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With "Surplus" Revenue, Why No Further Expansion Of Choice?

Mon, 03/06/2017 - 03:30

Gov. Walker's budget proposal doesn't make substantial changes to school choice programs, but the Legislature is eyeing its own changes

March 6, 2017

By Ola Lisowski
MacIver Institute Research Associate


[Madison, Wis...] Back in January, the Legislative Fiscal Bureau set the context for the coming budget debate and published its latest revenue forecast for the next few years. According to director Bob Lang, the state of Wisconsin is expected to have $714 million more in its coffers than it anticipated in November. One might spend time debating how close this projection will be to reality, but the real debate for the purposes of this biennium, of course, is how that money will be split up.

Other than an increase in per-pupil aids, Gov. Walker's 2017-19 budget proposal includes no substantial changes to any of Wisconsin's school choice programs. After two budgets that included considerable wins for school choice - the creation of the Racine program in 2011 and statewide expansion in 2013 - choice advocates are asking themselves what happened.

Many in the school choice movement had hoped the Governor would use some of the state's expected budget "surplus" to lift the last remaining enrollment cap.

After Governor Walker released the details of his budget proposal, pro-choice groups School Choice Wisconsin and the Wisconsin Federation for Children released a joint statement, writing:

"We are disappointed that none of these funds will be used to help hundreds of families get their children off of waiting lists and into the school of their choice. Across Wisconsin, demand for the Parental Choice Programs and the Special Needs Scholarship continues to grow. Unfortunately, program caps and limitations constrain supply and restrict access to quality schools by parents and students."

The expected "surplus" amounts to $21 million across the biennium, according to the memo.

Student enrollment in the statewide program - formally known as the Wisconsin Parental Choice Program (WPCP) - remains limited by district. Currently, no more than 1 percent of pupils residing in a public school district can participate in WPCP. Once the current school year ends, that limit will increase by 1 percent each year until the 2025-26 school year, when a 10 percent threshold is reached. The following year, the caps will be removed entirely.

Neither the Racine nor the Milwaukee programs utilize such caps. While pro-voucher groups have pushed for other administrative measures that would increase efficiency within the programs, WPCP's district enrollment caps are one of the last substantial barriers for the growth of school choice in Wisconsin.

The ultimate goal? Ensuring that access to school choice in this state does not hang at the whim of one election. Though with over 33,000 students and more than 200 schools currently participating, that goal seems to be getting further and further away.

From the perspective of the Governor's office, choice schools do just fine under the budget proposal, with a $217 per pupil aid increase.

"There's been no greater advocate for choice and charter schools across the nation than Governor Walker over the last six years," Tom Evenson, a spokesman for the Governor, said. "We think that with this increase, they do well."

When funding goes up for children in traditional public schools, per pupil funding must go up an equal amount for students in the choice programs. In other words, the additional per-pupil funding is required by law.

"Hopefully, the legislative process will produce solutions for parents on waiting lists across Wisconsin," School Choice Wisconsin and Wisconsin Federation for Children's joint press release reads.

Hope exists in the Legislature, where Majority Leader Sen. Scott Fitzgerald said that lifting the enrollment caps in choice programs would "absolutely" be part of the discussion moving forward. During a wispolitics.com luncheon, Fitzgerald said that Republican lawmakers were interested in continuing their substantial efforts towards school reform this budget.

School choice in Wisconsin is not going away. Demand on the side of students and of schools is constantly growing, with many districts already hitting their artificial caps on enrollment. Choice schools are posting ever-improving academic outcomes, in some cases even outperforming their full-income public school counterparts. The Governor knows this, having nodded to the movement in his budget address when he said that he trusts parents.

For now, the budget moves onto the Legislature.

Republican Grassroots Expects Washington to Deliver on Tax Reform Promises

Sat, 03/04/2017 - 05:00

March 4, 2017

By Chris Rochester
MacIver Institute Communications Director

The Republican grassroots expects Washington politicians to deliver on their campaign promises of a major tax code overhaul, a sentiment that's backed up by a new poll by the American Action Network, a center-right advocacy group based in Washington - as well as Republican leaders in an area of Wisconsin where Trump emerged the surprising victor.

The poll, which surveyed Republicans, found that 77 percent of Republicans think tax reform is extremely or very important. It also found that Republican rank-and-file voters are most concerned that the current tax code is too complicated and tax rates are too high.

"As President Trump and conservatives in Congress work on tax reform, this constituency is strongly behind them and overwhelmingly supports center-right tax reform. It's clear, now is the right time to deliver on a simple tax code with lower rates for all Americans," said AAN Executive Director Corry Bliss in a statement.

Brian Westrate, chairman of Wisconsin's 3rd District Republican Party - a historically blue, mostly rural district in western and central Wisconsin that Trump won handily - framed the imperative to reform the tax code as a moral one.

"Those in power in our nation's capital have a moral duty to the people they represent to tackle the over 75,000 pages that comprise the current tax code, to deconstruct it line by line, and reform it as a simple, effective, efficient, and fair new law," Westrate said.

Bill Feehan, chairman of the La Crosse County Republican Party, said rank-and-file Republicans are very much in tune with the conversation in Washington and expect bold tax reform, especially after Trump - who made tax reform a centerpiece of his campaign - won the presidency in November.

"Tax cuts are the fastest way to stimulate our economy. Income tax cuts put more money in people's pockets and most of the money gets spent right away," Feehan said.

"This gets the economy going from the bottom up. Allowing businesses to keep more of the money they earn results in pay raises for employees, new equipment purchases and investment in business expansion," added Feehan, also a La Crosse-area business owner.

AAN's poll also went into specifics about Trump and Congressional Republicans' job performance and asked respondents about their tax reform plan. Respondents overwhelmingly support the broad outlines of the GOP's plan, with 85 percent approving. Respondents also said tax reform should make it easier to create jobs, raise wages, and expand opportunity. A new tax code should grow the economy and encourage job creation.

Respondents also viewed President Trump favorably - 89 percent registered their approval. As for Congressional leadership, 77 percent approve of the job GOP leaders are doing.

The high support for Trump and Congressional leaders should be a boost for fence-sitting Republicans who might be afraid of the electoral ramifications of major tax reform. "This will take courage, and fortitude, but now that the conservatives in Washington control all levers of power in Washington they must use this opportunity to serve the people," Westrate said.

"They must kill the tax beast built by progressive socialists over the course of the last 100 years."

Both Trump and Congressional leaders in the majority party can maintain those relatively high numbers, it seems, by advancing a bold, pro-growth tax reform plan and doing it sooner rather than later. "Republicans should move quickly on tax cuts," Feehan said.

"With great power comes great responsibility, the American people have given conservatives the power, now it's time to accept the responsibility," said Westrate.

Photo credit: The Motley Fool

Wisconsin Manufacturing Now Envy Of Nation

Thu, 03/02/2017 - 15:23

MacIver News Service | March 2, 2017

By Bill Osmulski

[Madison, Wisc...] Governor Scott Walker broke out the shades once again on Wednesday for the Wisconsin Manufacturers and Commerce Business Day conference at Monona Terrace.

"Not too long ago at the economic forecast, I put on a pair of sunglasses because of that song, "the Future's So Bright I've Got to Wear Shades." Forget about all the rest of it, but that line alone is so important because it really describes what's happening here in the State of Wisconsin," Walker said in his speech.

Jay Timmons, National Association of Manufacturers President, told MacIver News Service that Wisconsin has good reason to be optimistic.

"You've tried to figure out what you can do to attract jobs to Wisconsin, and you've done a fantastic job in setting the environment for investment and job creation right here, thanks to the leadership of Governor Walker," Timmons said.

Just the night before, President Donald Trump gave his first speech to a joint session of Congress, and on Wednesday stocks were surging to new records. Additional, every week seems to bring a new story about a big manufacturer deciding to stay in the US or to bring back production. Timmons said this is due to the belief that the tax and regulation climate in the US is about to radically change for the better.

"Manufacturers are extremely optimistic about the future as long as we get our policies right at the federal level, and for the first time in a long time we have partners who seem to want to do exactly that," Timmons said.

Now states like Wisconsin are facing a problem they never could have dreamed about back in 2008, when the Great Recession started.

"There are 350 thousand jobs in manufacturing that are going unfilled today. The reason for that is because job in modern manufacturing are very technological, they're focused on automation, on robotics, and we just don't have the people with the skills that can do those jobs."

"I've got to believe it's true in other states, but my number one challenge is workforce. It's workforce. When you have more people employed than ever before, one of your biggest challenges is what do you do to find the people needed to fill those positions. And not just the ones we have open right now, but even more so the ones we're going to have open in the next three, four, five, six years. As the baby boom generation is at or near retirement, we're going to have even greater challenges in manufacturing, construction, transportation, IT, healthcare, finance and accounting, you name it."

Timmons says states across the country are looking to Wisconsin as an example of how to regain dominance in manufacturing.

