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Wednesday, Jan. 12, 2011

The Walker Agenda

Will killing consumer protections really create 250,000 jobs?

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On his first day as governor of Wisconsin, Scott Walker declared a state of “economic emergency” caused by “years of mismanagement” and a business climate that has “for too long been stifled by burdensome regulation, taxes and costly litigation.”

But will the bills proposed in this special session of the state Legislature actually end the “economic emergency” and help to create 250,000 jobs, as Walker promised on the campaign trail?

Unfortunately, that is not likely.

The bills simply appear to satisfy the wish list of goodies of the Republicans and their allies who financed Scott Walker’s campaign.

Do the proposals have far-reaching repercussions that have nothing to do with job creation?

Unfortunately, you bet.

Because the legislation, as proposed, would:
  • Increase the amount of corporate tax breaks that haven’t been fully utililzed in the past
  • Prevent district attorneys from prosecuting negligent health care workers
  • Provide incentives to manufacturers to ship jobs overseas
  • Make it extremely difficult and costly for district attorneys to prosecute truly violent criminals
  • Remove state protections for wetlands

Creating Tax Breaks That Won’t Change Anything

Walker and his fellow Republicans campaigned on creating broad tax breaks for Wisconsin businesses—and companies that want to move to the state—because they claim that only private businesses create jobs, not the government.

So corporate tax breaks were expected to be introduced during the special session.

Walker wants to create a tax credit for businesses with gross sales of less than $500,000 a year. But few businesses would qualify for it, since even very small businesses generate more than half a million dollars in revenue.

Walker is also promoting a tax credit for businesses that want to relocate to Wisconsin. This, too, would have little impact. According to the highly respected, nonpartisan Legislative Fiscal Bureau (LFB), these tax credits for all the businesses that would qualify would add up to just $280,000 annually, too modest to affect business decisions.

Lastly, Walker is planning to increase the amount of economic development tax credits by $25 million. But the state already has a business development tax incentives program that has $73 million just waiting to be used. The addition of another $25 million is unlikely to be claimed during 2011-2013 since the current allocation is being left on the table, the LFB concluded.

Walker also wants to get rid of the Department of Commerce and replace it with a public-private entity, the Wisconsin Economic Development Corp. (WEDC). State Rep. Peter Barca (D-Kenosha), the new Assembly minority leader, said he’s open to the reorganization. But he has concerns about Walker’s plan to fire the department’s state employees and force them to reapply for their jobs, since that could reduce continuity and predictability in the agency’s operations. Barca said he’s also concerned about possibly granting WEDC bonding authority, since that would allow the agency to spend money without getting approval from the state Legislature.

“This shouldn’t be part of the special session,” Barca said. “We should only deal with the economic emergency.”



Changing the Business Climate

One of the rallying cries of the conservative business community is that Wisconsin must change its liability laws to make its business climate friendlier to corporations.

Wisconsin Manufacturers & Commerce (WMC), the conservative business lobby, has made tort reform a priority issue for 2011. And, obviously, so has Walker.

But is Wisconsin’s business climate heavily burdened by excessive regulation and frivolous lawsuits filed by greedy trial lawyers? Are doctors unwilling to set up shop because the cost of malpractice insurance is so high?

The short answer is no, according to research conducted in 2009 by Marc Galanter and Susan Steingass at the University of Wisconsin Law School. After looking at data from 1996 to 2007, the professors concluded that “citizens resort to Wisconsin state and federal courts at a low rate, whether compared to the United States as a whole or to Wisconsin’s neighboring states.”

Upticks were found in family law cases, small claims suits, mortgage defaults and businesses attempting to collect debts.

But tort filings in Wisconsin—cases dealing with injuries, negligent behavior, medical malpractice and product liability—actually fell 17% from 1996 to 2007, “in line with the national trend.” Medical malpractice claims fell even further during that period—34%—and are low compared to other states. When these cases went to trial, Wisconsin insurers paid out less to injured parties than insurers do in other states. Other research found that insurers in Wisconsin won 84% of cases that went to trial between 2005 and 2007.

Similarly, though product liability claims in Milwaukee County courts resulted in more favorable verdicts for injured individuals, the payouts are smaller than they are in metropolitan areas in neighboring states.

Lastly, and perhaps most importantly, Galanter and Steingass could find no direct evidence of Wisconsin’s civil justice system creating a bad business climate or discouraging investment in the state.

Immunity for Sellers and Distributors of Faulty Products

So why is the WMC ignoring the data and complaining about the state’s liability laws?

Well, the WMC leaders think it’s a problem and it resonates with allegedly pro-business Republicans. But it’s a problem that barely registers with WMC members. In fact, according to WMC’s own June 2010 survey, only 1% of its members listed tort reform as “one thing that state government could do to help your business” or as “one thing that state government could do to improve Wisconsin’s business climate.”

Regardless, legislation has been introduced in this special session that would severely limit an individual’s access to the courts if they are injured by a company, health care provider or individual. The bill is multifaceted and covers everything from pain and suffering awards to nursing home safety to expert testimony during trials.

“It’s hard to make a connection between this bill and job creation,” Barca said.

First, the bill reduces a consumer’s ability to recover damages from a retailer or distributor of a faulty product. If the change becomes law, consumers would have to attempt to collect damages from the manufacturer of a harmful product. This leaves people with very little recourse.

