Tuesday, January 27, 2015

Walker's plan for the Bucks needs more blanks filled in

I wanted to say "the plan is far from a slam-dunk" in the headline, but that would be really lame.

I had a good idea that we would be seeing a bill in Wisconsin giving state funding for a new Bucks arena when I saw that Seattle Mayor Ed Murray met with NBA Commissioner Adam Silver last week, and emerged from the meeting saying that he wasn’t planning on the Bucks to head to the Pacific Northwest.
“I actually have to say, that brought clarity to the process for me,” Murray said. “I had the impression that maybe the whole expansion and/or other teams (relocating) might be sooner and more of a possibility.”

Murray had believed the Milwaukee Bucks might be a relocation candidate if the franchise can’t get a new arena deal worked out this year. But he says Silver and others quickly shot that down.

“They were very clear that they see them staying,” he said.
So that likely gets rid of the idea of Seattle stealing the Bucks away (although the people of the Land of Grunge still get to keep the victory they stole over another Wisconsin team from earlier this month. And no, I’m not quite over that one).

Which led to today, when we finally got a look at the Bucks arena deal, including a release from Governor Walker’s office explaining that the provision will be part of his upcoming state budget, with the state putting down money to get the arena built, and the money being paid back through a “jock tax.”
Under the “Pay Their Way” plan, a Sports and Entertainment District would be created to provide bonding authority to pay back a $220 million grant for a new sports arena. The grant will be in the form of an appropriation bond issuance, paid back by projected growth in income taxes from the Bucks, as well as visiting teams, due to salary increases and new TV contracts. No current base revenues would be used to pay for the bonds, and once the bonds are paid off, the tax growth would return to the state.

Without a new arena, the Bucks would likely leave Wisconsin in 2017, costing the state nearly $10 million per year in income tax collections alone. In addition, if no action is taken on the current Bradley Center, the state is still on the hook for as much as $100 million in maintenance and debt service costs, but without an anchor tenant to drive sales and bring business to the arena and local area.

If the Bucks are sold, the revenue from that sale would first go to pay back these appropriation bonds.
The projections of increased NBA revenues and a higher salary cap (with higher “jock taxes” going with it) make sense. ESPN’s Zach Lowe has consistently mentioned the impact of the league’s new TV contract and the likely huge increase in the cap that’ll result from that, and I’ll direct you to an article he wrote in November talking about what those numbers may look like, under the umbrella of a larger article on the Golden State Warriors’ plans.
No one knows what will happen to the cap in 2015-16 and 2016-17, the first year of the league’s mammoth new national TV contract, but the league’s most recent projections for 2015-16 remain in the range of $66 million to $68 million, per several league sources. It appears unlikely the league bakes any of the anticipated TV money into the cap figure a year early, meaning the 2015-16 cap will sit right around where the NBA had projected it.

But the Warriors were smart to structure the [Klay Thompson] deal this way, since the league’s finances are so fluid. The league and players’ union have only just started discussing “smoothing” proposals for the TV money that would have the cap increase in similar year-by-year increments instead of shooting up in a single season — that 2016-17 campaign.

Who knows where those talks will lead? If the TV money flows in without any smoothing scheme, the cap could jump from about $66.5 million in 2015-16 to somewhere in the $90 million ballpark the following season — an unprecedented one-year spike. The league would like to spread that jump over several seasons so teams can plan with some certainty and one class of free agents — those hitting the market in the summer of 2016 — don’t get to cash in on a once-in-a-lifetime bonanza while their peers sit out.
Theoretically this would also raise salaries for the Bucks (especially if they continue to improve), and some of this money would funnel back to the arena authority in the form of the jock tax. If done right, perhaps that $220 million (plus interest) could be paid off sooner than 2045.

