Eisenga lower his child-support payments.
Eisenga wasn't exactly qualifying for Father of the Year before this bill either, because in May 2012, a Madison TV station reported Eisenga had put his kids on Badgercare after his divorce, despite having assets of more than $20 million. Unlike his kids' health care, Eisenga had no problems paying for politicians, as the article notes he his ex has given over $41,000 to Republicans in the last 8 years, including $3,500 to Joel Kleefisch, $7,500 to Kleefisch's wife, Lt. Gov. Rebecca Kleefisch, and $15,000 to Governor Scott Walker. This includes $5,000 that Eisenga gave to Walker last March, when he allegedly wasn't making enough to provide for his own kids' health care.

We already knew Eisenga's dedication to the Wisconsin GOP went beyond throwing money to candidates. He also was the guy who hired Walkergate criminal Kelly Rindfleisch after the heat from John Doe 1 got too hot before the 2012 recall elections. And what the "business" he and Rindfleisch were in seems as legitimate as United Sportsmen of Wisconsin.
A former aide and campaign worker for Governor Scott Walker who faces misconduct charges was affiliated with a business with ties to the largest alleged violator of the state's No-Call List.

Nevada state records show Kelly Rindfleisch as affiliated with National Lending Solutions, a business with a Columbus address, between December 2011 and March 2012.

Milwaukee County's district attorney has charged Rindfleisch with misconduct in public office for allegedly doing campaign work while on-the-job as deputy chief of staff for then-Milwaukee County executive Scott Walker. Rindfleisch was criminally charged at the same time she was listed as the business reservation holder in Nevada.

The business address for National Lending Solutions is identical to the address of American Lending Solutions, formerly First American Funding Company, owned by Michael Eisenga of Columbus.
And it's not surprising that Eisenga would choose Joel Kleefisch to try to sneak this child support bill through, because we already know J. Kleefisch can be bought, and will go to the wall for those who buy him. This was best shown in late 2011 and early 2012 when he told the Walker-appointed DNR official (and ex-state Rep.) Scott Gunderson to back off fining Herr Environmental as Herr was literally spreading shit near Oconomowoc.
Gunderson and other DNR administrators sought to iron out the problem in meetings with Herr and Herr’s state representative, Joel Kleefisch, R-Oconomowoc, who interceded on his behalf, records show. At one meeting, on Dec. 13, Herr said he spoke with [DNR Secretary Cathy] Stepp who assured him “no citations or forfeitures would be required,” according to [a DNR wastewater specialist's] notes.

Stepp, who declined several requests to be interviewed for this story, denied in an email she made such a claim to Herr. Asked if she knew Herr or had business dealings with him in the past, or if she spoke with him at all during the enforcement case, Stepp responded, “All are ‘no’ answers.”...

At a second meeting, on Dec. 20, Kleefisch — who also received $100 in campaign donations from Herr and whose wife Rebecca received $2,250 from the Herr family during her campaign for lieutenant governor — challenged Gunderson to reconsider the citations the DNR was weighing against Herr.
We know that Joel's wife Rebecca is also free to spread around affection to GOP supporters, as shown last month when she asked oligarchs in Beloit "How can we love you more?" when it came to proposing "tax reform" in Wisconsin. As the Root River Siren well put it, Becky has shown she's more than willing to trade keys with campaign contributors when her and Joel attend their little get-togethers.



And it all interconnects so well between the Kleefisches, influence-peddlers like Michael Eisenga, and GOP donors and officials. You think I was kidding when I called WisGOP one large, incestuous organized crime family? I wasn't. It makes for quite a bizarre bunch of love triangles, but they inevitably connect back to each other at some point. I just wish we had a real media outside of Dee Hall and a few others to look into those connections further.

Friday, January 10, 2014

Unemployment claims showing something lurking?

1. With today's surprisingly disappointing December jobs report (only 74,000 jobs added, after averaging just under 200K a month for 2013 up till then), it leads one to look at whether there is a slowdown afoot, or if it's merely an odd month that will be revised upward with further revisions. My instinct is the latter for now, because few other reports had indicated such a slowdown in job growth (ADP's payroll survey had come out on Wednesday and estimated private sector jobs in December went up 238,000, instead of the 87,000 the BLS had).

