Republican-Controlled Joint Finance Committee to Recast Doyle Budget
After a two-month open season on Gov. Doyle’s budget proposal, it’s the Republican-controlled Legislature’s turn to craft a solution to the $3.2 billion budget hole. On Wednesday, April 23, the Joint Finance Committee (JFC), controlled by the Republicans by a 12-4 margin, started voting on amendments to the budget proposal unveiled by Doyle in mid-February. (See related articles, below)

Differences between the Governor and the Republicans became clearer as the public hearing process wound down. The primary points of contention relate to the transfer of $500 million from the Transportation Fund and the use of other one-time money such as more than $200 million from the gaming compacts; a $200 million transfer for the Patients Compensation Fund; and, over $400 from intergovernmental transfers. JFC co-chair Rep. Kaufert outlined the Republican’s primary budget issues in an April 23^rd Release.

Despite initially stating they were encouraged by the lack of tax increases in the budget, Republicans have recently highlighted the proposed fee increases and the potential for an increase in property taxes. Citing an Apr. 10 Fiscal Bureau memo, JFC co-chairs Sen. Darling and Rep. Kaufert claim that Doyle’s budget plan would lead to property tax increases of $500 million. In addition, JFC member Sen. Welch, citing the same Fiscal Bureau analysis, announced his plan to introduce a property tax freeze amendment to the budget.

Moving Budget Target Frustrates Legislative Leaders
Legislators received some potentially bad news that the $3.2 billion budget hole may be growing. The Department of Revenue (DOR) released data on revenue collection through Apr. 20, 2003 that shows sales and income tax collections below projections, leading some to predict the deficit may grow by another $100 million. Other significant shifts in projections may result in a revised approach to the proposed $434 million intergovernmental transfer proposal and lower than expected gaming compact revenues. On the plus side, the Administration projects another $120 million in federal highway aid. (See below)

Given the pledge not to raise taxes, any significant downward estimates of tax collections or other projections will certainly make the Legislature’s job more difficult. In response, Republican leaders over the past few months have attempted to shift the possible lightning rod back to the Governor by demanding that he make specific proposals to fill any holes in his budget projections. The Democrats, including the Governor, counter that it is time for the Republicans to start offering their own solutions.

Doyle Approval of More Gaming Compacts Infuriates Legislators
On Friday, the Doyle Administration announced that the Governor entered into gaming compacts with tribal leaders from the following seven Native American tribes:

• Oneida Tribe of Indians of Wisconsin

• Ho-Chunk Nation

• Menominee Tribe of Indians

• Sokaogon (Mole Lake) Band of Chippewa Indians

• Lac Courte Oreilles Band of Lake Superior Chippewa Indians

• Bad River Band of Lake Superior Chippewa Indians

• Red Cliff Band of Lake Superior Chippewa Indians

Republicans attempted to legislatively override prior compacts through bills that were ultimately vetoed by the Governor. They are also taking their cause to the courts, battling the Administration over state versus federal court jurisdiction. Their primary objections relate to the expanding scope of games allowed and the open-ended term. These new compacts were similarly met with fierce opposition, with the additional fiscal footnote that they fall short of the projections used by Doyle to balance the budget.

Former Gov. McCallum Pays $13,500 to Settle Ethics Board Investigation
In an April 23 Release, the State Ethics Board announced a settlement with former Gov. McCallum over his personal use of a state-owned aircraft and a boat on loan from Mercury Marine. McCallum accepted responsibility for improperly using the state plane to return himself and his son to Madison from a soccer tournament in Colorado. He reimbursed the state $13,000 for the use of the plane. He also wrote a $500 check for using a boat for himself and his family during the summer of 2001.

The Board did, however, cite as a contributing factor the lack of Department of Administration (DOA) guidance on how government officials were to reimburse the state for using state aircraft. According to the Board, had DOA “been on the ball this matter would have been addressed on day one.” The Ethics Board produced fact-finding reports for both the boat and airplane incidents.