Where I disagree with the Governor’s assessment is the assumption that if the Bucks left, that the $10 million in income tax revenues would leave with nothing replacing it. It would hurt, just like the loss of any large employer would hurt, but it is na├»ve to think there wouldn’t be demand to have some other businesses slightly benefit and expand to take the place of those dollars that would go to the Bucks. Plus, the Bradley Center would still likely exist and hold events without the Bucks, including games for Marquette basketball and Milwaukee Admirals, concerts, and other private events. But I do agree that the BC would seem like a white elephant without having the NBA team there, and it would be difficult to sell the facility and/or its land to someone else to get rid of the large amount of state costs that the facility would require.

And there are two other important details to sort out. The first deals with the site and a final projected cost of the project- neither of which we have seen yet. If you put together the personal investment from new Bucks owners Marc Lasry and Wes Edens of around $150 million, along with $100 million from former owner Herb Kohl and money from naming rights, and add it to the $220 million from the state, that might well be enough to take care of the $400 million to $500 million that was originally estimated to pay for the arena. But we don’t know where that arena would be and how it fits together with the overall development plan of downtown Milwaukee. This is a bigger piece to me than the financing, because I want the arena to be a “hit” that fires up even more development around the area that it’ll be built on, and could be a spectacle that has a major impact on the vibe in the blocks around the area where it exists (the bland-looking BC doesn’t really do that right now).

Of course, the other problem is the state’s huge budget deficit, currently at $2.3 billion and counting. While the Milwaukee Business Journal’s Rich Kirchen points out that Walker’s proposal would enable the state to keep $6.5 million of player taxes, with the rest being diverted into the new arena fund, that $6.5 million won't cover all of the taxes that players and other Bucks employees would pay. You may remember this memo from the Legislative Fiscal Bureau that came out in November upon request from Assembly Speaker Robin Vos asking about how much a “jock tax” would produce for the state.
This office obtained information regarding NBA players and other employees who were potentially subject to Wisconsin income tax as of December, 2012. After conducting a search of tax returns filed for tax year 2012, the Department of Revenue indicates that these individuals, in the aggregate, paid state income taxes of approximately $10.7 million in that year.
So if that number were to hold for 2015 (for the sake of argument), the state would still be down $4.2 million from what it currently gets from NBA players and related personnel, which would add another $4.2 million to the state’s budget deficit. And obviously that number would grow as player salaries and related income grows, which widens the money that would have to be made up. Now, maybe the potential loss of the team and the high-priced employees make that a worthwhile trade, but let’s not pretend that the state’s treasury won’t have money taken out of it, because it will.

In addition, when you combine the fact that this proposal comes out the same day that we get details about Walker asking for a massive cut to the UW System in the same budget, it leads to this telling screenshot. And this picture should make anyone wonder about what the Gov's real priorities are.

Oh, who am I kidding? I KNOW what this guy's priorities are. And they don't involve anything that bettering conditions for most of us in Wisconsin.

But I still am agnostic on the Bucks arena issue, because I want to see the site plan, and how this’ll all work together. It may yet still be worth the investment, but given the direction of where this deficit-ridden budget is heading, it seems like a very hard sell. If the 99% of us are going to have to sacrifice services, wages, take-home pay and quality of life (even more than we already have in the last four years), it sure looks like bad form to have the government shelling out for 1%er ballplayers and team executives at the same time.

Monday, January 26, 2015

Euros show how to stand up to RW "news"

The Miami Herald’s Leonard Pitts Jr. has been one of our better political writers for years, with a way of bringing things into focus in a way that many of us can’t. One of my favorites was in 2005, when he explained that too many people allowed the George W. Bush Administration to try to create its own reality because “ignorance was easier.” Keep that phrase in mind, as I direct you to his latest excellent column on ignorance and lies from right-wing world, where Pitts went over the fallout of Fox News’s claims about Sharia Law and Muslim-run “no-go” zones in Europe, and how people overseas reacted to Fox’s act.

In response, French broadcasters ridiculed the Faux News “report”, and condemnation from Paris’s mayor and British Prime Minister David Cameron got Faux to back down and apologize for its dishonesty. Pitts points out this episode should be a wake-up call for us in Amercia on how we can and should fight the lies and hate of the GOP-aganda machine.
The most important takeaway here is not the admittedly startling news that Fox, contrary to all indications, is capable of shame. Rather, it is what the European response tells us about ourselves and our waning capacity for moral indignation with this sort of garbage.