"When I talk to manufacturers all across the country and I talk about the different states and what they're doing, number one on the list is always Wisconsin in a very favorable way. You've got a great focus on taxes and regulation. But more important you have people who really care about manufacturing, who want to work in manufacturing, who want to be a part of the manufacturing workforce. It's a really positive message you have. And I have to tell you, it's spreading far and wide," Timmons said.

Do You Have Too Much Money? Then The BAT Tax Is Just For You!

Thu, 03/02/2017 - 09:18

March 3, 2017

This satirical ad targets the proposed Border Adjustment Tax, or BAT tax, proposed by Congressional leaders. It's a parody of the typical infomercial-type ads that feature shots of people struggling to perform everyday activities. Except in this ad, people are struggling to close their overstuffed wallets or haul handbags loaded with cash up the stairs.

And then, of course, enter the charismatic spokesman with the solution to having too much money - the BAT tax, which the ad says will tax nearly everything Americans buy every day.

The tax is opposed by the National Retail Federation, which produced the ad and will run it during Saturday Night Live this weekend.

National Study: University of Wisconsin-Milwaukee Underserving Black Students

Thu, 03/02/2017 - 08:00

A recent study has revealed that only 1 in 5 black students at UWM graduate in six years

MacIver News Service | March 3, 2017

By Ola Lisowski

[Washington, DC...] Only one in five black students graduate from the University of Wisconsin-Milwaukee in six years, a new study from the Education Trust has revealed. The survey, which uses data from the national Center for Education Statistics, examined graduation rates among black students at 676 colleges and identified UWM as one of 21 universities with the worst academic outcomes for black students.

The study shows that just 21 percent of black students, or one in five, graduate the university in six years. That's about half the overall six-year graduation rate - 41 percent for black students - observed across the entire study. Overall, the study found that white students are more than 20 percent more likely to graduate in six years.

UWM also posts particularly large achievement gaps between black and white students, another reason that the institution made it on the lost of bottom-performing colleges in America for black students.

Eighteen schools are identified as high-performing institutes for black students, with Georgia State University posting the best results. None of the top-performing schools are in Wisconsin or even in the midwest, but are scattered across the south and the eastern seaboard. By contrast, nearly all of the bottom-performing institutions are in the midwest.

The findings fall in line with past trends in Milwaukee, where high schools are now working more closely with colleges to align curricula and better prepare graduates for success in higher education. Last year, the University of Wisconsin Remedial Course Report showed that 175 Wisconsin high schools sent more than six graduates to the UW System who needed remedial education. In 12 schools, 50 percent or more of the graduating class who went to the UW System needed remedial education.

The issue runs deep at Milwaukee Public Schools, where some high schools typically touted as high-performing were revealed to be graduating kids who are woefully unprepared for the real world. Reagan High School, for example, was named 2nd best high school in the state by U.S. News and World Report - but sent nearly 43 percent of graduates to college needing math remediation.

Milwaukee's issues with education black children start early - just 7.5 percent of black students in the third through eighth grades are proficient in math. Just over half of black students, or 55 percent, graduate from MPS high schools in four years. By contrast, 68 percent of white students graduate MPS in four years. And yet, as the MacIver News Service has reported, MPS dropped off the list of failing school districts last year.

The report's authors point to institutional barriers as a main reason for such underperformance, pointing to institutions with similar statistics such as SAT score, enrollment, percent of Pell Grant recipients, but with vastly different academic outcomes for black students. Notably, the authors strongly reject the notion that the differences in graduation rates are a result of factors that institutions cannot control.

The authors conclude that work must be done on three fronts: by addressing inequities in completion within individual institutions, by changing enrollment patterns so that selective institutions enroll more black students, and by improving the rates at which black students graduate from institutions where they are already more likely to attend.

Does Wisconsin Really Have A Billion-Dollar Transportation Deficit?

Thu, 03/02/2017 - 01:00

A MacIver Institute Perspective by Bill Osmulski

A billion-dollar shortfall in the next transportation budget started the debate about raising Wisconsin's gas tax, which was so explosive, no one seemingly had the time to confirm there is a billion-dollar shortfall. If they had, the current debate might not be centered on the gas tax, but instead on how we fund roads in the first place, because there's only a shortfall if you change the way Wisconsin funds transportation.

The current 2015-2017 state budget spends $2.8 billion on highways, and $855 million of that comes from bonding. That means about 30 percent of everything Wisconsin spends on roads is borrowed, and there are those who believe the state should not be borrowing at all to pay for roads. That was the cover story for a peculiar request the Legislative Fiscal Bureau received last summer.

Even though the DOT was about to submit a new budget request in less than two months, Fiscal Bureau was asked to project what the DOT's budget would look like under an unlikely set of circumstances. The request wanted the Fiscal Bureau to omit all bonding under a cost-to-continue scenario. The result was a $939 million difference between the current budget and the next.

The billion-dollar transportation deficit was born.

That number started the narrative that Wisconsin has a transportation funding crisis. It didn't matter that two months later the DOT presented its actual budget request that included spending projections, revenue estimates, current federal funding commitments, and existing bonding. That request also indicated there would be a shortfall, but at $449 million, it was less than half of the previous projection. When Governor Walker presented his budget proposal, he included $500 million in new transportation bonding to fill that gap, which would be the lowest amount since the 2001-2003 budget. It would also mean no delays on major projects currently underway.

Still, the fabricated billion-dollar deficit dominates coverage of the transportation budget, and it continues to frame the debate over the gas tax. Framing the transportation debate this benefits those who want to raise the gas tax. However, they will still readily point to bonding as an underlying concern.

"It is more conservative to pay for projects today than it is to borrow the money and make our children pay the price. But for far too long under Democratic and Republican leadership, the state has relied too heavily on bonding.  According to the Legislative Fiscal Bureau, Wisconsin will spend roughly 20 cents on every transportation dollar on debt service for this fiscal year," Vos said in a September 15, 2016 press release.

The Walker Administration, on the other hand, argues that transportation bonding is no different than taking out a mortgage for your house. The idea is you spread out the expense over the amount time you plan to use it.

Bonding is the one of the most common ways states fund transportation projects. There are only five states that don't use transportation bonds at all. The American Association of State Highway and Transportation Officials (AASHTO) released a report in November that found bonding to be one of the most successful approaches to transportation funding and finance.

Meanwhile, heavy reliance on fuel taxes is considered one of the least successful approaches to transportation funding according to AASHTO. In fact, many experts say fuel taxes are becoming obsolete as people drive less and cars become more fuel efficient. Even the supporters of raising the gas tax in Wisconsin admit it's not a perfect solution.

"Even though a lot of conversations have been about the gas tax being a declining revenue source or a dying revenue source long term, there are limitations to every different option that's out there," Representative John Nygren, Co-chair of the Joint Committee on Finance, told the Milwaukee Press Club at a luncheon on January 11th.

When it comes to options, Wisconsin has 19 different sources of revenue for its Transportation Fund. That's more than any other state in the country, according to AASHTO. These include aircraft registration fees, airline property tax, drivers and vehicle records fees, driver's license and state ID card fees, fines for truck size and weight violations, fuel tax, general funds, interest income, outdoor advertising revenues, oversize/overweight truck permit fees, passenger rail station sponsorship, passenger vehicle fees, petroleum inspection fund revenues, property sales, railroad property taxes, state rental vehicles fees, taxes on alternative fuels, taxes on aviation fuels, and truck registration fees. This is expected to bring in a total of $3.5 billion over the next biennium. When it comes to user fees specifically, Wisconsin's collections of user fees per lane mile are comparable to its neighbors.

Wisconsin has 19 different sources of revenue for road funding. More than any other state in the country. pic.twitter.com/y4wG8KI0qW

— MacIver News Service (@NewsMacIver) March 2, 2017

Wisconsin raises similar revenue from user fees per paved lane mile of road as neighboring states. pic.twitter.com/6UohbcLBqP

— MacIver News Service (@NewsMacIver) March 2, 2017

However, when we compare total highway spending (including administrative and debt service costs) per lane mile to road quality, we see that Wisconsin spends more for poorer quality roads. The state is clearly not getting a good deal on its roadwork, and it begs the question why? Fortunately, lawmakers sensed something was not right at DOT and ordered an audit last year.

Why does Wisconsin pay more for poorer roads? pic.twitter.com/fcUtH0ycNg

— MacIver News Service (@NewsMacIver) March 2, 2017 That audit came back in January 2017, and it was, in a word, devastating. The auditors found the DOT regularly breaks state law in budgeting, negotiating, communicating, and managing contracts. Among these statutory violations: the department does not always solicit bids from more than one vendor, it does not spread out solicitations throughout the year, it does not post required information on its website, its cost estimates to the governor are incomplete, and it skips steps in the evaluation process for selecting projects. These practices manifest themselves through an inescapable reality: the cost of major projects tends to double after the DOT gets approval from the governor and legislature to proceed. The auditors looked at 16 current highway projects and found they are over-budget by $3.1 billion.

Assembly Speaker Robin Vos said the audit indicates the state isn't spending enough on transportation.