Former Senator Shibilski Abruptly Resigns Tourism Post
Former Sen. Kevin Shibilski resigned as Secretary of the Department of Tourism on April 14. The unexpected resignation takes effect on May 2. Noting valuable time away from his family, Shibilski told the Governor in his resignation letter that his personal and professional interests lie elsewhere. On the other hand, several reports suggest his abrupt resignation may have had more to do with a riff between the Governor and Shibilski relating to the ongoing controversies tied to the Lassa/Paul race for Shibilski’s former Senate seat.

Joint Finance Pulls Policy to Launch Budget Deliberations
In an Apr. 17 memo to committee members, JFC co-chairs Sen. Darling and Rep. Kaufert outlined the process for JFC’s deliberations. Referencing an Apr. 8 Fiscal Bureau memo, the co-chairs identified 21 non-fiscal policy items that would be pulled from the budget (SB 44). For the most part, particularly compared to prior budgets, the Governor’s document contains few non-fiscal policy items, and few such items are expected to be added by the Legislature.

Among the 21 items is a provision that repeals the qualified economic offer (QEO), the elimination of which is a top priority of the teachers’ union. JFC also proposes to pull the Governor’s proposal to repeal the current requirement that DHFS collect, analyze, and disseminate claims and other health care information from health care providers.

The JFC executive action (voting on items by the committee) is expected to last about a month, after which the budget goes to the Senate, then Assembly for consideration. (For detail background on JFC, see Fiscal Bureau's JFC Information Paper). Any differences between the two houses will be resolved in conference committee. Senate Majority Leader Mary Panzer predicted the budget would be sent to the Governor by mid-June, at which time he will have the opportunity to rewrite major portions by exercising his sweeping partial veto authority.

Joint Finance Avoids Major Items in First Week of Budget Action
On their first day of deliberations JFC addressed the Department of Financial Institutions (DFI), Public Service Commission, Department of Regulation and Licensing, and the Office of the Commissioner of Insurance (OCI), among other, lower profile agencies. The more important actions included:

Private Employer Health Care Coverage Program (PEHCCP) – Adopted Motion 304 (12-4). (Reference Paper 310) The Governor recommended $210,900 GPR annually to support staffing in the Department of Employee Trust Funds for the Small Business Insurance Pool. Motion #304 creates a task force, appointed by Speaker Gard and Majority Leader Panzer, to provide recommendations for statutory changes to the program by Jan. 1, 2004. Funding for staff was placed in the JFC appropriation pending recommendations and reduced by $105,000 in FY 04 to reflect that positions would remain vacant the first half of the fiscal year.

LLC Annual Report – Approved the Governor’s recommendation to require LLC’s to submit an annual report to DFI and imposes a $25 filing fee. Adopted alternatives 1a, 1b, and 4 from Paper 343. Committee action modified revenue estimates and reporting dates and deleted the requirement that the annual report include the name and address of each member of the LLC.

Office of Commissioner of Insurance (OCI) – Action on Paper 458 relating to the Patients Compensation Fund was postponed for consideration with other Medical Assistance issues. Cost saving actions included adoption of Alternative A2 (13-3) that deleted $800,000 funding for COSMOS enhancements, and B2 (12-4) that deleted $600,000 for a new computer system for the patients’ compensation fund. (Reference Paper 455 relating to information technology.)

 PSC-Railroads Commissioner – Restored the Office of the Commissioner of Railroads. (Reference Paper 640, Alternative 3)

TEACH Grants – Made no change to the Governor’s proposal to delete funding of $35 million annually and eliminate the educational technology block grant program. (Reference Paper 710)

On Thursday, April 24, the committee addressed DOT (Motor Vehicles), Department of Commerce (DOC), DHFS, and miscellaneous other matters including topics held over from Wednesday. Some major actions included:

DOC-PECFA – Adopted Alternative 4 from Paper 220 (12-4) to approve $94 million in additional revenue bonding for the PECFA program on top of the Governor recommended $115 million. In addition, the Committee transferred $12 million ($6 million each year) from the petroleum inspection fund to the general fund.