It’s amazing, the things you can get used to, that can come to seem normal. In America, it has come to seem normal that a major news organization functions as the propaganda arm of an extremist political ideology, that it spews a constant stream of racism, sexism, homophobia, Islamophobia, paranoia and manufactured outrage, and that it does so with brazen disregard for what is factual, what is right, what is fair, what is balanced — virtues that are supposed to be the sine qua non of anything calling itself a newsroom.

If you live with aberrance long enough, you can forget it’s aberrance. You can forget that facts matter, that logic is important, that science is critical, that he who speaks claptrap loudly still speaks claptrap — and that claptrap has no place in reasoned and informed debate. Sometimes, it takes someone from outside to hold up a mirror and allow you to see more clearly what you have grown accustomed to.
Boy, if that doesn’t sound like the downward slide into “truthiness” for righties and the legitimizing of truthiness by the “legitimate” media over the last 15 years, what does? And Wisconsin has been especially bad at this, with the hate and dishonesty that rule daytime AM radio in this state. Combine that with a star-fucking pro-Walker media that seems determined to make Gov Dropout a legitimate presidential candidate over telling the truth about his damaging policies and the toxic environment he has left behind, and you have the divisive mess we have today.

It is well past time we take the fight to these paid-off hacks and hammer and ridicule them for the lies and filth that they spread on our airwaves and in our newspapers. Being nice and expecting mere reason to win out isn’t enough, not when big-money interests and weak-minded fools don't want to own up to what's really happening to our once-great state.

More evidence that right-to-work is wrong for Wisconsin

I wanted to continue my series on how things work in (right-to) work-for-less states and apply it to where we stand in Wisconsin, to compare how those states are doing versus what we have here, and to get the data out before the propaganda from (right-to) work-for-less advocates tries to overrun the debate if such a bill is ever produced here. And yes, sure I’m biased on this subject, but that bias is based on historical trends and comparisons- three of which I will have in this post.

The first is a report released over the weekend by the Wisconsin Contractor Coalition, who directs you to a paper by Marquette University economist Abdur Chowdhury. Chowdhury compared Wisconsin’s situation with (right-to) work-for-less states, and found that the state would definitely lose out. Here’s the executive summary of Chowdhury’s study.
A national assessment of the effect of RTW [right-to-work] laws on important labor market outcomes, such as, unionization, wages, employment, inequality and job-­‐related injuries reveal some important findings. First, unionization rates in RTW states are less than half of what they are in Collective Bargaining (CB) states. Second, aggregate employment in RTW states has increased modestly while employment in CB states has declined. Third, wages are lower in RTW states than in CB states. Fourth, RTW increases gender and racial wage inequality and also makes for less safe workplace.

The potential net loss in direct income to Wisconsin workers and their families due to a RTW legislation is between $3.89 and $4.82 billion annually. Using a conservative estimate of an impact multiplier of 1.5, the total direct and induced loss of a RTW legislation is estimated between $5.84 and $7.23 billion annually. Based upon the two estimates of lost incomes and an overall effective tax rate of 4.0%, the economic loss in state income taxes is estimated between $234 and $289 million per year.

While considerable efforts are being made by certain legislators to pass the RTW law in Wisconsin, the empirical evidence on the effect of adopting such a law does not support prescribing it as an economic policy tool. Overall, this study shows that RTW legislation would provide no discernible economic advantage to Wisconsin, but would impose significant social and economic costs. Low wages would weaken consumption. Higher rates of labor turnover and adversarial labor-­‐management relations would decrease productivity. It would also burden the state with higher ‘mop-­up’ costs [costs for social programs such as child care and food stamps].
But other than that, no problems, right? :P The lost income tax revenue and increased mop-costs are interesting to note in light of this state having $2.3 billion in budget deficits already- we can’t afford to make that go even higher through acts like (right-to) work-for-less.

