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Wednesday, June 24, 2009

State Budget Wrap-Up

What will make it into the final deal?

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There’s nothing like a deadline to focus one’s attention.

In the next week, negotiations will be under way to hammer out the final details on a state budget crafted during difficult economic times. While Democratic leaders in the state Assembly and Senate agree on the broad strokes of the budget—preserving services as much as possible while holding down costs—a number of items remain in play. Keep your eye on the following matters:

Oil Tax vs. Capital Gains Tax:

When you’re trying to fill an enormous $6.6 billion budget gap, it’s natural to try to squeeze more money out of those who are earning big profits. That would be big oil companies and wealthy investors. Gov. Jim Doyle has suggested creating a new tax on Big Oil’s profits to generate $260 million over the biennium. Doyle argues that Wisconsin can structure the law so the oil tax won’t be passed on to consumers. The Assembly’s version would allow gas prices to increase about 4 cents a gallon via that tax. And the Senate has dropped it altogether because leaders don’t think it’ll hold up legally or politically in the long run.

To make up for that shortfall, the Senate has voted to eliminate the capital gains tax exemption, which is a complicated way of saying that profits made from investments—say, you sell a stock at a profit—would be taxed at the same rate as earned income. The elimination of that tax break would generate $485 million over two years. The governor and Assembly would limit the exemption to 40% from Wisconsin’s current generous rate of 60%. That would generate $170 million over the next two years.

The theory is that the tax would mostly affect the state’s wealthiest residents. While there’s a reasonable case to be made that a capital gains tax increase would hinder investment, it could also be argued that if you’re earning profits during a recession and mass layoffs, paying a little more in taxes would be best for the common good.

 

Milwaukee Parental Choice Program:

The Milwaukee Parental Choice Program is still controversial after all these years, and Democratic leaders have realized that the rapid expansion of the program has led to a penalty for Milwaukee taxpayers. The Assembly has voted to limit enrollment to 21,500 full-time students in the next two school years, which is about the same number of kids who attended choice schools this past year. The Senate has voted to keep it at the current law’s limit, 22,500. While the two houses must hammer out an agreement, Gov. Doyle, who agreed to the 22,500 limit to placate choice supporters a few years ago, also gets to weigh in on the budget with his veto pen. We’re not sure how this one will pan out.

The Assembly retained some requirements for bilingual education in choice schools. The Senate has nixed them altogether. Both houses have agreed to a partial fix of the school choice funding flaw, which penalizes Milwaukee city taxpayers, but it’s not as much as Milwaukee leaders had hoped for. Accountability measures for schools receiving public monies through the choice program look like they’ll finally become law.

Mandatory Auto Insurance:

Wisconsin is one of two states that do not require all drivers to obtain auto insurance. The Senate has added that mandate to the state budget and, at first glance, that seems like one mandate that everyone can live with. However obvious this provision may seem, there are those who argue that this is yet another penalty for low-income drivers, who can’t afford insurance and could be fined $500 or have their license revoked simply because they’re too poor to afford insurance. According to Justice 2000’s Center for Driver’s License Recovery and Employability, uninsured drivers make up 15% of all Wisconsin drivers, yet uninsured accidents account for just 1% of all traffic violations. So why force low-income drivers to pay for coverage? (Ironically, the Legislature is not allowing for illegal immigrants to obtain a driver’s certificate, which would be necessary to purchase auto insurance, while mandating that all drivers have insurance. See Expresso’s Issue of the Week for more details.)

Regional Transit Authorities:

To be perfectly honest, this is a little confusing. The Assembly wants to create a Southeastern Regional Transit Authority (SERTA), which would include Kenosha, Racine and Milwaukee, and be funded by increasing the vehicle rental fee. That money would be used to apply for federal funds for mass transit projects, create the Kenosha- Racine-Milwaukee commuter rail line, as well as potentially support local transit systems in the cities of Racine and Kenosha. The Senate approved a similar measure. But it also added that prevailing wage requirements would apply to the SERTA’s contracts.

And then there’s Milwaukee County, which passed a nonbinding advisory referendum last fall to increase the sales tax 1 cent for transit, parks, cultural venues and emergency medical services (EMS). The Assembly version of the budget would allow for the creation of a Milwaukee Transit Authority. The new MTA could levy a half-cent sales tax for transit only. The county board could also levy a 0.15% sales tax for local municipalities’ police and fire service.

But the state Senate approved a proposal that goes beyond what the Assembly offered, and is closer to what Milwaukee County voters approved in the referendum last fall. According to the Senate’s proposal, there would be no Milwaukee Transit Authority. Instead, a “quality of life” sales tax would be established. Milwaukee County could levy a 1-cent sales tax; 85% of that revenue would be used for transit, parks, culture and EMS—all of which would be taken off of the property tax rolls, reducing it by at least $67 million. The remaining 15% of that new 1-cent sales tax would go to local municipalities’ police, fire and emergency medical services on a per capita basis.

So, in short, the Assembly supports a half-cent sales tax increase for transit and public safety, while the Senate prefers a 1-cent sales tax increase for transit and public safety, as well as the parks and cultural assets. The Senate’s plan would also reduce Milwaukee County’s property tax levy by $67 million.

In-State Tuition for Illegal Immigrants:

The Assembly voted to allow illegal immigrants who have lived in Wisconsin for at least three years, and who graduated from a Wisconsin high school, to be able to pay in-state tuition in the UW System and tech schools. The Senate deleted that proposal.

We’re firmly on the side of the Assembly on this one. If these students grew up here and graduated from a Wisconsin high school, then they are Wisconsin residents in our eyes. It doesn’t matter where they were born. We should encourage them to get a good education and become good citizens, taxpayers and community leaders. Forcing them to pay out-of-state tuition is not only unfair, but it also discourages bright students from achieving their potential and contributing educated talent to our society. Why is it OK to support their education through high school, and then tell them they’re out of luck? If lawmakers had more courage, they’d act “for the children” and support the Assembly’s proposal.

Comment on this article at ExpressMilwaukee.com.

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