MacIver News Service | September 20, 2017
By M.D. Kittle
[Madison, Wis...] Gov. Scott Walker on Wednesday released the full list of the budget items he intends to excise with his powerful veto pen, and made the case why the provisions shouldn't be in the state's recently passed 2017-19 spending plan.
In all, the Republican governor announced he will veto or partially veto 99 sections from the budget including several items he committed to nix in a closing budget battle.
Walker took the unprecedented step of publicly declaring a partial list of vetoes immediately following party-line passage of the budget Friday night in the GOP-controlled Senate. Four conservative senators - Sens. Robert Cowles (R-Green Bay), Chris Kapenga (R-Delafield), Steve Nass (R-Whitewater), and Duey Stroebel (R-Saukville) - declared they would cast no votes without veto assurances from Walker.
The governor stayed true to his word and vetoed the budget provisions the reluctant Republican senators had asked to be deleted. He did so even after hearing an earful from Assembly Speaker Robin Vos (R-Rochester) who was clearly frustrated by the veto pledges and what he described as "renegade" senators taking the budget process "hostage."
Walker's vetoes cover the alphabet of state agencies, from DATCP (the Department of Agriculture, Trade and Consumer Protection) to DPI (the Department of Public Instruction).
The vetoes improve the state's general fund balance by $16.5 million in the 2017-19 biennium and by an estimated $71 million in the 2019-21 biennium, according to a statement from the administration.
"The governor supports using some additional funds to enact broad-based tax reductions, including a sales tax holiday, and provide more aid for our rural schools through sparsity aid," the governor's office said. A sales tax holiday proposal in Walker's blueprint didn't survive the Legislature's budget-writing process.
Many of Walker's vetoes deliver relatively minor deletions to the budget, removing an "additional mandated report" here or an agency requirement there. Some are technical corrections. Others eliminate nonfiscal policy items from the budget, a class of vetoes Cowles in particular sought.
The more controversial vetoes involve provisions tucked into the $76.5 billion, two-year spending plan at the end of an elongated budget-writing session.
With a stroke of his pen, the governor swept away a last-minute measure that would have expanded the authority of a shadowy Public Finance Authority. The provision, among other things, would have granted the tax-free, risky bond peddler the force of eminent domain. Walker said he vetoed the provision because the nonfiscal policy should be vetted as separate legislation.
Rep. Scott Allen (R-Waukesha) said he voted against the budget specifically because of the PFA provision. Allen has called for a legislative audit of the quasi-public Finance Authority, created by unanimous approval of the Legislature in 2009. He notes the Wisconsin-based agency has done very little investment in the Badger State, while doing billions of dollars in business nationwide. The JFC measure also would have opened the door for the Finance Authority to do overseas investment.
Low Revenue Adjustment
One of the most significant vetoes, by far, involved changes to the low revenue adjustment for low-spending school districts. Walker's original budget kept that adjustment where it was - $9,100 per pupil - without changes. With his veto pen, the governor maintains the original level, writing that a change to the low revenue adjustment results in "a substantial increase in property tax capacity that school districts may exercise without voter input."
School district revenue limits were set in 1993 to prevent massive increases in local property taxes. Over the summer, it became clear that increasing the adjustment was a major priority for both houses of the Legislature. An education plan introduced by the Assembly Republican Caucus would have increased the limit to $9,800 in 2018. This would give low-spending school districts the ability to spend more per pupil, but would have increased their statewide levy authority - and property taxes - by $92.2 million.
Proponents of the plan said it would have sent more spendable money into the classroom while addressing a long-standing concern of school officials. However, immediate concerns about a property tax increase arose, especially considering Walker's pledge to hold the line on taxes.
The Senate Republican Caucus followed up with a different plan that also increased the low revenue adjustment, but more gradually than the Assembly plan. That plan would have had the adjustment increase to $9,300 in 2017, to $9,400 in 2018, followed by annual $100 per pupil increases until 2022, when it would hit $9,800. That change would have limited potential property tax increases to $23.2 million statewide - concerning to many, but less than the Assembly's proposal. JFC approved the Senate plan.
In a statement, Walker wrote that "school districts could pursue an increase in their revenue limit through a referendum, as is the case under current law."