DOC-Funding for Forward Wisconsin – Adopted Motion #59 that approves the Governor's recommendation to delete $95,000 annually plus an additional $60,000 annually in funding for Forward Wisconsin, for a total reduction of $310,000 GPR over the biennium. (Reference Paper 215)

DOC-Wisconsin Development Fund-Grants for Plant Closing – Adopted Motion 322 that requires Commerce to allocate $1 million in 2003-04 for grants from the Wisconsin Development Fund for individuals, communities, and businesses that are affected by a plant closing on or after February 1, 2001.

DOC-Wisconsin Manufacturing Extension Partnership – Adopted Motion 208 that moves $100,000 GPR annually from the Main Street program to a new GPR appropriation for grants for the Wisconsin Manufacturing Extension Partnership.

DOC-Rural Economic Development (RED) program – Adopted Alternative 2 that approves the Governor's recommendation to delete $50,000 GPR annually from the Rural Economic Development (RED) program plus an additional $237,700 GPR in 2003-04, but increase expenditure authority for the RED repayments appropriation by $237,700 PR in 2003-04. (Reference Paper 216)

DHFS-“Income Augmentation” Revenue – Adopted Motion 61 (14-2) that covers all income augmentation issues contained in Paper 365. Income augmentation funds are unanticipated federal funds DHFS receives under federal foster care, Medicaid, and Medicare programs. DHFS estimates that the state will receive $8.9 million FED in 2003-04 and $6.5 million FED in 2004-05, or about $12 million more than estimated in the Governor’s budget.

DHFS-Assistant Area Administrators – Adopted Motion 206 that eliminates all DHFS assistant administrators. The Governor proposed to delete 3.5 positions; this motion deletes the remaining 15.

DOT-Blood Alcohol Concentration – Set aside action on the Governor’s proposal to adopt a 0.08 alcohol concentration level. Issue will be considered later.  (Reference Paper 773) (See committee action on passage of stand alone 0.08 bill, below)

DOT Identifies Project Delays
In part, the Joint Finance Committee delayed any actions on major components of DOT’s budget pending information from the Administration on the status of DOT projects. In an Apr. 24 letter to JFC, DOT Secretary Busalacchi provided the requested information to the committee. The letter highlights and incorporates in its analysis the expected $120 million bump in federal funds, although DOT notes that amount would be offset by a reduction of $21 million in state funds.

The Administration asked the committee to allocate the $100 million in new funds to the State Highway Rehabilitation program ($54.6 million), Major program ($37.6 million), and to the State Planning and Research program ($6.5 million). The listing of projects going forward and delayed, along with a related press release can be found on DOT’s web site.

Assembly Committee Advances 0.08 BAC and Seatbelt Bills
On Wednesday, April 23, the Assembly Transportation Committee recommended passage of AB 88 by an 8-4 vote. The bill would change the prohibited alcohol concentration from 0.1 to 0.08. The controversial measure was also included in the Governor’s budget, in part, due to linkage between the lower limits and federal transportation dollars.

The committee also held a hearing on AB 90 that would allow for the primary enforcement of seat belt violations. Later in that same meeting, the committee voted the measure out of committee by a surprisingly strong 8-4 vote. The committee also recommended passage of AB 21, as amended, relating to loading requirements for dump trucks. The amendment would eliminate the tarping requirement, but prohibits loads above the truck side levels.

Natural Resources Board Adopts Air Toxics Revisions
At its April 22 meeting, the Natural Resources Board adopted the controversial rewrite of the state’s air toxics program. Overall, the existing rule was improved during the three-year advisory committee process. Key changes include new applicability language that excludes sources subject to federal requirements, a new exemption for sources not expected to emit threshold amounts of hazardous substances, and new due diligence/safe harbor provisions that should limit the scope of inquiry needed to discern whether a source emits a regulated substance. Additional positive changes relate to certain "off-ramps" and clarification on how substances get listed.

Despite these changes, the proposed addition of about 153 new substances (bringing the total to 577) and the lowering of many thresholds, substantially increases the reach of the rule and creates new burdens for sources already regulated under NR 445. It is this expanded scope and the projected $100 million price tag that caused the state’s leading business group, Wisconsin Manufacturers & Commerce, to oppose the measure. The proposal now goes to the Legislature, which in light of their own concern over Wisconsin’s regulatory climate, may respond more favorably than the Board to industry’s concerns.