Chowdhury goes on to explain the factors that does seem to encourage business development and growth, and it doesn’t seem to have much to do with the lower wages that (right-to) work-for-less would result in.
Studies examining why firms locate where they do have consistently found that there are several key factors that business decision-­‐makers consider and compare when deciding among alternative investment sites. These include proximity to markets for their products; access to the raw materials and supplies that firms need; access to quality transportation networks and infrastructure; quality of life characteristics (e.g., good schools, health services, recreational facilities, low crime rates, quality housing, and weather); regulatory environment; the cost and reliability of utilities, etc. Stevens (2009) report that there is no more business capital formation in right to work states, as measured by the number of businesses and the ratio of firm formations to total firms. In addition, recent studies of high-tech firms indicate that they often seek out areas with highly skilled labor and proximity to universities and research centers.
Hmm, that doesn’t really seem to follow the defunding of education and lowering of public services that has become a central strategy in Wisconsin during the Age of Fitzwalkerstan, now does it?

Another release came out from the Wisconsin AFL-CIO today using information from the Economic Policy Institute, which shows that (right-to) work for less laws makes all workers worse off, not just those that are in unions.
These laws lower wages, for both union and non-union workers, by an average of 3.2 percent, reduce the odds of getting health insurance through one’s job by 2.6 percent, and reduce the odds of getting a pension through an employer by 4.8 percent.
The AFL-CIO then continued by comparing what we have here in Wisconsin with what people in (right-to) work-for-less states have. As the full EPI paper notes, states with (right-to) work-for-less states have higher poverty rates, higher rates of violent crime and lower levels of educational achievement, among other quality-of-life drawbacks.

Bruce Thompson of Urban Milwaukee performed a similar evaluation last week, which also shows that (right-to) work-for-less states generally have lower pay. As part of the article, Thompson supplied this graph, where the green squares are work-for-less states in the former Confederacy, and the blue triangles are work-for-less states in other parts of the country. Compare and contrast those states with where the orange circles are, which represent states that don’t have such union-busting laws. You will notice that Wisconsin is smack dab in the middle of this graph, with per capita income just below $43,000 in 2013.

As a group, these (non-RTW) states have somewhat higher income but lower growth than either group of RTW states. It is perhaps telling that Indiana and Michigan, the two states that recently adopted RTW, are at the low end of the non-RTW states in average income and the growth of income.

Other statistical measures support these generalizations. Southern states have the lowest mean income and the lowest standard deviation suggesting that there is a commonality among them. The Western RTW states have the highest growth and the highest standard deviation of growth, reflecting their volatility. (I did not weight these calculations by populations). The southern RTW states are growing faster than the non-RTW states, but at the present rate it would take 50 years for the southern states to catch up in income.
Thompson also points out that promoters of work-for-less often point to the gains in income in work-for-less states while not mentioning that the wages are still much less than in non-work-for-less states. And I will add that those work-for-less honks NEVER bring up the lower social conditions in work-for-less states that the EPI study mentions, such as more people without health insurance and higher poverty and crime rates.

So really the question you want to ask yourself is this. Does lowering wages and quality of life make for a worthwhile trade-off to “compete” with the states that have (right-to) work-for-less laws, or is keeping wages high and maintaining a good quality of life the better way to economic success in the 2010s? It certainly seems like the Walker/WisGOP administration is pointing to the first strategy, but a whole lot of evidence indicates that it’s probably not the right strategy.

Sunday, January 25, 2015

Milwaukee charter schools not measuring up...so take it statewide????