"Construction delays are driving up costs unnecessarily, our road conditions are only getting worse and a long-term solution is needed. It's clear Wisconsin is trying to do too much with too little and taxpayers are not getting their money's worth," he said in a release.

When the Joint Audit Committee held a hearing about the DOT on February 21, 2017, Rep. Nygren described the audit as "the tip of the spear" in the transportation funding debate. However, after acknowledging the need for reforms, he, too, claimed the audit suggests the need for even more transportation funding.

"Could it also be interpreted that because costs are not being estimated appropriately, that the actual projected shortfall that we've discuss of about a billion dollars is actually underestimated?" he asked the auditors. They answered that was outside the scope of their investigation.

Senator Chris Kapenga responded that "giving them more money would just absolutely be the wrong thing to do at this point," until the new DOT Secretary has a chance to reform the agency and the legislature implements new oversight measures.

This light sparring has been typical of the DOT debate so far. That's because the bottom line is we don't know what the bottom line is. The side arguing for more highway spending hasn't provided a solid figure. We often hear about that fabricated billion-dollar deficit, but now there are some, like Rep. Nygren, who say even that might not be enough. On the other hand, Rep. Vos has suggested $300 million might be a realistic amount given the governor's budget criteria.

The governor has been firm and public in his opposition to raising taxes or fees for transportation. However, in December he made a comment that the only reason he might reconsider is if there were tax cuts in other parts of the budget to offset it. Vos took that comment and ran with it. He announced the $300 million target a month later, and Walker quickly clarified there was no deal to begin with.

Hypothetically, if Wisconsin were to boost highway funding by $300 million and it all came from a gas tax increase, the state's gas tax would have to go from 32.9 cents to 37.7 cents a gallon. That would give Wisconsin the eighth highest gas tax in the country. Of course, Vos' plan could spread that $300 million out across various taxes and fees in order to soften the blow. No one's really talked about that $300 million for over a month now, but then again, Vos and his allies are playing this very close to the vest.

When Nygren was asked about his side's lack of a definitive proposal to increase transportation funding at the Milwaukee Press Club luncheon, he simply responded, "We have been more about keeping all options on the table and having that dialogue, rather than choosing one path or one plan over the other."

Yet, the only option we continue to hear is raise the gas tax, and the best evidence to support that option is the fabricated billion-dollar shortfall. And nobody has definitively promised if we raise the gas tax, there will be no transportation bonding - which supposedly initiated this debate in the first place.

Madison Middle Schoolers Explore Very Adult Themes in Class (Warning: Explicit Material)

Tue, 02/28/2017 - 04:05

MacIver News Service | February 28, 2017

By Bill Osmulski

[Madison, Wisc...] In the school library at O'Keeffe Middle School in Madison, Wisconsin, an eighth-grader is presenting her homework assignment to the class.

"When people started calling us 'lesbians' that kind of sank her. Just a little more weight on top of her shoulders. It scared me that some nights I wouldn't be there to hold her," the girl recited.

A boy later presents his poem, "And in bed we abbreviate our intentions in weighty osculations, and my tears over you will be libations creating tiny pools of salty devastation atop your soft spot."

Another girl asks rhetorically, "Why is it when I have sex I'm a slut, but when he does it, he's a god?"

"He was addictive like heroin or cocaine. The type where each time he kissed me, I injected them into my bloodstream," another poem reads.

MacIver News Service began investigating this classroom activity after receiving a tip from a Madison resident concerned that the material was inappropriate for children in 8th grade. Students in 8th grade are typically around 13 years old.

MNS first downloaded and examined classroom videos Ms. Swetz had posted on YouTube. Then on Tuesday, February 21st MNS contacted Ms. Swetz, her principal Tony Dugas, and MMSD Superintendent Jennifer Cheatham. Cheatham and Swetz both acknowledged receipt of the email, but never responded to MNS' questions. Ms. Swetz then turned her videos to private on YouTube.

MacIver was still able to learn a great deal about the spoken word section from previously downloaded videos, MMSD's YouTube channel, a video from the UW School of Education, and a Journal Sentinel Article.

Ms. Swetz's spoken word section traces back to her days as a student teacher. Later, as a teacher at O'Keeffe Middle School, she taught spoken word and held three days of open mic in class. In 2012, she received a $5,000 grant from the Foundation for Madison's Public Schools and expanded Open Mic to after school hours and to off-site locations. She has even been able to take students on field trips to Milwaukee for the Teen Poetry Slam State Finals.

Not all the videos of student poems on her channel are explicit, but it is a recurring theme. Some videos reference drug use, homosexuality, sexual relationships, and rape. MMSD would not comment if the district has any policies about explicit material and presentations. MNS also wanted to know if parents had objections, could they opt their children out of the class?

It's possible that not all O'Keeffe Middle School parents would be surprised by this material. Some of the videos are of Open Mic Nights in the school library and there are clearly adults present.

This explicit material certainly wouldn't be a surprise to other media outlets. In 2015, Milwaukee Journal Sentinel reporter Erin Richards was a judge at the State Slam Finals and interviewed Ms. Swetz.

"Most of the poems were negative or sad; they were about really dark issues or pain. That's why the girl's poem about the vibrator was so refreshing - it was humorous. Is it uncool to write with humor?" Richards asked, seemingly unfazed.

Ms. Swetz often takes the mic at these events to share her own poetic works with her students. She's recited "Love Lines," about having to go out of state to get married to her same-sex partner. She's recited "1600" about police killing African Americans, hate crimes, and the president being a bigot.

In one of her poems, she explains how she determines what to teach in class.

"Some days I look out over my students and I close my lesson plan and I shut my door and I open my eyes to the lessons they really need to learn, no matter what some dead old white guy legislators in Washington deem worthy of my curriculum," Swetz said.

Lawmakers Consider How To Get DOT In Line

Tue, 02/21/2017 - 16:06

MacIver News Service | February 21,2017

By Bill Osmulski

[Madison, Wisc...] The Legislative Audit Committee recommended the state put more information and reporting requirements on the Wisconsin DOT after a devastating report.

The auditors told the committee about the trouble they encountered collecting basic information from the DOT. The department new secretary, Dave Ross, told the committee things were already changing under his management.

Democrats voiced concern about the recommendations. Rep. Sargent asked what difference new rules will make when the DOT wasn't following the old ones. Sen. Vinehout wanted to know where the Joint Committee on Finance was when DOT project costs were exploding.

The committee voted unanimously to introduce a bill based on the auditors' recommendations.

Border Adjustment Tax Just Complicates Tax Code Even More

Mon, 02/20/2017 - 05:57

With fiscal conservatives in charge, why raise taxes on anyone?

Federal Tax Reform Should Lower and Simplify Everyone's Taxes, Not Complicate The Tax Code Even More

February 20, 2017

By Brett Healy
MacIver Institute President

With President Trump's election in November and a Republican-controlled Congress came high expectations that finally the American people would see long-term and meaningful tax relief.

Unfortunately, the tax reform discussion in DC since the election has quickly fallen back into a familiar bad habit and the politicians have completely missed the lesson of the 2016 election.

The November 2016 election was above all else, a rejection of Washington DC and its wicked fiscal recklessness. Trump won because a majority of the country rejected the sky rocketing cost and broken promises of Obamacare. Trump won because the American people believe it is unconscionable that our country would be $19 trillion dollars in debt and that we would pass that financial time bomb on to our children and our children's children. Trump won because common-sense middle Americans decided that they were tired of being told that the government must always grow and that it is impossible to downsize their government. Trump won, in short, because taxpayers believed he was the only person capable of standing up to the professional politicians in DC and finally restoring fiscal sanity and prudence to our government.

Washington has, of course, decided to ignore this obvious lesson and quickly resorted to its evil ways by proposing a plan that would muck up and further complicate the tax code all in order to reform the tax code.

While Speaker Paul Ryan expressed his desire in an interview with MacIver last week to have individual taxpayers file their income tax return on a postcard, the tax reform discussion on the corporate side of things has been anything but simple and straightforward.

Everyone seems to be in agreement that the current 35% corporate income tax rate is too high and because it is so high it encourages corporations to park profits overseas. There is little agreement however on what we should do to fix this problem.

Enter the innocent sounding "Border Adjustment Tax." I was hopeful when I first heard the term a border adjustment tax that it would completely surround my house, wall off my earnings from the evil IRS and allow me finally to live in a free market and genuine capitalist peace. How naive of me to think that a border adjustment tax would simplify our tax code.

According to tax experts, a border adjustment tax would eliminate the tax deductibility of expenditures on imported goods and services including the imported raw materials used in manufacturing here in the United States and exclude from taxable income gross receipts derived from exports. This attempt to reform the federal tax code would supposedly raise 1 trillion dollars in tax revenue over 10 years, a trillion dollars that would go to pay for other tax cuts.