JFC Assembly Chair Rep. John Nygren (R-Marinette) tweeted about his disappointment in Walker's veto list, and took special care to highlight the changes to the low revenue adjustment championed by the Assembly.
I am severely disappointed in Governor Walker's decision to reject an opportunity to correct a long-term inequity in our K12 funding system.— John Nygren (@rep89) September 20, 2017
As a result, over 200 school districts across the state will lose over $90 million in funding over the next 6 years.— John Nygren (@rep89) September 20, 2017
The veto will continue this funding imbalance and have lasting impacts on the quality of education available to some of our children.— John Nygren (@rep89) September 20, 2017
This is a funding inequity that has existed for over 20 years and under this budget will continue to do so.— John Nygren (@rep89) September 20, 2017
For his part, Walker focused on the lowering of property taxes while putting more money into classrooms.
Love this mini-billboard: lower property taxes and more money for schools. It's possible. And it's in the budget I will sign tomorrow! pic.twitter.com/u8znHI1P73— Scott Walker (@ScottWalker) September 20, 2017
Budget will include largest amount invested in K-12 edu. in state history. Veto ensures attempts to raise property taxes go before voters— Governor Walker (@GovWalker) September 20, 2017
Shared Services and Whole Grade Sharing
The budget allocates $2.75 million for several programs that would incentivize school districts to consolidate different services - namely, shared services aid and whole grade sharing aid.
The purpose of the initiatives is to provide grants to school districts that participate in whole grade sharing or shared services such as combined district administrators or human resources directors. Both would be new continuing appropriations to reward school districts that participate in such arrangements to save taxpayer dollars.
Walker vetoed both programs, asserting that the costly incentives defeat the purpose of savings.
"Sharing services will create savings for school districts; therefore, providing state grants would nullify savings to taxpayers that would result from local actions."
This budget includes significant reform for referenda - in particular, those held by school districts. The occurrence of referenda has increased in recent years, with voters approving millions of dollars in spending and bonding outside of regular revenue limits each election. In many communities, the trend has raised property taxes.
There has been a lot of interest among legislators in reforming referenda, especially from Sen. Duey Stroebel. This session, he introduced eight separate bills that would address potential referenda abuse. The budget includes a few of those ideas, and Walker's vetoes made them even stronger.
Referenda will be limited to primary or general election days. Final negotiations between the Senate and governor resulted in a further veto that will no longer allow school district referenda to be held in November of odd-numbered years. School districts will now be limited to holding referenda on two dates per year. This change will go into effect on Jan. 1, 2018, to ensure that already-scheduled referenda for this fall are not affected.
Off-cycle elections result in notoriously low voter turnout. With these reforms, a greater portion of each voting population is likely to weigh in on questions of massive spending and property tax increases.
Energy Efficiency Measures
In his original budget proposal, Walker had recommended altering rules for school districts using the energy efficiency adjustment. This program, established in the 2009-11 budget, allows school districts to increase their revenue limits by the amount they spend on energy efficiency projects. In February, Walker proposed changing those rules so that school districts would no longer be able to spend over their revenue limits without first holding a referendum.
The Joint Finance Committee's final budget motion on education would have reopened that door, prohibiting districts from using the adjustment in 2018, but not altering the rules moving forward.
In a speech before the finance committee's vote, Sen. Leah Vukmir (R-Brookfield) slammed the decision, saying that "it seems counterproductive to modify the governor's recommendation" and that the provision "has been abused, and the governor was right when he eliminated it."
Referencing a recent case in her own district, Vukmir went on to describe that "the voters of the West Allis-West Milwaukee School District rejected a referendum of $12.5 million. Four months later, the school district utilized this loophole for $12.8 million on what they called 'energy efficient projects.'"
"This was an end-run around the taxpayers," Vukmir continued. "The voters had said no. What is the point of having restrictions on referenda while at the same time providing a loophole for dodging the process?"
Walker seemed to agree, using his veto pen to restore his original plan.