Environmental Groups Petition for CO2 Rules
On April 14, environmental and associated groups filed a petition before the Department of Natural Resources asking the department to promulgate carbon dioxide rules. Petitioners included former DNR Secretary George Meyer, representatives from environmental groups, physicians and clergy. The petition references a “declining cap framework” that would result in a 75 percent cumulative reduction by 2060 from the “power sector.”

Under the relevant law, the decision by the Board to proceed with rulemaking is entirely discretionary, although the Board must inform the petitioners of the decision within a reasonable time period. The make-up of the Board will certainly be relevant, as Gov. Doyle can appoint five of the seven Board members once Tiefenthaler and Willett’s terms expire on May 1, 2003. However, four of those five nominees cannot sit until the Senate confirms them.

Energy Policy Moving Forward
Senate Energy and Natural Resources Chairman Domenici has revised the electricity market reform provision in the energy policy bill his panel is putting together. Retaining most of the original proposal, the revised version remains silent on repeal of the Public Utility Holding Company Act, but does speed up the implementation date for a plan to impose a national regulatory structure on the power market.

Senate Committee Seeks Overhaul of Tea-21's Funding System
The congressional daily reported that Senate Finance Committee staffers are in the early stages of developing a major overhaul of the federal funding system for transportation -- including the creation of a new federal bond program that would be used to generate about $14 billion per year for use on rail and road projects. The plan would shift the bulk of the estimated $7 billion in Highway Trust Fund monies, now used for transit, back into the highway program. Committee staff members are expected to propose a set of aggressive new gas tax enforcement mechanisms, as well as move a federal ethanol subsidy out of the Highway Trust Fund and into general revenue.

Asbestos Litigation Talks Continue
Key parties in labor and industry, as well as senators on both sides of the aisle, several weeks ago agreed to make a good faith effort to pursue the trust fund concept as a means of settling a flood of asbestos claims. The Senate Judiciary Committee still plans a May markup. For more on asbestos reform, go to Asbestos Negotiations Focus on Trust Fund and Asbestos Accord said to Be Near.

Homeland Security
Congressional Republicans have prepared a proposal requiring thousands of chemical sites to assess their vulnerability and response plans to a terrorist attack. The draft proposal, which has been circulating among members of the Senate Environmental and Public Works Committee, is expected to be introduced as soon as next week.

Among other things, the measure urges companies to conduct background checks of employees, assess computer security and tighten access to chemicals. It would allow the Department of Homeland Security to fine companies up to $250,000 for failure to comply and would allow courts to penalize companies $50,000 more per day. The bill, the Chemical Facilities Security Act, does not require companies to submit their assessments to the government for review.

Transportation and Commerce
The federal government issued new rules for truck drivers to permit them to drive more hours in one stretch but requires that drivers take off more time between shifts. In the first major revision of hours-of-service rules in 64 years, the Federal Motor Carrier Safety Administration will allow truck drivers to spend up to 11 straight hours behind the wheel, an increase of one hour from existing limits. The new rules will require drivers to take off at least 10 hours between shifts, a two-hour increase.

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For Further Information

For further information on these initiatives, contact Jim Hough at The Hamilton Consulting Group.

News Articles

GOP struggling in effort to plug remaining $3 billion state deficit: Milwaukee Journal Sentinel, Apr. 27, 2003.

Wisconsin signs six gaming pacts: Appleton Post-Crescent, Apr. 26, 2003.

Republicans blast Doyle on compacts: Appleton Post-Crescent, Apr. 26, 2003.

Tax totals could miss forecasts: Milwaukee Journal Sentinel, Apr. 25, 2003.

McCallum pays $13,500 to settle ethics probe: Wisconsin State Journal, Apr. 24, 2003.

Ho-Chunk lay cards on table: Wisconsin Rapids Daily Tribune, Apr. 23, 2003.

DNR board backs tough emission rules: Madison Capital Times, Apr. 23, 2003.