Earlier this month, The Tax Foundation hosted a roundtable discussion in Washington about the border adjust tax and the effects it would have on the economy. During this event, William Gale, Co-Director at the liberal-leaning Urban Brookings Tax Policy Center, told the crowd gathered that the border adjustment tax as proposed has never been implemented anywhere in the history of the world and that it makes the government a shareholder in every corporation.

The government a shareholder in every business? Wait a second. That doesn't sound like tax reform. Most entrepreneurs would say that the government as a shareholder sounds more like Dante's nine circles of hell.

While the crowd was trying to wrap their heads around Gale's profoundly disconcerting statement, the conservative on the panel, Douglas Holtz-Eakin, jokingly asked him if he was trying to kill the proposal. Let's hope so.

Given the rare and historic opportunity to fix this country's fiscal shortcomings for generations to come and to finally turn the tide on our debt, why would we be discussing new ways to tax people, companies and commerce that would make the federal government a partner in your business?

Instead of talking about shrinking the size and scope of the federal government and the spending cuts that are needed to free all Americans, the discussion in DC is centered on a new tax system that has never been tried before anywhere in the world?

Does anyone in middle America feel good about Congress trying out a new tax system? Let's be clear - the reason that the US tax code is over seventy-four thousand pages-long and that the country is $19 trillion dollars in debt is that the federal government, specifically Congress, has for too long picked winners and losers. Instead of giving all of us a tax rate that is low, broad and comprehensive, federal officials have handed out special favors, exemptions and deductions to the special interests and political insiders with privileged access. The federal government has not earned the trust of the taxpayer to try something new.

What do you think the professional politicians will do with a trillion dollars that the border adjust tax will raise? Fund more government and pet projects? Me, too.

The sole purpose of tax reform should be to lower everyone's tax burden, simplify our leviathan tax code, allow taxpayers the "privilege" of keeping more of their hard-earned money and walling off the government from picking winners and losers. Nothing more, nothing less.

While DC may have already conveniently forgotten the true lesson of the 2016 election, let's hope President Trump remembers why the rest of America sent him there - to stand up to the entrenched insiders and restore fiscal sanity to our country once and for all.

Any other purpose is just another DC scam.

The discussion so far in DC has focused on how do we adequately fund the out-of-control federal government and not enough on how do we lower and simplify the taxes of every American.

Tax reform that is primarily worried about coming up with enough taxpayer money to fund current obese levels of government spending is misguided.

Reparations at UW-Madison: A Lesson On Real Diversity

Mon, 02/20/2017 - 05:00

February 20, 2017

By Tyler Brandt
Vice President, UW-Madison Young Americans for Liberty

On the morning of February 16th, 2017 Tyriek Mack and other ASM representatives introduced campus legislation calling for "test-optional admissions and reparations in the full and free access for all black people to attend UW-Madison".

The legislation would effectively make tuition free for all black people, undocumented students, and formerly incarcerated students. The proposal cutely named, "Cognitive Dissonance" was introduced to actualize UW-Madison's proclaimed commitment to diversity and inclusion.

Mack gives several explanations as to why this legislation is necessary. He cites evidence of black people being underrepresented at a mere 2 percent of the entire student population. He questions why Chancellor Blank and the university would hold diversity and inclusion as campus values while they do nothing to bring more black students to campus.

First of all, it is important to accept the fact that black people have been historically disadvantaged in America. I wish not to deny the harsh reality that many have had to face in this country. Mack is correct in that there is a problem with minorities having unequal access to quality education. While this is true, his policy would do little to solve the problem.

The problem of there not being enough black people at the university level is a direct result of the failure of K-12 education. This is apparent not only around the country but also on a local level such as in Milwaukee, where nearly 25,000 students attend 42 failing schools. MPS has continuously failed to provide quality education to its inner-city students despite having one of the highest spending per pupil in the state.

The achievement gap between black and white students at MPS is consistently among the highest in the country. The most recent statewide tests show us that only 7.5 percent of black kids at MPS are proficient in math. The data also shows that students aren't improving as they get older, either - last year's Report on Remedial Education revealed that 56 percent of MPS graduates who attend the UW System require math remediation. If the UW System has an inclusivity issue, it begins at MPS, which has a clear record of consistently underserving its students.

I think Mack along with many others share the common goal of providing better education to inner-city students. If we want to see promising results this must be targeted at the K-12 level. Free tuition at the university level is almost like fixing potholes by filling them with rainwater.

Not only is Mack's proposal inadequate in addressing the education problem, it also rests on a sweeping claim based on skin color alone, neglecting any sort economic background. It is wholly irrational to suggest that only black people should be allowed free tuition. This is on its face absurd. It is giving unequal privileges to a population based only on their skin color. Legislation on skin color alone has no proper basis.

Why are we being led to believe that diversity based solely on skin color has some sort of educational benefit? Why are we not being taught that the true meaning of diversity is having multiple groups with divergent interests being allowed to freely express their beliefs?

Diversity is a crucial virtue, but it is rendered meaningless when only attributed to the color of one's skin. If we are truly to judge men based on the content of their character, rather than the color of their skin, then it is our duty to publicly condemn policies which do just the opposite.

Work Experience Requirement is Paternalism 101

Fri, 02/17/2017 - 05:00

February 17, 2017

By Ola Lisowski
MacIver Institute Research Associate

Last week, Gov. Scott Walker introduced his 2017-19 state budget. While one could spend all day picking apart the minutiae of the document - as this very Institute will do for the next several months - today, I hone in on a single provision. While well-intentioned, the proposal to require that undergraduates obtain an internship or work experience before earning a Bachelor's degree will ultimately do more harm than good. Such paternalistic provisions make it clear that the state knows what's best and everyone else is just along for the ride.

As written, the provision allows the Board of Regents to establish policies that will determine whether or not a student has satisfied the requirement. Students starting at the UW System during the 2018-19 academic year or later will need to satisfy the work experience provision if they are to obtain a degree. Like many single-paragraph government edicts, this one creates more questions than it answers.

The first question: are there any undergraduates out there who are actually unaware that they should obtain some sort of work experience for a better chance at future success?

If so, the second question is: how?

Our public education system is practically centered around telling children they'll need to get a job one day, and that they should try to figure out what job that might be sooner rather than later. That's not to deny that there are kids slipping through the cracks of our public education system, evidenced by statistics such as our woeful black-white achievement gap or proficiency rates among the many failing schools in the state.

I won't argue against anyone who wants more graduates connected with employment in meaningful ways, but this provision goes far beyond a simple encouragement and hangs degree completion in the balance. Walker's budget simultaneously requires the UW System to create new three-year degree pathways while also adding on a requirement like this that only serves to lengthen the amount of time that students are in school.

Some unsolicited advice from a graduate closer to her commencement ceremony than her final loan payout letter: every college student in the state already knows that they need a job or an internship, and soon. This is literally the stuff that students stress over on a daily basis. Rather than adding on new burdens and requirements for graduation, the state should focus on the one thing it should be doing these days -- getting out of the way.

This provision has all the makings of a feel-good law without much else behind it, besides good intentions.

We all know what they say about good intentions.

To Combat Opiate Epidemic, Schimel Forced to Fight Dumb Federal System

Thu, 02/16/2017 - 15:01

If we are to beat opiate addiction, taxpayers need drug companies to compete with new, more cost-effective treatment options, not protectionism

By Brett Healy
MacIver Institute President

It is hard to turn on the nightly news these days without seeing a story detailing a grave new threat in Wisconsin - the heroin and opiate epidemic. Talk to anyone who works in law enforcement and surely you will hear horror stories about the destructive and devastating impact heroin is having on communities all across Wisconsin.

According to a USA Today Network-Wisconsin report, we lost 281 lives to heroin addiction in just 2015 alone. In 2016, more people in Wisconsin died from opioid abuse (heroin and prescription opiates) than in car accidents. Think about that for a minute. More than traffic accidents.1

The situation is so grave, Wisconsin's elected officials are moving outside the normal legislative calendar to respond to the crisis. Just last month, Governor Scott Walker called a special session of the Legislature to debate specific proposals designed to take this scourge head-on.

But while the horrific plague that is blanketing our state is receiving plenty of mainstream media coverage these days, there is an underlying fundamental lesson about free-market capitalism that may have been missed in all of this.

Back in 2015, Attorney General Brad Schimel, along with over thirty other AGs, sued Indivior, the makers of Suboxone, for alleged violations of state and federal antitrust laws. Suboxone is a treatment drug used to reduce cravings for opiate addicts. The lawsuit alleged that the makers of Suboxone engaged in "illegal 'product hopping', where a company makes modest changes to its product to extend patent protections so other companies can't enter the market and offer cheaper generic alternatives." 2

Apparently federal bureaucrats don't realize that competition drives innovation and progress.

In 2002, Suboxone received expedited approval from the FDA as an orphan drug, a designation that is usually reserved for drugs that treat rare diseases. Not sure how opiate addiction is considered a rare disease, but I'm not a federal bureaucrat. With that designation, Suboxone was given market exclusivity in this treatment area for seven years. In reality, the FDA's designation prevented competitors from bringing other alternatives to market.