Getting rid of Wisconsin's prevailing wage law has been a conservative priority for some time, but the Legislature has been reluctant to do so. The 2015-17 budget eliminated prevailing wage on local projects, but that provision didn't go into effect until Jan. 1, 2017. For the 2017-19 budget, lawmakers approved Walker's proposal to repeal prevailing wage for state building and road projects, but they wanted to push off its effective date until Sept. 1, 2018. Walker's veto puts prevailing wage changes in effect almost immediately, as three of the hold-out senators had requested.
"I am vetoing this section because I object to making the taxpayers of Wisconsin wait for nearly a year before they can begin to benefit from the cost savings to be created by the repeal of the state's prevailing wage laws," Walker explained.
Even though Wisconsin will soon be rid of its prevailing wage laws, it is still subject to the federal prevailing wage laws under the Davis-Bacon Act. Any state project that includes more than $2,000 in federal funding must pay prevailing wage.
In 2015, Stroebel proposed limiting the number of projects affected by Davis-Bacon through a process called "Fed Swap." Under his plan, the state would replace federal funding going to local projects with state funding. The Wisconsin Transportation Finance and Policy Commission Report in January 2013 found that this would save 25 percent on those projects.
There are other requirements associated with federally funded projects that inflate project costs. Rep. Dale Kooyenga (R-Brookfield) points to Waukesha County, where there were two identical projects involving 1.2 miles of road. One was locally funded and the other was federally funded. The local leg cost $6.28 million. The federal portion cost $8.2 million. That extra $2 million was due to oversight, relocation rates, labor, and over-construction.
Walker's veto gets rid of a Joint Finance Committee provision calling for a Fed Swap study and gives the Department of Transportation more leeway in implementing the cost-savings measures. It delivers on the promise to the senators.
"The limitations placed on the amounts provided for the southeast megaprojects and the major highway projects, in particular, will inhibit the department's ability to allocate funds in the most advantageous manner especially in light of the I-94 north-south corridor project funding provided for in separate legislation," Walker wrote in his veto message. The latter project, I-94 north-south, is funded in the budget through bonding, contingent on a federal award.
"As a result of my partial vetoes of these sections, the department will be able to make dollar for dollar reallocations among all state and local road and highway projects - including the southeast megaprojects," Walker wrote. "My veto will ensure that the state can maximize the use of federal matching dollars and begin to implement state efforts to reduce local government's costs immediately."
Fed Swap wasn't the only transportation item that JFC wanted to study. It also wanted to know how Wisconsin might be able to set up toll roads. It's an idea that frequently comes up during transportation funding debates. The state of Wisconsin can't just create its own toll road, however. It needs permission from the feds, and that's a lengthy process. JFC wanted to get the ball rolling on it by conducting a study of potential traffic, revenue, and environmental issues all at a cost of $2.5 million. The problem is, they've been down that road before. Walker said further study is unnecessary.
Transportation Projects Commission
There is no escaping politics when it comes to picking road projects. Lawmakers are always going to advocate for projects in their own districts. The Transportation Projects Commission is supposed to limit the impact of politics on these projects and focus more on the state's actual transportation needs.
A last-minute provision, critics argue, would insert more political influence into the commission. It certainly would create another layer of bureaucracy.
The TPC includes the governor, five senators, five representatives, three members of the public appointed by the governor, and the DOT secretary. The Legislature wanted to change the commission's membership to the governor, three senators, three representatives, two governor appointees, four members of the public appointed by the legislative leadership, and the DOT secretary. Naturally this would reduce the governor's influence on the TPC, making it immediate veto-fodder. The budget item would also create a new bureaucratic office to support the TPC. That office would include a four-person full-time staff and conduct reviews and evaluations of DOT projects. The three reluctant Republican senators wanted this provision nixed. Walker seems to whole-heartedly agree.
Carve-outs and special protections have a way of making their way into budgets in the fierce pace at the end of the budget-writing process. That's the case with a measure that would have prohibited local governments from issuing onerous restrictions on quarries. Conservative critics like the idea of ending onerous regulations for every business, but offering protections to one industry could leave others unprotected. Wisconsin's sand mining trade was particularly worried about the language of the legislation.
Walker said he vetoed the provisions because he objects to inserting a major policy item into the budget without sufficient time to debate its merits.
