UPDATED: What You Need to Know About the Joint Finance Endgame

The Bucks, transportation budget and what to do about prevailing wage

MacIver Institute Budget Blog | June 17, 2015

[Madison, Wisc…] It’s been nearly three weeks since the last meeting of Wisconsin’s budget-making committee, the Joint Committee on Finance (JFC). Only a few issues remain before the JFC can pass a budget out of committee. After JFC, the Assembly and Senate will be expected to deliberate on the floor. The issues are hefty ones, however, and it may be a few more days until a final plan is reached.

JFC must come to an agreement on transportation funding, as well as any changes to the tax code and the “wrap-up” 999 motion (more on this later). The Bucks plan that was announced last week may or may not be part of the JFC process. Legislators could stick it in the budget, offer it as an amendment on the floor or make it a separate piece of legislation.

On transportation, the governor has proposed a Department of Transportation (DOT) budget of just over $6.3 billion over the 2015-17 biennium. That is over $300 million more than DOT has for the current budget. On top of that, Walker has suggested $1.3 billion in borrowing for transportation projects around the state. Once again, that is about a $300 million increase in borrowing over what DOT has in this budget.

Gov. Walker told the press on Wednesdy that he is standing by his opposition to any gas tax or vehicle registration fee increase unless an “equal or greater” tax decrease is also passed. This is a position Walker has held from the beginning and it doesn’t seem like the pressure is changing his mind.

So how much more does the DOT truly need? Matt Crumb of the MacIver Institute posed the question in a recent perspectives piece that outlines a number of questionable DOT spending priorities. Multi-million dollar roundabouts in the middle of nowhere, taxpayers paying for fishing piers and bridges with snowmobile accommodations are just a few examples of questionable DOT spending.

Most JFC members think the transportation borrowing total is too high, but the real question is how much legislators would be willing to cut from transportation projects.

JFC vice-chair Rep. Dale Kooyenga (R-Brookfield) has a few fixes for Wisconsin’s tax code that he intends to introduce. The first is an elimination of the state’s Alternative Minimum Tax (AMT) that would return around $26 million a year to a small number of taxpayers. The AMT, at 6.5 percent, applies only to those whose state income tax liability has been so heavily chopped down by deductions and tax credits that they end up paying substantially less than their peers. It really functions as a second tax code for those unlucky few who qualify, and only five other states have one.

Predictably, the left has labeled the AMT repeal as a tax cut for the wealthy. While its true that the AMT mostly affects people with incomes over $200,000, a repeal is good tax policy because it simplifies our already burdensome tax code.

Kooyenga also wants to increase the standard deduction for married couples. Currently, the deduction for married couples is less than what the two could get as individuals, something that Kooyenga sees as an injustice in the tax code.

Now for the scary stuff, the end-of-JFC 999 motion that lobbyists love but taxpayers dread. The 999 is meant to be a wrap-up exercise for the budget to tie up any lose ends. Unfortunately for Wisconsinites, it has become an avenue for special interests and politicians to slip into the budget policy items with little debate.

There are only rumors of what might be included in this year’s 999 because legislative leaders won’t show their cards. Some of the bad ones include a tax on the frac sand industry that has taken off in Western Wisconsin, changes to the three-tier liquor distribution system that could increase the price of your drink and mandatory inclusion of chiropractor, optometry and podiatry coverage for health insurance.

A few more that are highly debated include allowing prisoners to issue bonds for bail and relaxed regulations on rent-to-own stores. Even though some of these items have been publicly quashed, we are going to continue to raise concerns about their inclusion because the public has not yet seen what is in the 999.

Rumors are rumors, but the bottom line is that the 999 is sure to hold plenty of surprises.

Less scary but no less debated is how the new Milwaukee Bucks arena and development plan will fit into the budget puzzle. The plan, which uses a mix of private and taxpayer funding, is opposed by some members of the legislature. Those legislators are concerned about the use of state money for a “regional” project and are uncomfortable with the idea of building a new arena for the wealthy, private owners of the Milwaukee Bucks.

Two key legislative blocs will be the ones to watch in the Bucks arena debate: out-state Republicans and Milwaukee Democrats. Republicans who live nowhere near Milwaukee could be a tough sell, but some Milwaukee Democrats may break from their traditional opposition to most Republican measures for something that will have a direct impact on their communities.

Last but certainly not least is taxpayer theft… I mean, prevailing wage. Full repeal is guaranteed to save taxpayers hundreds of millions and opposing arguments over the loss of public project quality are questionable at best. JFC member Sen. Leah Vukmir (R-Wauwatosa) has said that full repeal is not likely at this point, but substantial reform is probable.

Legislators may decide to exempt local units of government and raise some of the threshold amounts for qualifying projects. Such changes would be an improvement but an overall disappointment. The law is indefensible, benefitting a few select union members at the expense of all taxpayers who pay their inflated wages.

As always, stay tuned to the MacIver Institute for news, updates and analysis. You can follow us on Twitter and Facebook, and be sure to check the website for the latest and greatest.