Mark Thomsen of Cannon & Dunphy said that this provision would encourage businesses to manufacture their products in other countries since it would be nearly impossible for consumers to sue a manufacturer based in China, for example.

“This bill will promote job growth overseas,” Thomsen said. “I call it Scott Walker’s Job Export Bill.”

The bill also immunizes retailers and distributors if the product is in a sealed container. The Wisconsin Council on Children and Families blasted that change, saying that it would reduce parents’ confidence in the safety of the items they buy for their kids.

The bill also guts a state Supreme Court decision that allows children who have been injured by lead paint to sue manufacturers. It does so not only for cases to be filed in the future; it also includes language that seems to apply to cases that have already been filed, said Milwaukee attorney Peter Earle, who has taken on the lead-paint-poisoned kids’ cases in state and federal court. In doing so, Earle said, Republican legislators are ignoring a 2001 state Supreme Court decision barring this sort of retroactive application of liability law, Earle said.

“The WMC, in cahoots with the lead paint companies, have surgically designed a proposed bill that would give the lead paint manufacturers immunity,” Earle said.



Corporations Will Be Able to Put Us at Risk

If the bill is passed as written, injured individuals would have a very difficult time suing corporations—and even drunken drivers—for punitive damages if they cause harm or even the death of another person.

Why? Because plaintiffs will have to prove that the corporation intended to cause the injury or that they were “practically certain” that it would result in injuries.

That’s a really high hurdle to clear, said Milwaukee attorney Alex Flynn, because “no business or company could be accused of trying to kill its employees.”

Big payouts from negligent corporations to their victims would become a thing of the past. Take the big crane collapse at Miller Park in 1999, which killed three ironworkers in a horrific accident. In 2000, a 16-member jury ruled unanimously that the families of the deceased workers should receive $99,250,000 in punitive damages, mostly from Mitsubishi. The verdict and award were upheld by the state Supreme Court.

But those victims would likely not win their suit if the proposed legislation were the law of the land, Flynn said. Even worse, corporations would likely informally relax their safety standards because they wouldn’t have to pay out punitive damages to those they have injured.

And some attorneys are arguing that drunken drivers could also use their intent as a defense, since they could argue that they didn’t intend to hit and kill anyone while driving drunk—they were merely trying to drive home from the bar.

Weakening Patient Protections and Prosecutions

Walker’s reforms also carve out protections for health care providers who commit “an act or omission of mere inefficiency, unsatisfactory conduct or failure in good performance as the result of inability, incapacity, inadvertency, ordinary negligence or good faith error in judgment or discretion.”

In plain language, that sentence bars district attorneys from prosecuting health care workers who “negligently abuse or neglect a patient or resident” if they’re on the job.

“This is a shock,” Thomsen said.

In addition, Thomsen said the bill prohibits district attorneys from accessing health care providers’ incident reports when building a case or investigating a questionable provider. Patients and families wouldn’t be able to use these documents in suits against a provider, either.

“Incident reports have always been used to build the facts of a case,” Thomsen said. “Now, that document could not be used.”

District attorneys, patients and families would no longer be able to use hospital reports sent to the state Department of Regulation and Licensing or the Department of Health Services, either.

Patients who have been harmed in nursing homes, hospices and assisted living facilities would see changes, too. Pain and suffering damages would be capped at $750,000 for medical malpractice, while relatives of a deceased adult could recover up to $350,000 for a wrongful death.

“Our hope is that the nursing home provision will be removed from the bill,” said Jim Flaherty, spokesman for the Wisconsin AARP. “Our primary concern is that the most vulnerable people in our society, those who are in long-term care facilities, will be harmfully impacted.”

And while the connection between expert witness testimony and the state’s business climate isn’t clear, it’s included in this wide-ranging “tort reform” legislation.

The bill changes the standard for expert witnesses to make it more stringent, which will make prosecution of dangerous crimes more difficult and costly, said attorney Flynn.

Milwaukee County District Attorney John Chisholm said that the bill would make it “extraordinarily difficult” to establish expert testimony in some of the office’s most serious cases, such as those involving child sex predators, homicides and felony drug offenders.

“All of those cases routinely depend on what we consider to be exceptionally qualified expert testimony, but we wouldn’t be able to meet this extraordinarily restrictive burden that’s in the current bill,” Chisholm said.

In a letter to legislators, Winn Collins, president of the Wisconsin District Attorneys Association, echoed that sentiment, and added: “Passage of this legislation may also increase the workload of the Wisconsin State Crime Laboratories and it will certainly increase the cost counties incur in their role of providing our offices with the financial support necessary to procure expert witnesses.”

Wetlands Protections to Be Dropped

And no allegedly pro-business session would be complete without the weakening of environmental protections. Although a formal bill hasn’t been introduced as of this writing, Walker’s executive order includes language that exempts some wetlands from regulation.

Anne Sayers, program director for the nonpartisan Wisconsin League of Conservation Voters, said Walker may be trying to remove state protections for isolated wetlands enacted in 2001 to counter President Bush’s moves to open up these environmentally fragile areas. In fact, the legislation was so popular that it passed both houses of the state Legislature unanimously—which included, interestingly, then-state Rep. Scott Walker.

Sayers said removing these protections could result in paving over and filling wetlands, more flooded basements, fewer areas for duck and game hunting and increased costs for water treatment.

“It sounds like we’re headed back to 2001,” Sayers said.