Here's a great expose by the Shepherd Express showing just how a number of Milwaukee's charter schools really operate, with the answer being "often at a substandard level while costing city taxpayers a whole lot of money." Lisa Kaiser's article mentions that 4 of these 10 charters are operating at such a low level that they could be closed, but only 2 were put on probation by city's Charter School Review Committee (CSRC), and that these schools often do a worse job than the MPS schools they're sold as an improvement over. Here's an example of the type of organization operating these schools, with very little oversight or procedure to take care of bad operators.
When presenting their annual review of the city’s 10 charter schools last week, the CSRC limited the discussion to the schools’ academic performance—even omitting the fact that Concept Schools, the Illinois-based national operator of MMSA, has been raided by the FBI in four states as part of an investigation into possible financial fraud. Concept Schools is run by a Turkish Islamic cleric who lives in the Poconos and the organization brings in Turkish teachers on H-1B visas, which are meant for recruiting hard-to-find workers, primarily in the high-tech sector, and not K-12 teachers, according to the Cincinnati Enquirer.

Jeanette Mitchell, chair of the CSRC, told the Steering and Rules Committee that she wasn’t aware of the FBI raids on Concept Schools, even though it’s been widely reported in the press. An MMSA representative denied that the federal investigation had anything to do with his charter school and said that none of the MMSA teachers are here on a H-1B visa.
But the real concerning part to me is the fact that these taxpayer-funded charter schools are operating in a veil of secrecy that wouldn't be allowed with a regular MPS school, and that the charters' financial mismanagement puts other city governmments at fiscal risk.
Jack Norman, a consultant for Schools and Communities United, argued that the charter advocates were providing an incomplete picture of the program for the council members. The CSRC doesn’t discipline schools that are new to the program, but Norman argued that some of the city’s failing charters have long track records as taxpayer-funded voucher schools that should be taken into consideration. The struggling King’s Academy, for example, began as a voucher school in 1999 and became a city charter school in 2010 and has been operating continuously for 15 years. MMSA can trace its lineage to Wisconsin Career Academy, an MPS charter school that was closed in 2012, as well as Wisconsin College Prep Academy, a voucher school that was shut down in 2013. He accused Lighthouse (which received an "F" from the CSRC) of “charter hopping or shopping” because it had received a charter from MPS and UW-Milwaukee before becoming a city charter....

He also argued that the city’s charter school program affects the city’s financial outlook. The program destabilizes Milwaukee Public Schools by reducing student enrollment. A weakened MPS may not be able to make good on its bond payments and Norman warned that could make the city responsible for MPS’s debt. That’s because MPS is treated as a branch of city government for bonding.

“The city is ultimately on the hook for the $300-plus million in bonds that MPS has put out,” Norman said. “To the degree that MPS is put under greater financial pressures, in effect the city is, because the city is the ultimately responsible for that debt. In effect, the city charter program is helping to contribute to possible instability in the city’s own financial reporting.”
Of course, if you're a suburban GOP trying to mess up the City of Milwaukee's finances, so you can beat it up among your constituents and AM 1130 and 620 as a "mismanaged Dem-run area", that's not such a bad strategy. And it works even better if you make the area have to privatize even more of its schools to your campaign contributors!

As usual, these alternative methods of schooling don't seem to be anything that ends up improving education services in Milwaukee, but does seem to be successful in putting unneeded strain on public services and making it harder for them to succeed. Which is the real goal in right-wing world, which helps explain why they want to make this the rule throughout the state.

Saturday, January 24, 2015

DC Republicans screw up, show their Obamacare "fix" won't work

Yeah, that whole idea of Republicans having a better grip on the economy now that they're in power in D.C.? That doesn’t seem to be going so well. Take a look at this summary of Thursday’s Senate committee meeting that was intended to show support for the GOP’s bill to allow businesses to avoid penalties under Obamacare if they choose not to insure employees that work less than 40 hours a week, instead of the 30-hour limit that exists today.

This committee hearing tried to prop up Hardee’s/Carl’s Junior CEO Andrew Puzder (2012 compensation,just under $4.5 million) as an example of a hard-pressed businessman who would be facing extra costs due to the employer mandate hitting his restaurants that have people working between 30 and 39.5 hours a week. We'll let Slate's Alec MacGillis take it from there.
For starters, there is the basic problem that President Obama has made clear that he’ll veto the 40-hour measure. If he does, Republicans could still seek to use the proposal as a cudgel to attack the law politically, but even here there are problems. The Congressional Budget Office has given the measure a decidedly unfavorable review. It estimates that the bill would result in as many as 1 million workers having their hours cut to put them under the new 40-hour limit and thereby losing their employer coverage; about 500,000 workers being left without any health coverage at all; and the deficit increasing by more than $50 billion as a result of fewer employers paying the $3,000 fine, as well as more people turning to Medicaid and federal subsidies to purchase their own insurance after being denied employer coverage.