Why would bureaucrats decide that Suboxone needed or deserved the orphan drug designation? Companies can product hop only if the all-mighty FDA gives the special designation in the first place and the protection that comes with that designation.

When government interferes in the free market, when the government picks winners and losers, we all lose. We lose the competition that true capitalism brings. Competition that makes our world better because companies compete to meet demand - the demand in this situation is the need for many innovative treatment drugs to battle the opiate epidemic. The federal government, by setting up a system handing out a special designation to just one company which prevented other companies from entering the marketplace, is actually delaying the market's response to this demand. The inept federal government is only delaying the treatment help that is so desperately needed.

The special protections that came with the orphan drug designation were supposed to be lifted by 2009 yet Brad Schimel decided he still needed to do something six years later.

"Wisconsin and the nation are suffering hundreds and thousands of opiate-related deaths each year, and we cannot allow treatment barriers to exist for those suffering from addiction," said Schimel at the time of the filing of lawsuit.

Maybe Schimel should look next to sue the FDA and this cockamamy system that stifles innovation and competition. The bureaucrats at the FDA clearly need a refresher course on Econ 101.

Speaking of bureaucrats, there is a change state bureaucrats could make while we wait for the merits of the lawsuit to be decided and for the FDA to find some common sense. State officials could move Suboxone from its current preferred drug designation to the more competition friendly non-preferred designation. Preferred drug designation? Sounds like state bureaucrats need to be reminded as well about the power of competition and innovation that only comes from a true free market system.

And while Walker, Schimel and the other politicians take the necessary immediate steps to fight the opiate epidemic here in Wisconsin, we need to have a long-term discussion as a nation about ways we can eliminate counter-productive government interference. Government interference that prevents the free market and competition from responding quickly and effectively to demand.

We clearly need to make this a demand of our elected government.

This column has appeared in the Janesville Gazette, La Crosse Tribune, and Chippewa Herald.

1 - Heroin killed 281 in Wisconsin in 2015 Eric Litke, USA TODAY NETWORK-WISCONSIN,
Dec. 28, 2016.
2 - Attorney General Brad Schimel press release, Maker of Opiate Addiction Treatment
Drug, Suboxone, Accused of Conspiring to Keep Monopoly Profits, September 23, 2016.

Poll: What Do You Think of Gov. Walker's Budget?

Thu, 02/16/2017 - 05:00

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Ryan: New Tax Code, Obamacare Gone in 2017

Mon, 02/13/2017 - 00:00

By Bill Osmulski

[Washington D.C.] By the end of this summer, Obamacare will be gone and your tax return will fit onto a postcard, House Speaker Paul Ryan told the MacIver News Service in a recent interview.

"Those two things right there will dramatically help us create jobs and economic growth, and help families take home more pay," Ryan said. "Getting this done in the first 200 days will make this the most productive Congress in my lifetime."

Obamacare

The speaker addressed concerns that Republicans had changed their position from "repeal and replace," to simply "repair." Ryan stated the plan has always been to "repeal and replace." When people said "repair," they were referring to the healthcare system, and not the Obamacare law.

"We are achieving a repair of the United States' healthcare system, which is in the middle of a collapse. And in order to repair the healthcare system, you must repeal and replace Obamacare," Ryan explained.

Right now, one-third of US counties only have one insurer available through Obamacare, giving those insurance companies a virtual monopoly. This then becomes expensive to the taxpayers, because the subsidies have to get bigger to cover low-income individuals using the plans.

"So Obamacare is in a death spiral. It's really a collapsing law, where the premiums are getting higher, deductibles are getting higher, the networks are getting narrower, and the choices are getting fewer to the point to where people have no choices," he said.

Ryan calls his plan "patient centered, affordable healthcare reform." He says this means creating a system that actually encourages more competition, and with that lower prices and higher quality.

"Monopolies drive up prices and reduce choices," Ryan explained. "Competition lowers prices. And so the philosophy under Obamacare was have the government run it all and basically end up rationing healthcare."

Right now, several bills are working their way through committee. Last week the Energy and Commerce health subcommittee advanced two bills to strengthen Medicaid, and the Small Business Committee held a hearing on the healthcare marketplace.

Ryan said all the bills are moving through the system at the same time, and that the House will pass them by the end of next month. Ryan said this urgency is due to the fact Obamacare is collapsing.

Tax Reform

In addition to this massive endeavor, Congress is working on the budget, which will include significant tax reform.

"The reason we have to do tax reform now, is that America has the worst tax code in the industrialized world when it comes to how we tax our businesses," Ryan said.

The US top corporate tax rate is 38.9 percent. That's the highest among the 35 industrialized nations in the Organization for Economic Cooperation and Development (OECD), and the third highest in the world. The average corporate tax rate throughout the world is 22.5 percent.

Small businesses can be subject to an even higher rate of 39.6 percent. That's because most small businesses are structured as pass through entities and are subject to the individual income tax.

"[We have] an extremely complicated tax code and an obnoxious Internal Revenue Service. By dramatically simplifying the tax code and reducing the tax form basically to the size of a postcard, increasing the stand deductions so people don't have to go through the complicated itemizations, we contain the IRS, convert it into a service agency and not the obnoxious agency it's been, and make vastly more simple for people to fill out their taxes," Ryan told MNS.

Congress has not changed the tax code significantly since the Tax Reform Act of 1986. This was a major revision of the tax code, and at the time was considered one of the most important pieces of legislation ever passed. However, over the next 30 years, most of the problems it fixed have crept back into the code. Ryan wants to fix that.

"[Under this plan] you'll have a simplified, streamlined tax system that's easy to comply with, and that will do a lot to make families keep more of what they earn," Ryan said.

Ryan said if the federal can fix the healthcare system and the tax code, it will transform the country and the lives of the American People.

"So much of people's pay gets eaten up by healthcare premiums and deductibles. If we can fix that problem and focus on that, then people will have a higher quality of life, a higher standard of living, and more take home pay. And if we can get the economy growing and make American businesses more competitive by staying in the country, then we can get more jobs and higher wages," Ryan said.

Ryan is baffled by critics who say Congress is not working fast enough and that Republicans are squandering their time in the majority.

"I know people want to wake up tomorrow and have every problem solved. It took about six years for Obamacare to become law and get into place. It's going to take us a few months to fix this."

By setting these goals to such a tight timeline, Republicans have no choice but to accomplish these goals. There will be no space to distance themselves from these promises if they don't.

Chart of the Day: Visualizing Walker's Budget

Thu, 02/09/2017 - 15:43

February 9, 2017

After spending weeks rolling out aspects of his 2017-19 budget proposal, Governor Scott Walker delivered his budget address Wednesday afternoon in front of a joint session of the state legislature.

Walker said his budget, which increases spending on K-12 and higher education while cutting taxes, is possible because of the "Reform Dividend," the result of years of reforms and prudent fiscal management. Walker's budget includes large investments in K-12 and higher education, cuts taxes by nearly $600 million, and includes a variety of new welfare reform measures as part of a plan he calls "Wisconsin Works for Everyone."

Here are a few key graphics Walker included with the budget rollout this week:

The Governor and the Speaker

Thu, 02/09/2017 - 12:46

[Madison, Wisc...] The most serious opposition to Governor Scott Walker's budget proposal won't come from Democrats. Instead, it's fellow Republican, Assembly Speaker Robin Vos, who has probably been the most outspoken critic of Walker's budget when it comes to specifics.

**PROFANITY WARNING** Transgender Protest Crashes Insurance Board Meeting

Thu, 02/09/2017 - 04:00

February 8, 2017

[Madison, Wis...] Unhappy with the Group Insurance Board's recent decision to stop covering hormone therapy and gender reassignment surgeries for state employees, one protester thought the board's meeting this morning was the right time to launch a profanity-riddled protest.

The GIB's decision to cease the coverage came after a federal judge ruled that states are not required to cover those treatments under federal law. By ceasing the coverage, the state returned to a policy it had maintained since July 2016.

Gov. Walker: Let's Spend The Reform Dividend

Wed, 02/08/2017 - 20:23

The 2017-19 State Budget Proposal: What You, The Taxpayer, Need to Know

February 8, 2017

[Madison, Wisc...] After spending weeks rolling out aspects of his 2017-19 budget proposal, Governor Scott Walker delivered his budget address today in front of a joint session of the state legislature.

Walker said his budget, which increases spending in a number of key areas and reduces taxes, is made possible by an improving economy and prudent fiscal management - which he calls the "Reform Dividend."

Major themes of Walker's budget include large investments in K-12 and higher education. The budget increases K-12 spending by $649 million, reduces tuition for in-state students at UW System campuses, and adds $105.2 million in state funding for UW.

The budget also promises to make government more accountable to taxpayers. As part of this initiative, Walker's budget cuts taxes by nearly $600 million by reducing the lowest two tax rates, putting more of the earnings of a middle income family into a lower tax bracket, and eliminating the state's share of the property tax. The budget also invests more money in local road maintenance and rural broadband.

