The fiscal future of the state is better served by investing unanticipated revenues toward paying its bills on time and building budget reserves. By vetoing this provision, I am maximizing the amount of revenues allocated to the general fund balance and placing the state on firmer financial footing.
3.
Statutory Minimum Balance
Sections 392m and 9101 (25j) [as it relates to establishing the statutory minimum balance for fiscal year 2002-03]
These provisions reduce the statutory minimum balance from 1.4 percent of general fund appropriations and compensation reserves to $90,000,000.
I am vetoing this provision because the reduction in the minimum balance would jeopardize the financial soundness of the general fund. At $90,000,000, the minimum balance would be less than one percent of general fund appropriations. This is inadequate as a financial reserve to preserve a balanced budget. As a result of my veto, the minimum balance would be increased to 1.2 percent for fiscal year 2002-03.
The state of Wisconsin has one of the weakest financial reserves of any state in the nation. Unlike the vast majority of states, Wisconsin has failed to build budget balances or set-aside revenues in a stabilization fund. During the last biennium, recognizing this weakness, the Legislature saw fit to adopt a staged approach to building higher budget balances. This biennium, the Legislature chose to retreat from this objective by adopting a minimum balance that is the lowest in years.
If Wisconsin had developed adequate reserves in times of surplus, some of the difficult decisions made in this budget would be unnecessary. To avoid retreating on the budget balance, I am partially vetoing these sections to preserve the budget balance standard in place for fiscal year 2000-01.
EMPLOYMENT RELATIONS COMMISSION
4.
Qualified Economic Offer
Sections 2609L, 2609m, 2609p, 2609t and 9317 (8m)
These sections make three major changes to Wisconsin's qualified economic offer provision, which affects the collective bargaining process between school boards and teachers unions. First, section 2609L requires a qualified economic offer to maintain all conditions of employment that existed in the previous contract. Second, section 2609m requires a qualified economic offer to maintain all permissive subjects of borrowing that existed in the previous contract. Third, section 2609p requires that school boards submit qualified economic offers on a timely basis. Section 2609t requires the Employment Relations Commission to establish a methodology for assessing the validity of qualified economic offers, and section 9317 (8m) makes the changes first apply to petitions for arbitration on the effective date of the budget act.
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I am vetoing these sections in their entirety because their potential economic and policy impact has not received any objective review or analysis. Before any changes are made to the qualified economic offer provision it is critical to know what impact they will have on the state's financial commitment to support elementary and secondary education and on school district revenue limits.
It is also important to analyze how the changes will effect the collective bargaining process itself. For example, requiring school boards to maintain all permissive subjects of borrowing may increase the reluctance of school boards to include these subjects in future contracts. Maintaining all conditions of employment, no matter how innocuous, could result in otherwise qualified offers being invalidated on technicalities. Depending on the interpretation, requiring school boards to submit qualified economic offers on a timely basis could force school boards to impose qualified economic offers instead of actively bargaining with teachers unions. In addition, making this provision apply to petitions for arbitration filed after the effective date creates a double standard between districts that have already settled their contracts for the 2001-03 contract period and those that have not.
The collective bargaining process is very complex and has significant implications for both the financing and management of the state's public school system. Major changes to the process must not be made without careful study and review. Including these changes in an omnibus budget bill without objective analysis or public hearings is not good public policy.
I recognize that state programs need to be reviewed periodically and sometimes require revision. I would support efforts to provide for a comprehensive and objective study of Wisconsin's qualified economic offer law.
Department of Financial Institutions
5.
Regulation of Rent-to-Own Agreements
Sections 3020p, 3020v, 3021v, 3021w, 3492f, 3492r, 9120 (1d), 9320 (1d) and 9420 (1d)
These sections remove rental purchase companies from the jurisdiction of the Wisconsin Consumer Act and create Subchapter
XI of Chapter
218 under which these companies would be licensed and rental purchase agreements regulated. The sections also authorize the Department of Financial Institutions to promulgate rules regarding certain licensing fees required under Subchapter XI.