Even worse, perhaps, several prominent conservatives have come out against the revision—notably Yuval Levin, one of the right’s most influential policy wonks, who wrote in National Review that changing to 40 hours would inevitably cause more Americans to lose hours than the 30-hour rule does, because there are far more workers just at or above that threshold than at the 30-hour threshold. “By setting the definition lower, Obamacare’s architects were trying to mitigate the damaging effects of the employer mandate some,” Levin wrote in a burst of intellectual honesty, “and by setting it higher Republicans would be worsening those effects.”…

The Democrats on the panel, in the minority for the first time in eight years, relished cross-examining the Republicans’ witnesses. Sen. Patty Murray of Washington, the panel’s top Democrat, noted that Puzder’s claim—that Hardee’s and Carl’s Jr. workers who did not get coverage at work could get Obamacare coverage instead—did not hold up in the many states that have rejected the law’s Medicaid expansion. Sen. Elizabeth Warren of Massachusetts quoted Yuval Levin’s criticism of the 40-hour change and noted the irony that Republicans were pushing a measure that would both raise the deficit and make more people reliant on Obamacare. “This bill is corporate welfare,” she said. “Big corporations would be able to cut their coverage, and taxpayers would get stuck with the tab. I’m against adding $53 billion to the deficit so corporations can push their responsibilities onto the government.”

This provoked Puzder, the CEO, into taking a shot at the CBO’s deficit estimate. “I love the CBO, but have they ever estimated anything that is accurate? I mean, really?” This off-message outburst — delivered with former CBO director Holtz-Eakin sitting right next to him — in turn earned Puzder a rebuke from his putative ally, Alexander, who reminded him that it was the CBO that had done the fast-food industry a big favor with its estimate of high job losses under a minimum-wage increase.
And may I remind you that same CBO report that claimed a minimum wage increase might end up reducing job growth by 500,000 also estimated that poverty would be reduced by more than 900,000 and real incomes would grow by more than $2 billion. That’s a good trade in my opinion, especially in times of rising job growth that would blunt quite a bit of the potential job loss (in 2014, this would have translated to 2.45 million new jobs being added instead of 2.95 million).

Gee, what a surprise that Republicans find it a lot easier to strike poses against Obamacare provisions they don’t like, but the bills they produce would end up working a lot worse than what we have today under the ACA. Sort of like their attempts to still argue that “tax cuts pay for themselves” when we have 35 years of evidence proving that they do not (in fact, the only “dynamic” part of tax cuts on the rich and corporate seems to involve rent-seeking by those people, who run to the tax breaks and reduce job growth and tax revenues).

Not surprisingly this hearing is being underreported in our “liberal” media, because it doesn’t fit the narrative that their corporate buddies and the new GOP-controlled Senate wants, and it's not as sexy as 2016 speculation. But I encourage you to take heed of what was said in there, as the testimony and the CBO figures on this bill that would raise the threshold to avoid ACA penalties has exposed the lie behind the alleged “reform” in the GOP's Obamacare bill. It is nothing but a clear attempt to allow corporations to continue to freeload off of the government by paying low wages and no benefits to just-less-than-full-time employees, forcing us as taxpayers to pay for these businesses’ negligence (aka the Wal-Mart business model).

In addition, the appearance by the fittingly named Andrew Pu(t)zder at yesterday’s hearing certainly is going to keep me from stopping at Hardee’s the next time I want a fast-food fix, joining Papa John’s and Darden Restaurants on the “let’s not eat there” list. So way to go, Andy, you hurt your cause and your company with your lame, whiny performance on Capitol Hill this week.

Is "added workforce investment" merely taking money from MKE?