In addition, Walker's budget includes a variety of new welfare reform measures, a plan he calls "Wisconsin Works for Everyone." The plan adds new work requirements for those receiving government assistance and includes various provisions that make it easier to transition from welfare to the workforce.

In the coming weeks, the Joint Committee on Finance (JFC) will begin to review the plan, the beginning of the long budgeting process in the legislature, but portions of the governor's budget might encounter headwinds in the legislature.

Walker and Assembly leaders have sparred over transportation funding - Walker's budget keeps a campaign pledge not to raise the gas tax or vehicle registration fees, but Assembly leaders are open to the increases. Assembly Speaker Robin Vos was also lukewarm to Walker's proposed tuition cut and others have questioned the increases in spending. But before JFC starts making changes, we bring you this short synopsis of the 691-page document.

Here is what you need to know about Walker's 2017-19 budget proposal.

The Process

Walker's full proposal has already been referred to the JFC, which will begin deliberations after the Legislative Fiscal Bureau (LFB) prepares budget papers. That is likely to take about a month according to LFB Director Bob Lang.

According to JFC Co-Chair Rep. John Nygren, committee members are deliberating the details of how to consider the budget - whether to work entirely off the governor's proposal or to consider certain agencies using their base funding. After JFC is finished with its work, the budget will be passed along to the full legislature.

Overview

Key Takeaways:


  • Spending - The 2017-19 budget all-funds spending is $76.1 billion and $34.5 billion in GPR spending. That's an increase of 2.1 percent and 2.6 percent over the last budget, respectively.

  • Taxes - The budget reduces the lowest two income tax rates and increases the amount of earnings that fall under the second-lowest bracket for a $204 million income tax cut. It also eliminates the state's portion of the property tax, a $180.5 million tax cut.

  • Bonding - Total bonding in the 2017-19 budget amounts to $1.027 billion in 2017-19, down from $1.067 billion in the current budget. Of the new bonding, $500 billion is for transportation.

  • Positions - This budget adds 445 full-time equivalent positions, mostly in UW, the Department of Corrections, and the Department of Health Services.

  • New Programs - ??

  • Reforms - A major new initiative is to require UW schools to provide a 3-year degree option. The governor also proposes eliminating the state prevailing wage law.

The 2017-19 budget would spend $76.1 billion in total - $37.5 billion in 2018 and $38.6 billion in 2019, the first and second years of the biennial budget. That all-funds total includes state general purpose revenue (GPR), federal revenue, segregated revenue and program revenue.

Total GPR spending, which is spending entirely controlled by the state, would be $16.9 billion in 2018 and $17.6 billion in 2019 for total two-year GPR spending of $34.5 billion.

Compared with the 2015-17 budget, all-funds spending increases by $375 million in the first year and $1.18 billion in the second year - a total increase of $1.55 billion, or 2.1 percent. It also increases GPR spending by $862 million, or 2.6 percent.

As MacIver has repeatedly pointed out, GPR spending is especially important because it is the funding that the state completely controls. All GPR funds come directly from Wisconsin taxpayers - income taxes, sales taxes, and corporate taxes, among many others.

Walker has described the increased funding proposals for a variety of state agencies in this budget a "reform dividend," made possible by cost savings and revenue increases thanks to reforms passed over the last six years.

Transportation has been the marquee matchup in the months leading up to Walker's budget proposal. Walker has steadfastly stuck by his campaign pledge not to raise taxes or fees, and he has said he will not raise the state's gas tax or vehicle registration fee without a corresponding decrease in taxes elsewhere. Legislative leaders disagree and say that all options should be on the table.

Walker's transportation budget fulfills his pledge not to raise taxes or fees. Instead, his budget proposes a total of $6.1 billion for transportation. His budget invests $77 million more in for local road maintenance and delays some mega-projects in southeast Wisconsin.

Walker proposes increasing spending on K-12 education by $649 million over the biennium. That includes $55.4 million more in Sparsity Aid for rural school districts, $25.4 million more in transportation aid, and $9 million in various programs in Milwaukee.

Walker's $509.2 million increase in per-pupil funding will be tied to Act 10 compliance. That means that school districts will need to show that their employees pay roughly 12 percent towards healthcare and 6 percent towards retirement in order to receive the per-pupil funding increase. Madison Metropolitan School District, for example, is not currently in compliance with this provision. Employees would need to begin paying towards these funds in order for schools to receive the funding increase.

Overall bonding will be $1.027 billion in 2017-19, down from $1.067 billion in the current budget. Of the new bonding, $500 billion is for transportation, which is down from the previous budget's transportation bonding level of $850 million.

The biggest funding increases in this budget versus the current budget are for the Department of Public Instruction (DPI), which will receive a $418 million increase; the Department of Health Services, which will get a $386 million increase; shared revenue - funding that is sent back to local governments - will see a $242 million increase; and the UW System, which will get a $272 million increase over the biennium.

Walker's proposal would increase the total number of full-time equivalent positions from all fund sources from 70,411.4 FTE to 70,827.11 FTE, an increase of 415.71 full-time equivalent positions from the FY16 adjusted base. Of those positions, 35,466.49 are from GPR funding, an increase of 12.77 FTEs from the FY16 adjusted base of 35,453.72.

Walker has made tax relief one of the top priorities of his administration, and that positive trend continues in earnest with his 2017-19 budget proposal. Walker proposes cutting income taxes by $204 million total by reducing the lowest income tax bracket from 4 percent to 3.90 percent and the second-lowest bracket from 5.84 percent to 5.74 percent. The plan also expands the size of the second-lowest bracket by 25 percent. Since all taxpayers, regardless of income, pay those rates on at least a portion of their income, that's a tax break for all Wisconsin income tax payers.

Walker also zeroes out the last remaining portion of the state property tax - the forestry tax. This tax cut will save Wisconsin property taxpayers $88.8 million in FY18 and $91.7 million in FY19 - a total of $180.5 million over the two-year budget.

These tax cuts and others Walker's budget proposes - including a back-to-school sales tax holiday estimated to lower shoppers' sales tax bill by $11 million per year - would save Wisconsinites nearly $600 million over the 2017-19 budget.

While Walker's tax cut proposals are another giant step in the right direction, Wisconsin is still a long way from a truly fair, economically competitive tax system. In January, the MacIver Institute introduced its ambitious tax reform proposal - a Glide Path to a 3 Percent Flat Income Tax for Wisconsin. In order to make Wisconsin competitive in a global economy, lawmakers should strive for bold tax reform in the upcoming budget deliberations.

Transportation

Transportation funding is expected to dominate this year's budget debate as concerns over Wisconsin's road conditions clash with concerns over financial mismanagement at the DOT.

Governor Walker insists there will be no gas tax or fee increases for transportation, sticking with a campaign pledge made in his 2014 re-election campaign. His 2017-19 budget proposal makes good on the pledge by holding the line on the gas tax and vehicle registration fee.

He plans to bond for $500 million for transportation projects over the biennium, whereas the last budget authorized $850 million in transportation bonding. New bonding levels are $500 million over the biennium, the lowest amount since the 2001-03 budget and a dramatic 41 percent decrease from the previous budget, which borrowed $850 million for transportation projects.

Walker also wants to transfer $30 million from the petroleum inspection fund (PIF) into the transportation fund. The PIF is funded by 2 cents of the state's 30.9 cents per gallon gas tax.

The governor says all active major projects would stay on schedule under his plan. However, the Zoo Interchange "North Leg" would remain on hold, and the state would not enumerate the East-West I-94 project. The core of the Zoo Interchange will be completed on schedule.

Walker's plan also leaves $31 million for southeast Mega Projects for the North-South I-94 project, although work on that will not be finished on time.

In total, Walker's budget proposes an increase of more than $522 million from the Department of Transportation's (DOT) base funding. That includes nearly $15.9 million in increased transportation aid to counties and more than $30 million in increased aid to municipalities. DOT is also requesting an increase of $14 million for the Local Roads Improvement Program and $5 million for the Local Bridge Improvement Assistance program.

The governor's budget also proposes nearly $30 million for highway maintenance and traffic operation needs, $33.7 million for routine maintenance performed by the counties, and one-time transfers of $19 million in FY18 and $19 million in FY19 as revenue to the segregated Transportation Fund.

In all, Walker increases aid to a variety of local transportation funds by $77 million.

Click here for a more detailed summary of Gov. Walker's transportation budget.

UW System

Walker previewed his budget proposal for the UW System in his State of the State address in January. For the first time, he proposed a tuition cut for in-state students and promised that the cut would be fully paid for in his budget proposal. UW-Madison chancellor Rebecca Blank, in a response, praised the proposal but asked that the cut be paid for in addition to increased state aid.

Walker fleshed out his tuition cut proposal in his budget, which provides more than $100 million more in state aid to the UW System in addition to increased funding to pay for the tuition cut.

The governor's budget proposes a 5 percent tuition cut for resident undergraduate students, saving the average student $360 per year on average. His budget offsets the reduced tuition by providing $35 million more in state aid to the UW System.