Merchants who offer credit sales and merchants offering rental purchase agreements should be regulated to guarantee a level playing field for the merchants and fairness for consumers. Although these provisions recognize that the rental purchase industry offers a service that is in some ways different from credit sales, they do not sufficiently recognize the issues common to both rental purchase and credit sales merchants. One of these issues is disclosure of annual percentage rates. Without full disclosure of these rates, comparison shopping by consumers becomes even more difficult. These provisions fail to address this essential issue of consumer fairness.
I am vetoing these sections entirely because these provisions do not adequately address the common issues of consumer protection and because I object to the inclusion of this substantial and important policy change in the budget. The rental purchase industry offers consumers a valuable service and the unique features of this service should be recognized. Revisions to acknowledge the appropriate manner and substance of the regulation of rental purchase companies should be considered as separate legislation.
GENERAL FUND TAXES
6.
Internal Revenue Code Update
Sections 2130d, 2130db, 2130dd, 2130df, 2130dh, 2130dj, 2130dL, 2130dn, 2130dp, 2130dr, 2130dt, 2158d, 2158db, 2158dd, 2158df, 2158dh, 2158dj, 2158dL, 2158dn, 2158dp, 2158dr, 2158dt, 2158du, 2158dv, 2158dw, 2158dx, 2158dy, 2158dz, 2158dzb, 2158dzd, 2158dzf, 2175d, 2175db, 2175dc, 2175dd, 2175de, 2175df, 2175dg, 2175dgm, 2175dh, 2175dj, 2176d, 2182d, 2182db, 2182dc, 2182dd, 2182de, 2182df, 2182dg, 2182dh, 2182dj, 2182dk, 2182dL, 2182dm, 2182dn, 2182dp, 2182dq, 2182dr, 2182ds, 2182dt, 2182du, 2182dv, 2182dw, 2184r, 9144 (3z) and 9344 (28z)
Beginning in tax year 2001, these sections, with three exceptions, provide that state individual and corporate income and business tax provisions referenced to the federal Internal Revenue Code (IRC) would refer to the code in effect on December 31, 2000, rather than to December 1999, as under current law.
The Legislature intended to exclude the three federal law changes that relate to the deductions for environmental remediation costs, donations of computer equipment and the treatment of foreign sales corporations. However, the bill as passed by the Legislature excludes these provisions only for tax years prior to 2001. It inadvertently adopts them for 2001 and subsequent years. In so doing, there could be a decrease in tax revenue not intended by the Legislature.
I am vetoing these sections to avoid the potential revenue loss. This would keep the revenue estimates in accord with the estimates the Legislature considered in passing the budget.
I recognize the inherent complexity of the Internal Revenue Code. I request the Legislature to reconsider the IRC update as it intended and pass the update as separate legislation.
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7.
Sales Tax Exemption for Water Slides
Sections 2246nm and 9444 (3w)
This provision provides a sales and use tax exemption for commercial water-park slides including support structures, attachments and parts. The exemption reduces general fund revenues by $90,000 in 2001-02 and by $120,000 in 2002-03.
I am vetoing this section because I object to such a narrowing of the sales tax base. This is a highly selective exemption for one form of construction and maintenance of entertainment or recreational structures. This favors a single industry among a variety of industries providing recreation
8.
Individual Income Tax Exclusion for Military Pensions
Sections 2142m and 2142n
Starting in tax year 2002, these sections exclude from taxation all payments, other than surviving spouse benefits, received from the U.S. military employee retirement system that are not excluded under current law.
I object to the exclusion of surviving spouse benefits from this new tax benefit. Under current law pre-1964 military pension and surviving spouse benefits are not taxed. It is inequitable to broaden the exemption to include only post-1963 military pension and to not include post-1963 surviving spouse military retirement benefits. My partial veto of this section will make these surviving spouse benefits tax exempt.
9.
Estate Tax
Section 2200L
This section requires persons who prepare an estate tax return for deaths occurring after December 31, 2002, to prepare a return under this newly decoupled Wisconsin estate tax. Other provisions in the bill decouple the Wisconsin estate tax from the federal estate tax beginning in fiscal year 2003-04. Because estate taxes are due nine months after a death, the relevant date for deaths should have been for deaths occurring after September 30, 2002.