One item that grabbed headlines this week involved Scott Walker’s call for programs and funding in workforce development and training. Among these is a provision in the Department of Children and Families known as the Transitional Jobs program, which evolved out of the state’s Transform Milwaukee program. A look at the DCF’s Informational Paper from the Wisconsin Legislative Fiscal Bureau helps to explain how the current Transform Milwaukee program works, and I’ll add a bit more explanation in italics.
The Transform Milwaukee program, which was created under 2013 Act 20 (the state budget bill) and took effect on July 1, 2013, provides employers in the City of Milwaukee with financial subsidies if they hire eligible low-income individuals. In contrast with W-2, childless individuals may qualify for the Transform Milwaukee program, and the income eligibility limit is higher. The program is a public-private partnership focusing on the area of Milwaukee encompassed by West Silver Spring Drive, West Mitchell Street, North Sherman Boulevard, and Highway 43 (which entails most of the poorest areas of Milwaukee). A total of 587 participants were placed in Transform Milwaukee jobs in 2014.

Under the program, DCF may reimburse an employer or contractor for a minimum of 20 hours per week for any of the following costs that are attributable to the employment of an eligible individual: (a) a wage subsidy equal to the amount of wages paid to the individual for hours actually worked, not to exceed 40 hours per week at the applicable federal or state minimum wage; (b) federal social security and Medicare taxes; (c) state and federal unemployment taxes; and (d) worker's compensation insurance premiums. An employer or, subject to DCF's approval, a contractor, may pay a participant an amount that exceeds the wage subsidy. Participants can work in the program for a maximum of 1,040 hours.
Basically it reduces the cost to those employers in that part of Milwaukee that hire people at or near the poverty line.

Now those 587 people that got placed through Transform Milwaukee may sound like a lot, but it’s really not, especially when compared to how the program was sold, which was an outgrowth of a $100 million package that Walker announced in April 2012 (just weeks before the 2012 recall election). News reports at the time quoted Walker as saying 2,000 jobs would be created in construction and other industries, which seems like a whole lot more than 587 often-temporary jobs. But maybe other areas are being touched by the program and it’s going OK.

With that in mind, here’s what the release from the Governor’s Office has to say about the plans for that program in the next state budget.
Transform Milwaukee Jobs Program – Invests $5 million annually, and extends to high-need rural areas of the state, including Racine and Kenosha, at $3 million over the biennium.
Sounds good on the face, as certainly there are other high-need areas with underemployed skilled workers throughout the state, not just in Milwaukee.

But here comes the part that made me stop and become suspicious. A sizable amount of those 587 people listed as being placed through Transform Milwaukee may not have taken that job, or started work after July 1, 2014, so the expenses didn’t show up in the 2014 Fiscal Year. But even so, Transform Milwaukee paid less than 3% of the money that was set aside in the 2014 budget. These figures from Page 43 of the DCF Informational Paper.

Transform Milwaukee/Transitional Jobs funding
2013-14 Budget $3,750,000
2013-14 Actual Expenditures $103,900
2014-15 Budget $5,716,100

And the ability to expand the Transform Milwaukee/ Transitional Jobs program has already been put into law, as also noted in the DCF paper.
Transitional Jobs Program. Subsequent to the enactment of the Transform Milwaukee program, 2013 Act 113 authorized DCF to establish a similar program in areas outside Milwaukee, to the extent funding is available. DCF must give priority to areas having relatively high rates of unemployment and childhood poverty. The same eligibility and program requirements apply to both programs. To date, the program has not been expanded beyond Milwaukee.
So is the press release that Walker’s office sent out saying that he will “invest” in the Transform Milwaukee program merely mean that he will continue to ask for DCF to keep getting $5.7 million a year, while diverting a sizable amount of that funding away from Milwaukee (the $3 million "extended to other high-need areas in the state")? In other words, there would be no change at all, other than possibly designating the Transitional Jobs funds to areas outside of the City of Milwaukee. Or are they merely going to carry over the left-over funding from this budget and apply it to the next one, to make it look like an "added" investment?