In addition, Walker grants the UW System's request for $42.5 million in additional funding but ties it to performance measures for campuses, including improved affordability and attainability, work readiness, the success of graduates, administrative efficiency, service, and two other benchmarks to be decided by the Board of Regents. Each campus will have to produce a new "Performance Funding Report Card" that will be used to determine how the additional funding is allocated.

Walker's budget also proposes letting students opt-out of allocable segregated fees, which are student fees allocated by a university's student government and administration that support campus activities. This would give students some say in what they do or do not want to fund.

The governor has also emphasized that shorter times-to-degree reduce the cost of a higher education. In that spirit, his proposal would require UW campuses to outline plans for offering 3-year bachelor's degree options - Walker cited an LFB memo stating this could reduce the net cost of a degree by $18,000-$25,000 via reduced tuition costs and increased earnings.

The governor also calls for a plan to hold faculty accountable by instituting a faculty workload policy. Campuses would be required to track and report the number of hours professors and academic staff spend teaching and establish policies for rewarding those that go beyond the standard academic load. Faculty workload reports would be made available to the public.

Walker also proposes $100,000 for Alzheimer's research at UW-Madison and $200,000 for the Rural Physician Residency Assistance program.

However, several controversies calling into question the UW System's stewardship of taxpayer dollars might impede any attempt to spend more on the UW. Several years ago, lawmakers discovered an undisclosed slush fund within UW System coffers totaling nearly a billion dollars.

More recently, it was discovered that the former chancellor and a top administrator at UW-Oshkosh had improperly used taxpayer money as a backstop against privately funded building projects by the UW-Oshkosh foundation. The Board of Regents has filed lawsuits against those former administrators. [link to our statement]

UW-Madison also stirred up its own controversy when one of its course offerings, entitled "The Problem of Whiteness," grabbed lawmakers' attention.

In May, the UW System came across $55 million in unanticipated savings from lower-than-expected utility costs and costs of employee benefits. The majority of that money was used to pay for increased base salaries for faculty and staff - increasing the base expenses within UW campus's budgets.

Will lawmakers overlook their well-earned skepticism about how the UW System spends the money it currently receives from taxpayers and approve a sizeable increase in funding? We'll find out in the coming months.

Welfare Reform

In late January, the governor introduced a significant welfare reform package that beefs up work requirements for participants and makes it easier to transition from government assistance to work.

The wide-ranging plan expands work requirements for those on the state's FoodShare program, requiring able bodied adults with school-age children to either work 80 hours per month or enroll in a job training program. It would also expand work requirements to working-age able-bodied adults on housing assistance.

The new work requirements expand on Walker's 2015 FoodShare reform, which required able-bodied childless adults to work 80 hours per month or enroll in the FoodShare Employment Training program. Since that reform was implemented, 21,000 participants have found employment.

The plan also seeks to eliminate the "benefits cliffs" in the childcare assistance and Medicaid Purchase Plan (MAPP) programs. In both programs, a recipient loses all benefits at a certain income threshold, which means taking pay raises, promotions and more hours at work could cost the recipient all their benefits. Walker's plan introduces a phase-out model for the benefits as a recipient's' income rises.

In addition, Walker's plan would reform occupational licensing practices in the state, providing more scrutiny for proposed new occupational licenses and a review process for existing licenses with the intention of removing barriers to work.

It would also strengthen child support work programs in a pilot program involving five counties, help offenders re-enter the workforce with vocational training and work placement, and provide grants to help develop employer resource networks that connect job seekers with work. The plan also creates two new tax credits to incentivize work.

Portions of Walker's welfare reform agenda will require waivers from the federal government. However, one major change since the state's last budget is the occupant of the White House. How open will President Trump's administration be to issuing waivers, or to make even more substantial changes to how states administer their welfare programs? We'll find that out as 2017 moves along.

Healthcare

Governor Walker's health services budget includes one of the largest programs the state administers - Medicaid. As always, Medicaid represents the single largest GPR increase in the entire budget.

By far the largest agency request was from the Department of Health Services, which asked for about $24.4 billion in total, a 5.1 percent increase over the agency's base funding, which is determined by multiplying the agency's current annual budget by two.

In a letter accompanying its budget request, DHS stated the request includes $452 million in new general purpose revenue (GPR) funding for Medicaid over the biennium. The previous three biennial budgets increased GPR spending on Medicaid by $650 million, $685 million, and $1.6 billion. While $452 million is a lot of money, the rate of increase in Medicaid spending during Walker's tenure has slowed significantly. Medicaid's GPR cost to continue is $279 million over the biennium - the smallest cost-to-continue in recent years.

In all, under this proposal DHS will spend $7.63 billion in GPR funds for a total of $24.4 billion in all-funds spending.

As with Walker's welfare reform proposals, Wisconsin will be awaiting the Trump administration on how much increased flexibility the state will have in implementing healthcare reforms at the state level.

Increased Aid to Counties

Walker is also proposing a significant increase for a variety of social services programs administered by counties.

He proposes spending an additional $14,067,300 in FY17 and $25,205,500 in FY18 to eliminate a waiting list for long-term support for children with developmental or physical disabilities or severe emotional disturbances.

The governor's budget also increases funding for children and families aids by $1.25 million in FY17 and by $5 million in FY18 for child welfare costs. It would also increase foster care and kinship care rates by 2.5 percent in each year of the biennium - additional funding for the programs under the budget proposal would be $861,300 in FY17 and $2,162,100 in FY18.

In addition, Walker proposes significant increases in nursing home provider rates amounting to $18.4 million in the budget's first year and $33 million in its second year. He also increases funding for a variety of other programs including the Treatment Alternatives and Diversion (TAD) program, additional aid to counties to expand drug courts, and increases in a host of other forms of financial aid to counties.

K-12 Education

As expected, Walker's budget includes massive spending increases for education. The proposal calls for $648.9 million in new state aids for K-12 education and more than $100 million more towards the UW System. Increases to per-pupil aid will be sent to school districts under the condition that they certify to the Department of Public Instruction that they met pension and healthcare savings made possible in Act 10.

In the past several months, the governor has repeatedly stated that he hopes to send more money to public schools in this budget. The new spending - nearly $649 million - is more than three times larger than the 2015-17 budget's increase, which grew public school spending by $203 million overall.

Walker's budget also increases funding for a variety of other education related initiatives, including an incentive fund for troubled Milwaukee schools, mental health initiatives, and workforce development initiatives geared toward schools.

Notably, Walker provides significant increases for rural schools. His proposal offers massive commitments to rural areas through Sparsity Aid, which is funding for small rural districts with fewer than 745 pupils and a population density of less than 10 pupils per square mile of district attendance. Walker's proposal increases Sparsity Aid by $20 million, bringing the fund to $55.4 million over the biennium, or $12.3 million more than DPI requested. The 2015-17 budget allocated $35.3 million to Sparsity Aid across the biennium.

The budget also increases funding for rural schools' transportation needs, provides funding for expanded rural broadband access, and creates a new Sparsity Aid tier for districts that are slightly too large to qualify for the aid under the current formula.

See our detailed breakdown of Walker's education proposal here.

Prevailing Wage

The governor's budget completely eliminates what's left of the state's prevailing wage law, which artificially sets wages based on the federal Davis-Bacon law. The previous budget eliminated prevailing wage for local projects as part of a compromise, leaving state projects on the hook for inflated costs.

How much could Wisconsin taxpayers save if Walker's complete repeal is passed? One study from the Wisconsin Taxpayers Alliance showed that Wisconsinites could have saved $200-$300 million on vertical construction projects in 2014 in the absence of prevailing wage. That estimate doesn't even consider all other public construction that goes on in the state, including billions of dollars on road construction projects.

Examples abound of cost overruns thanks to the prevailing wage law. One six-mile ATV trail in Vilas county was initially going to cost $30,000 per mile, but when the prevailing wage determination was made the price shot up to $55,000 per mile. In the Village of Grafton, an already-completed water tower maintenance project exploded in price from $597,000 to $861,000. Since the project was already completed, local taxpayers had to come up with an extra $260,000.

If prevailing wage was costing taxpayers so much extra money for local projects alone, imagine how much could be saved if legislators pass Walker's plan to finally repeal it at the state level.

JFC to Begin Budget Debate in Coming Weeks

JFC is expected to start reviewing Walker's budget after the LFB compiles budget papers, which should take about a month. From there, the budget writing committee will begin deliberating the proposal. Considering the disagreements between Gov. Walker and some legislative leaders, the timeline is uncertain.

One thing is for certain, though. The 2017-19 budget that Walker proposed will see at least changes before it finally passes through both houses of the legislature and lands on the governor's desk - usually by early summer.

The MacIver Institute will provide updates throughout the budget process and should serve as your one-stop shop to get all the information you need. Follow us on Twitter, Facebook and our Budget Blog for the most up to date information and analysis.