"While I support the need to address quarry regulations and the ability to provide materials for public works projects in a timely manner, changes of this magnitude should be addressed as separate legislation where implications can be more carefully explored," the governor wrote in his veto message.
$1 Million Capitol Basement Upgrade
The Legislature did not escape the governor's veto pen. Walker vetoed $1 million in General Purpose Revenue-supported bonding for unspecified "State Capitol Basement Renovations." The set-aside became the object of ridicule during an Aug. 28 committee debate, with Sen. Jon Erpenbach (D-Middleton) mocking the fact that no one could say what the money would specifically be used for. Walker's veto leaves it to the State Capitol and Executive Residence Board to examine the funding proposal and decide whether the renovations are the best use of taxpayer money.
And Walker removed legislative funding for events celebrating the 100th anniversary of the State Capitol. The State Capitol and Executive Residence Board already has authorized money from the Capitol Restoration Fund, the governor said.
While the PFA and TPC changes were nixed, plenty of pork still made it through. In fact, almost all of the earmarks survived the veto pen.
Laptops For All
Walker didn't touch a new entitlement that provides $9.2 million for laptops for high school freshmen beginning in 2018. The Assembly Republican caucus had first proposed spending $18.4 million for the electronic devices, which would be provided to students regardless of family income. Both the Senate and Joint Finance Committee cut the provision in half, beginning the initiative one year later. Once an entitlement is established, its hard to remove, putting taxpayers on the hook indefinitely for this feel-good initiative.
And Walker kept the DNR magazine. The Joint Finance Committee relented to some public pressure and voted to maintain the magazine's publication, something Walker proposed ending. He didn't veto the JFC's act of salvation. Subscribers cover the cost of the magazine, but its production does take DNR employees away from their core duties.
Special Tax Exemptions
A measure that would have provided a sales and use tax exemption for broadcast equipment is history. Walker vetoed the provision because it "does not have any clear tax equity or economic purpose." Vetoing the provision increases annual revenue collections by $928,000, beginning in fiscal year 2019-20.
Several new sales tax exemptions are also created for various industries, including beekeeping. Those who enter competitive tournaments and leagues and submit fees for prize money will also see a sales tax exemption. And if you manufacture dairy products containing more than 50 percent yogurt, but sell it in a separate retail store, you're also off the hook for paying the sales tax. Walker did not veto these specialized tax breaks.
One provision gets the government more involved with emerging services like Airbnb. While the state would bar local governments from prohibiting short-term rentals of residences for seven consecutive days or more, it also adds many more onerous regulations on the independent hospitality trade.
Those who rent out their home for more than 10 nights a year would now need to get a "tourist rooming house" license from the state. They'd have to get a license from their local government, if the locals require it. The state would also begin collecting room tax dollars on those exchanges, as well as sales tax.
Regulations like these muddy up markets and without increasing public safety. Services like Airbnb are often effective at self-regulating, namely through user reviews. In fact, in the eyes of most users, the "riskiest" rooms to book on Airbnb are those with no reviews. These proposed new regulations would discourage serious Airbnb renters by forcing them to get a license.
The governor did delete at least one provision that strikes at a key conservative principle. No. 99 on the veto list is a challenge to property rights.
Walker vetoed a provision that would have restricted railroad corporation condemnation authority. In his veto message, he explains that the limitation "may be deemed an unreasonable interference with railroad transportation, which is prohibited under federal law."
"In addition, I am vetoing these sections because the requirement that the Legislature must enact a law prior to the acquisition of property through condemnation may cause excessive delays in railroad projects necessary for economic growth in the state," the governor wrote.
The governor also maintained the Legislature's changes to the sparsity aid program, which is meant to serve rural districts with low student populations that are highly spread out. Walker had proposed creating a new level of sparsity aid and increasing reimbursements for those already in the program, but the Legislature came up with a new plan that made it through to the final budget.
Now, when they grow too big to qualify for the aptly-named pot of money that is sparsity aid, school districts will be able to receive 50 percent of however much they received in the last year they qualified. That blurring of lines will likely grow spending in the program over time.
Ola Lisowski, Bill Osmulski, and Chris Rochester also contributed to this report.