But let's take a look at unemployment claims, to see if they might be a tipoff for the December and January jobs numbers. Remember, both of these months often see large numbers of layoffs due to the weather growing colder (and the BLS especially noted that December's awful cold and snow played a role in this bad report), and a higher-or-lower number for these months especially can translate into big seasonally-adjusted changes in job "growth." The last couple of years we have seen year-over-year decreases in weekly jobless claims around 10% nationwide, so let's look at the 6 weeks since the week of Thanksgiving to see if that trend is changing.

Year-over-year change in unemployment claims, U.S.
Week ending Nov. 30 -12.17%
Week ending Dec. 7 -7.59%
Week ending Dec. 14 -3.52%
Week ending Dec. 21 +4.13%
Week ending Dec. 28 -1.14%
Week ending Jan. 4 -0.83%

So it's generally less than a 10% drop. But it's also still decreasing, and January 2013 was a decent month for job growth, with a seasonally-adjusted 164,000 private sector jobs added, and 148,000 overall. So this small sample size indicates that there may be slightly less job growth in January 2014 than in the same month last year, but nothing that would indicate the economy is going into recession or anything like that.

And scaling it down to Wisconsin, we're especially vulnerable to higher unemployment claims this time of year, not only because we get colder than most places, but also because Holiday-related jobs in retail and other sectors go away. It's why unemployment claims in Wisconsin have a typical cycle of peaking in the first week after New Year's, staying high through Winter, dropping through the Summer and Fall, and then going back up as the weather cools.

Wisconsin new unemployment claims by week, 2010-2013



As you can see in that graph, we ended 2013 with new unemployment claims around the same levels as we saw in December 2012, a month that saw a moderate gain of 2,400 jobs overall, and 3,300 in the private sector. The cyclical nature of unemployment claims is what makes the recent delays and lack of processing of unemployment claims at the Department of Workforce Development especially bad. Here's an example of that screw-up.
Ron Youngbluth of Pewaukee said he started calling to see whether he'd be eligible for unemployment after he was laid off from his part-time job as an optometrist in Brookfield on Dec. 6. He estimated he called up to two dozen times in the past month, sometimes several times a day. He got through to the automated system, but never to a person.

"I called them the past at least three weeks, I don't know how many times. I couldn't get ahold of anyone," he told the Public Investigator.

"Sometimes, I got a busy signal. Sometimes, they ask for information and I put my Social Security number in, my pin number. They said, 'We're experiencing peak volumes. We'll attempt to transfer you to an agent.' They said 'all our agents are busy with others. Call back some other time.'...

John Dipko, a spokesman for the Department of Workforce Development, said the department is working to handle the high call volume.

"We have additional staff working the phone lines and putting in extra hours to take calls during this temporary high-volume season, and we expect the situation will improve, especially now that the holiday-related office closures are behind us," he said in an email.
Well, apparently not enough additional staff. And given that more people are laid off this time of year, you'd think they wouldn't have a problem finding people, even in 4.0% unemployment Dane County.

What could be worrying looking ahead is that this was the first year in the last 4 that Wisconsin didn't see a sizable year-over-year drop in unemployment claims, which explains the upward swing past 0% in this graph.

Year-over-year change in unemployment claims, 2009-2013



The times in the last 2 years when year-over-year claims have spiked over 0% have generally coincided with months and time periods that have flat job growth or job losses (such as the Fall of 2012 and March and April of 2013). So if we start 2014 with the lines continuing above 0%, then it becomes likely that Governor Walker slips further and further behind the 250,000 goal of job growth that was made in 2010. It also means the Walker job gap will likely grow, as even with this low December report, November was revised up by 38,000 jobs, which means the private sector Walker jobs gap is now back over 50,000 as of November.



Suppose the only positive in today's bad jobs report if you're Scott Walker is that perhaps the jobs gap you created in Wisconsin will close some in December, even if Wisconsin's own gains are tiny. But it's still a long way to get back toward the U.S. pace for Walker's term, and if the unemployment claim numbers are an indication, it won't be closing that much in the next couple of months, at least.