It sure makes me wonder if there’s something beyond the press release that the Governor’s office doesn’t want to reveal until after the budget is released on Feb. 3. And it would certainly go with the cynical way this administration has operated, as the press release is designed to make the state and national media believe Gov Walker is doing some “innovative and bold” in this budget. In reality, he may simply be clarifying details of funding that already exists, and not adding or changing a thing. Sneaky, sneaky there Scotty!

Friday, January 23, 2015

LFB confirms- Wisconsin budget deficits now, and for the future

Here’s my quick reaction to the newly-updated revenue figures from the Wisconsin Legislative Fiscal Bureau that were released this afternoon.

As predicted, the LFB found the November estimates from Scott Walker’s Department of Revenue to be too rosy for this current fiscal year, which means we have to fix a larger budget hole over the next 5 months.
Based upon the November report, the administration's general fund condition statement for 2014-15 reflects a gross ending balance (June 30, 2015) of -$132.1 million. Our analysis indicates a gross balance of -$283.4 million for 2014-15. This is $151.3 million below that of the administration's report…..

The factors that cause the $151.3 million variance are as follows. First, based on economic forecasts and tax collections to date, the estimated tax collections of this memorandum are $173.5 million below the projections of the November 20 report. Second, departmental revenues (non-tax amounts deposited into the general fund) are projected to be $2.7 million less than the estimate of the administration. Third, it is estimated that net appropriations will be $24.9 million below the amount reflected in the administration's report. The primary reason for this difference is a reduction of $18.4 million in debt service payments.
In other words, this would have been worse if it wasn’t for the fact that our falling deficit and stronger dollar are putting interest rates at 2-year lows, which means we pay less in debt service (thanks Obama!).

Looking ahead, the LFB is slightly more positive on revenue growth than the relatively-optimistic figures from the DOR. A lot of this is due to the expectation of strong growth continuing in the U.S. for 2015 and 2016, with the LFB paper quoting Global Insight forecasts of 3.1% GDP growth and 2.83 million more jobs for this year, and 2.7% GDP growth and 2.49 million more jobs next year (thanks, Obama!).

The LFB predicts revenue growth of 4.7% in Fiscal Year 2015-16, and 3.8% in 2016-17, which puts total tax revenues modestly above the DOR’s estimates for those two years (by $110.9 million in ’15-’16, and $65.9 million in ’16-’17). However, this still leaves a massive budget hole, based on the budget requests made by the state’s many departments.

2015-17 projected budget, based on LFB revenue est.
2015-16 Starting balance $65 million (required reserves)
2015-16 proj. revenues $15,651.3 million
2015-16 proj. expenses $16,636.4 million
2015-16 TOTAL DEFICIT $920.1 million

2016-17 Starting in the hole -$920.1 million
2016-17 proj. revenues $16,191.4 million
2016-17 proj. expenses $17,243.6 million
2016-17 TOTAL DEFICIT -$1,052.2 million

Plus $65 million required reserves

Yes, the $2.3 billion plus in deficit are lower than the $3.5 billion I was predicting earlier this week, but it's still a whole lot to make up, and we aren't even mentioning the additional troubles in the Transportation Fund. Given the strong economic expectations and the LFB’s estimates of significantly higher tax collections in early 2015 due to a “bounce back” in investment income in 2014 (the LFB says this, along with the lower withholding rates should lower tax refunds and increase revenues), I’d say the risk is to the downside for revenues. Remember, it just takes a small revenue shortfall in this fiscal year to balloon the shortfalls in the future years, due to the lower tax base.

Somehow I’m guessing our governor won’t mentioning these new deficit numbers on his weekend trips to Steve King’s race-bashfest in Iowa or the Koch Brothers’ soiree in Palm Springs. But unlike the star-fucking Wisconsin media, let’s see if some in the national poitical reportage start to take notice of these numbers, and start asking real questions, as Scott Walker’s and WisGOP’s “fiscal responsibility” doesn’t seem to be working out the way they are claiming it to be.