I am partially vetoing this section to remove the December 31, 2002, date because it does not reflect legislative intent. This partial veto realizes the Legislature's intent to begin the new, separate Wisconsin estate tax in fiscal year 2003-04 by requiring estate tax preparers to prepare returns under the decoupled Wisconsin tax in fiscal year 2003-04. It is my intent to rescind the decoupling of Wisconsin's estate tax from the federal estate tax in my 2003-05 biennial budget.
10.
Artistic Endowment Foundation Tax Credits
Sections 2148m, 2150d, 2150t, 2175, 2179d, 2179h, 2193d, 2193h and 2205n
Sections 2148m, 2150d, 2150t, 2175, 2179d, 2179h, 2193d and 2193h provide a nonrefundable individual, corporate and insurance company tax credit for contributions to the Artistic Endowment Foundation created in this budget.
Under this credit a tax filer could claim ten percent of the amounts contributed to the artistic endowment fund. The maximum credit is $50 ($100 for married couples filing jointly) or $500 for the corporate tax credit.
Section 2205n requires the Department of Revenue to provide for an income tax form provision that would allow a taxpayer to contribute additional funds to the Artistic Endowment Foundation. These additional contributions would reduce a taxpayer's refund or increase a taxpayer's payment for tax liability.
I support the new Artistic Endowment Foundation, but I object to the new ten percent credit as it doubles the amount of the current five percent itemized deductions credit. Many contributions or expenses that are eligible for the current five percent credit are as worthy of tax code benefits as are contributions to the arts. I support the arts, but I do not believe Wisconsin should provide a new and exceptional tax benefit to artistic contributions. I am vetoing these sections to eliminate this new credit. As a charitable contribution, contributions to the Artistic Endowment Fund will be eligible for the current five percent itemized deductions credit.
I am vetoing section 2205n entirely because I object to the requirement that the Department of Revenue should modify the tax forms as indicated in section 2205n. The above veto of the credit removes the need for the department to modify the tax forms.
11.
Baseball Park District Income Tax Checkoff
Sections 395 [as it relates to s.
20.566 (1) (hp)] 917r, 2153g, 3037m, 3037n and 9344 (8x)
These sections:
•
Provide funding for the Department of Revenue's administration of voluntary payments for professional baseball park districts.
•
Define voluntary payments for these districts and establish the procedure for making such contributions to a baseball park district on the income tax return. These additional contributions would reduce a taxpayer's refund or increase a taxpayer's payment for tax liability.
•
Specify how the department must handle taxpayer conditional donations and errors such as failures to remit correct amounts or refunds insufficient to pay the designated contribution.
•
Structure the collection and distribution of any such contributions for administrative expenses and to retire bonds issued for the initial construction of such baseball park facilities.
•
Provide for refunds of such donations under specific circumstances.
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I am vetoing these sections entirely because I object to this checkoff. Wisconsin should strive to simplify and reduce the length of income tax forms. This provision will increase the complexity and length of our forms. This veto will not prevent taxpayers and other interested parties from contributing to a baseball park district. Therefore, this checkoff is not needed and this veto eliminates the provision.
PUBLIC SERVICE COMMISSION
12.
Promulgation of Rules to Facilitate the Production of Distributed Energy
Section 9142 (2zq)
These provisions direct the Public Service Commission to promulgate rules on distributed energy by the first day of the ninth month after the effective date of the budget.
I am vetoing this section to give the commission flexibility in developing these rules. The technical requirements for engineering, electric reliability and safety set elsewhere in the bill are extensive. The bill also adds review and analysis by an advisory panel in addition to the review already required by the Joint Committee on Administrative Rules. To ensure there is adequate time for complete review and analysis of these rules, I am partially vetoing this section to remove the nine month deadline.
13.
Technical Veto – Telecommunications Regulation
Section 3011d
This provision was among a series of changes I recommended regarding the Public Service Commission's enforcement authority against telecommunications providers. The Joint Committee on Finance decided to remove the proposal from the budget. However, due to a drafting error this section of the proposal remained in the bill.
I am vetoing this section to conform the bill to the record of legislative intent.
14.
Voice Mail for the Homeless
This provision provides funding from the universal service fund. This includes $20,000 each year for voice mail for the homeless.
By lining out the Public Service Commission's s.