Walker Presents "Reform Dividend" Budget That Hikes Spending, Slashes Taxes

Wed, 02/08/2017 - 20:17

After spending weeks rolling out aspects of his 2017-19 budget proposal, Governor Scott Walker delivered his budget address this afternoon in front of a joint session of the state legislature.

Walker said his budget, which increases spending in a number of key areas and reduces taxes, is made possible by an improving economy and prudent fiscal management - which he calls the "Reform Dividend." He centered the speech on three main themes: student success, accountable government, and rewarding work

Walker's budget includes large investments in K-12 and higher education. It increases K-12 spending by $649 million, reduces tuition for in-state students at UW System campuses for the first time ever, and adds $105.2 million in state funding for UW - much of it tied to individual campuses' performance.

The budget also cuts taxes by nearly $600 million by reducing the lowest two tax rates, putting more of the earnings of a middle income family into a lower tax bracket, and eliminating the state's share of the property tax. The budget also invests more money in local road maintenance and rural broadband.

In addition, the budget includes a variety of new welfare reform measures, a plan he calls "Wisconsin Works for Everyone." The plan adds new work requirements for those receiving government assistance and includes various provisions that make it easier to transition from welfare to the workforce.

In the coming weeks, the Joint Committee on Finance (JFC) will begin to review the plan, the beginning of the long budgeting process in the legislature.

Walker's Education Budget: Act 10 Compliance Required for Per-Pupil Funding Boost

Wed, 02/08/2017 - 18:43

The Governor's 2017-19 budget proposal for education puts hundreds of millions more dollars into K-12 and higher education, and ties additional per-pupil revenue to Act 10 compliance

February 8, 2017

By Ola Lisowski
MacIver Institute Research Associate

[Madison, Wis...] Gov. Scott Walker introduced his 2017-19 budget proposal on Wednesday, and as expected, the document includes massive spending increases for education. The proposal calls for $648.9 million in new state aids for K-12 education and more than $100 million more towards the UW System. Increases to per-pupil aid will be sent to school districts under the condition that they certify to the Department of Public Instruction that they met pension and healthcare savings made possible in Act 10.

Some school districts - most notably, Madison Metropolitan School District - do not currently require their employees to contribute towards their healthcare premiums. Under the proposal, MMSD and other districts not currently in compliance would need to adjust those requirements in order to receive the bump in per-pupil spending. Employees would need to start paying roughly 12 percent of their healthcare premiums and 6 percent of their pensions for school districts to receive the extra dollars.

All told, the $11.5 billion education proposal is the largest investment in K-12 education Wisconsin has ever seen.

In the past several months, the governor has repeatedly stated that he hopes to send more money to public schools in this budget. The new spending - nearly $649 million - is more than three times larger than the 2015-17 budget's increase, which grew public school spending by $203 million overall.

The proposal includes a $509.2 million increase in per-pupil state aid across the biennium, including a $200 per-pupil increase in fiscal year 2018 (FY18) and a $204 per-pupil increase in
Gov. Walker's 2017-19 budget proposal sends $648.9 million more to K-12 schools and over $100 million to the UW System. FY19. Similar to his 2015-17 proposal, the per-pupil increases will go into categorical aid funding rather than the general fund.

The 2015-17 budget increased funding by $150 per-pupil in FY16 and by $250 per-pupil in FY17 for a total of $338.1 million. In November, DPI requested a total of $460 million for per-pupil aid, meaning that the Governor's proposal allocates an additional $49.2 million more than DPI asked for.

The K-12 proposal puts state funding at 64.6 percent in the second year of the biennium, the highest level since FY09, when state K-12 contributions amounted to 65.8 percent of funding.

In line with state law, students who use vouchers for their education would receive a per-pupil increase of $217 in each year. The budget proposal does not make any other significant changes any of Wisconsin's parental choice programs.

Focus on Milwaukee
The budget proposal offers significant investment in Milwaukee Public Schools (MPS), including a new $5.6 million incentive fund for which failing public, charter, and choice schools will be able to compete. This performance-based funding is the latest in a line of ideas about how to reform Milwaukee's troubled schools. Gov. Walker said that he would opt to improve schools by introducing more market competition rather than by making changes to MPS' governance, such as reforming its school board.

Under the proposal, Milwaukee would also receive $2.8 million for its summer school program, including $1.4 million in each fiscal year for grants to schools that have plans to increase student achievement in summer school. Another $500,000 is allocated for FAST, a mental health initiative that addresses family functioning, abuse, delinquency, and maltreatment issues at home. All told, nearly $9 million is targeted directly towards Milwaukee.

Mental Health Initiatives
The Governor's proposal also creates a new categorical aid program for school social workers. Under his proposal, the new program receives $3 million. Another $2.5 million is allocated for Mental Health Expansion, a new grant program that helps districts connect students with mental health professionals. Finally, $1 million is included for mental health screening and training opportunities for district employees.

Workforce Development
In line with his workforce development initiatives, Walker proposes putting more than $10 million in training for students, keeping in line with his viewpoint that students must begin preparing for their careers at an earlier age. The brand new Early College Credit Program would get $2.9 million to help students receive college credit while in high school. The Special Education Transitional Jobs Program would receive $7.6 million towards awards for school districts who help students with disabilities successfully obtain employment.

Rural Schools
In the last few months, Walker has said that he would focus on rural schools in the coming budget. Indeed, his proposal offers massive commitments towards rural areas through sparsity aid, which is funding for small rural districts with fewer than 745 pupils and a population density of less than 10 pupils per square mile of district attendance. Walker's proposal increases Sparsity Aid by $20 million, bringing the fund to $55.4 million over the biennium, or $12.3 million more than DPI requested. The 2015-17 budget allocated $35.3 million to Sparsity Aid across the biennium.

The proposal increases per-pupil reimbursement rates to $400 per-pupil for districts that previously qualified for Sparsity Aid. In order to address this particular aid "cliff," created when districts tip just over 745 pupils and thus no longer qualify for any additional aid at all, Walker's proposal creates a new tier of Sparsity Aid funding for districts with 746-1000 pupils at $100 per-pupil.

Rural school districts would see a 100 percent reimbursement from the state in the High Cost Transportation Aid program, which provides additional transportation funding to districts with a density of 50 pupils per square mile or less and transportation costs that total more than 150 percent of the state average. Currently, this fund is reimbursed at about 60 percent. Walker's proposal offers $25.4 million over the biennium, an increase of $10.4 million over the previous budget. At $92,000 across the biennium, DPI's budget proposal for pupil transportation is fully funded under Walker's proposal.

As expected, the proposal offers significant funding for broadband and technology advancement - $13 million more is added to the Broadband Expansion Grant Program and $22.5 million is allocated to Teacher Training Grants through Technology for Educational Achievement (TEACH). TEACH lets schools apply for grants and reimburses districts for improving information technology infrastructure. Another $3 million is allocated over the biennium for the Teacher Training Grant Program, which awards grants to districts to train teachers in new educational technology.

The proposal also offers a few provisions that would aim to help rural school districts with regulatory obligations - school districts would be allowed to share or jointly provide certain specialists rather than be required to have specialists on staff at each district. By law, each district is required to hire individuals for roles such as reading specialist, emergency nursing services, guidance and counseling, and attendance officer.

Finally, the budget proposal adds another $1 million for the Fabrication Labs grant program, paid through the Wisconsin Economic Development Corporation.

University of Wisconsin System

In line with his announcement that his administration will not only freeze tuition at the UW System, but cut it this budget, the Governor's proposal includes a 5 percent tuition cut for resident undergraduate students in the second year of the biennium. The 5 percent tuition cut "costs" an estimated $35 million, which Gov. Walker will pay for by increasing the UW's general purpose revenue funding. The $35 million for the tuition cut is in addition to a planned $100 million increase in state commitment to the UW. The proposal includes a tuition freeze in the first year of the biennium.

The other major news for the UW System is a proposed new requirement that schools come up with plans for students to complete Bachelor's degrees in three years. Under the proposal, the UW System will have to create pathways to three-year degrees for 10 percent of programs by January 1, 2018, and for 60 percent of programs by the start of 2020.

Last budget, the UW received $2.05 billion in state funding. This budget, the System receives $2.2 billion in general public revenue across the biennium, a 7 percent increase.

Some of the funding will come in the form of performance-based grants totaling $42.5 million. Rather than simply cutting schools a blank check, the universities will get to receive money based on how well they do on certain metrics. The grants would be distributed by the Board of Regents to the different UW System institutions based upon performance on improving affordability, work readiness, and other state priorities.

UW students would be allowed to opt out of allocable segregated fees, which provide support for student activities such as clubs and organizations. Under the proposal, the UW System would be required to outline plans to allow students to complete their bachelor's degrees in three years.

The Governor's proposal offers several new pots of money for research at the UW System. Alzheimer's research at UW-Madison would receive $100,000 across the biennium, and $200,000 is allocated for the Wisconsin Rural Physician Residency Assistance program.

Make sure to keep following the MacIver Institute for updates as the state budget continues to take shape.

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