20.155 (1) (q) appropriation and writing in a smaller amount that deletes $20,000 SEG in fiscal year 2001-02 and $20,000 SEG in fiscal year 2002-03, I am vetoing the funding for voice mail for the homeless. Relative to the overall needs of the homeless, this is a luxury. Funds for homeless services should first be allocated for food and shelter. It is ironic that working families are called upon to pay for voice mail services they cannot afford for themselves.
This is not an area requiring state involvement. It can be handled through private donations and corporate contributions. In many states, and even in Wisconsin, telecommunications providers have stepped forward to provide the homeless with voice mail.
15.
Wisconsin Advanced Telecommunications Foundation Contributions
Section 9142 (3mk) (d)
This provision would allow telecommunications providers to pass assessments related to the Wisconsin Advanced Telecommunications Foundation (WATF) onto a customer's bill in the form of a surcharge. A telecommunications provider could only levy such a surcharge if the bill states that the surcharge is being assessed because of the telecommunications provider's failure to contribute to the WATF prior to its dissolution.
I am vetoing this provision because it would result in additional charges on consumers' phone bills at a time when consumers are already paying significant state and federal charges on their bills. The effect of this veto would be to delete telecommunications providers' ability to pass remaining WATF assessments onto consumers.
DEPARTMENT OF REVENUE
16.
Volunteer Income Tax Assistance Program
Sections 2205m and 9144 (2x)
These sections require the Department of Revenue to work with the Internal Revenue Service and the University of Wisconsin-Extension to undertake a volunteer income tax assistance program. The program is to encourage volunteering by the state's financial and legal professionals, provide training for the volunteers, and assist in creating mobile sites to offer income tax assistance to rural and underserved areas.
I am making two partial vetoes to these sections. First, I am vetoing the requirement that the department assist in the creation of mobile sites because this may not be the best means to serve all rural and underserved areas of the state. With my veto, the department will be able to examine other means of service delivery and consider the cost and benefit of each option. Second, I am vetoing the requirement that sufficient volunteers be recruited by January 1, 2002, to meet the demand for tax assistance services. I am vetoing this provision because the department will not be able to perfectly discern the level of demand for services by this date. If necessary, the department may need to recruit additional volunteers after January 1. Both of my partial vetoes of these sections reflect the Department of Revenue's ongoing effort to serve Wisconsin residents in the most efficient and effective manner possible.
SHARED REVENUE AND TAX RELIEF
17.
Municipal Shared Revenue Payments
Section 2281e
This section specifies that each municipality in calendar years 2002 and 2003 shall receive a one percent increase in its shared revenue payment compared to the payment the municipality received in the previous year. It also specifies that in 2004 and thereafter, each municipality shall receive a shared revenue payment equal to the payment it received in 2003.
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I am partially vetoing this section in two ways. I am partially vetoing the section to eliminate the freeze in shared revenue payments that the section creates beginning in 2004. I am vetoing this provision because the shared revenue formula should be allowed to redistribute state aid according to need over time. Without my veto, payments would remain static forever into the future regardless of whether a municipality gains tremendous property wealth or loses a large share of its tax base. With my veto, shared revenue payments will increase for those municipalities with greater needs.
I am also using a partial to veto to eliminate an ambiguity in the language. I am vetoing the phrase "under this section" because deleting this phase will clarify that the one percent across-the-board increases provided in 2002 and 2003 include the utility component of shared revenue but exclude small municipality shared revenue. This technical correction was recommended by the Legislative Fiscal Bureau to ensure that this section's language reflects legislative intent.
18.
Exclude Lafayette County from Maximum Constraint
Section 9344 (9m)
This section specifies that the exemption of Lafayette County from the maximum constraint provision of the shared revenue formula shall first apply to the shared revenue payments made in November 2001.
I am partially vetoing this section to move the initial applicability of the Lafayette County exemption from the 2001 to the 2002 payments. I am making this partial veto because it is disruptive to change shared revenue payments this late in counties' 2001 fiscal year. Without this partial veto, shared revenue payments for nineteen counties will be reduced in November 2001 to amounts below those anticipated by these counties when they set their 2001 budgets. As a consequence, these counties could end up in deficit situations by no fault of their own. My veto avoids this concern. By shifting the first year to which the exemption applies to 2002, counties will have adequate time to incorporate all of the bill's shared revenue provisions into their budget planning.
