Sections 9101 (11k) and 9101 (12k)
These provisions require the Department of Administration to report to the Joint Committee on Finance on plans to lease a new data center and the associated hardware and software costs. Also, any proposed acquisition of major management information system project resources is made subject to Committee review under a 14-day passive approval process.
I am vetoing these provisions because they are unnecessary. The Department of Administration remains committed to working with the Legislature on these issues. However, legally mandated reports unnecessarily limit information sharing and dialogue on these matters.
11.
Pension Obligation Lapses and Transfers
Section 79
This section codifies how the Department of Administration secretary will administer the lapses and fund transfers related to unfunded retirement liability debt service.
I am partially vetoing this section to ensure the budget intent to realize savings through the issuance of pension obligation bonds is achieved while the goal of property tax relief and adequate school funding is met under the Education and Workforce Development Section, Public Instruction, Item #4. This veto will allow the Department of Administration to allocate the costs of repaying the pension obligation bonds and fully recoup the savings residing in agency fringe benefit lines.
Building Commission
12.
General Fund Supported Borrowing Target
Sections 16p and 16r
These sections establish a target increase of general fund supported borrowing for the long-range state building program, beginning in the 2007-09 biennium. This target is set initially at $480 million and is adjusted each biennium by the percentage change in construction costs and reduced by general fund borrowing already authorized, but not yet issued, and general fund supported borrowing contained in executive bills and other legislation.
I am vetoing these sections in their entirety because they are unnecessary. The State of Wisconsin Building Commission exists to review the state building program and debt issuance strategies. The commission already considers general fund revenues and debt service, general fund borrowing already authorized but not yet issued, and general fund supported borrowing contained in executive bills and other legislation as it develops recommendations for additional general fund supported borrowing. A statutory target is unnecessary given this role.
Furthermore, the target is artificial as it is created by setting a $480 million starting point based on information from one year and inflating the amount based on percentage changes in construction costs, despite the fact that the target includes both construction and nonconstruction related borrowing. The target also does not allow for consideration of program requirements or regulatory requirements that may impact the commission's recommendations for new general fund supported borrowing.
EMPLOYEE TRUST FUNDS
13.
Required Nonrepresented State Employee Retirement Contributions
Sections 737e, 737r, 9101 (7k) and 9414 (1k)
These sections require nonrepresented state employees, including University of Wisconsin faculty and academic staff, to begin paying 1.5 percent of earnings into the Wisconsin Retirement System, effective September 1, 2005. Currently the state, as the employer, pays this portion of the total employee-required contribution for all represented and nonrepresented employees.
The GPR amounts budgeted in agencies for the 1.5 percent portion of the retirement contributions would lapse to the general fund. Comparable offsets would occur with other sources of funding.
I am vetoing these sections because they present serious legal and policy implications.
Adding these sections to the budget bill in a late night, last minute effort to secure votes did not allow for public input or a thorough debate of the issues. For good reason, the statutes require that bills and amendments related to the retirement system and pension contributions be referred to the legislative Joint Survey Committee on Retirement Systems.
Increasing the employee's required contribution may impair contractual rights.
These provisions create disparities among employees' compensation and benefit funding.
To maintain a neutral fiscal effect to the general fund associated with this veto, I am requesting the Department of Administration secretary use the authority granted under s.
16.50, Wisconsin Statutes, to prudently manage the allotment of funds in order to produce offsetting lapses during budget implementation.
Regulation and Licensing
14.
Transfer of Alcohol and Other Drug Abuse Counselor Certification
Sections 2337am, 9121 (12s) (am) and 9421 (10q)
A417
These provisions transfer the certification and regulation of Alcohol and Other Drug Abuse (AODA) counselors from the Department of Health and Family Services to the Department of Regulation and Licensing effective January 1, 2006. Included in these provisions is the creation of a certification review committee to advise the Department of Regulation and Licensing on proposed rules. The majority membership of this committee is to be recommended by the Wisconsin Association on Alcoholism and Other Drug Abuses, Inc. (WAAODA). Also included in this provision is an exemption from certification for any physician who specializes in psychiatry. Other physicians would be subject to the new certification.
I am partially vetoing the effective date of this provision because the Department of Regulation and Licensing needs additional time to prepare for this transfer.
Additionally, while WAAODA should have input into determining the certification committee membership, the final appointment authority should be the Department of Regulation and Licensing secretary. I am, therefore, vetoing the requirement that a majority membership of the committee be recommended by WAAODA.
Lastly, I believe that all licensed physicians should be able to practice AODA counseling without special certification under this provision. The Wisconsin Medical Society already certifies physicians for AODA counseling. I am, therefore, partially vetoing the provision to remove the exemption for a physician specializing in psychiatry because it is unnecessary. This partial veto will allow all licensed physicians to provide AODA counseling without further certification.
VETERANS AFFAIRS
15.
Operational Efficiency Consultant
This provision provides $200,000 in additional expenditure authority to the Department of Veterans Affairs to hire a consultant to determine how the department can operate the veterans homes at King and Union Grove more efficiently.
By lining out the departments appropriation under s.
20.485 (1) (gk) and writing in a smaller amount that deletes $200,000 PR in fiscal year 2005-06, I am vetoing the additional PR that was added by the Legislature to complete the study. I am also requesting the Department of Administration secretary not to allot these funds.
I am vetoing this provision because I object to providing scarce resources for this purpose. If the department feels there are operational efficiencies to be found at the two homes through an efficiency review, it should allocate existing base resources for this purpose.
F.
TAX
General Fund Taxes
1.
Individual Income Tax Exclusion for Social Security Benefits
Sections 1286hm, 1286im and 1286jm
These sections phase in a full income tax exclusion for Social Security benefits above certain thresholds: $25,000 for single filers and $32,000 for joint filers. Currently, 50 percent of the income above these thresholds is excluded from income tax (100 percent of income below these thresholds is excluded). The provision would increase this percentage to 65 percent for tax year 2007, 80 percent for tax year 2008 and 100 percent in tax year 2009.
I am partially vetoing this provision to start the full 100 percent exclusion of Social Security benefits one year earlier, beginning in tax year 2008 which makes the benefit of the full exclusion available to Social Security recipients sooner rather than later, and which provides $16.2 million more in tax relief to these individuals by the end of fiscal year 2008-09.
2.
Private School and Homeschool Tax Credit
Sections 140 [as it relates to s.
20.835 (2) (eo)], 451u, 1311p, 1312m [as it relates to s.
71.07 (8r)], 1312u [as it relates to the private school and homeschool tax credit] and 9341 (10p)
These sections create a refundable individual income tax credit of $100 per eligible pupil enrolled in kindergarten or grades one to twelve at an eligible private school or home-based private educational program if the pupil is a dependent of the claimant. The credit is funded with a sum sufficient GPR appropriation and begins for tax year 2006.
I am vetoing this provision because it undermines the state's ability to properly fund public education. This tax credit takes over $14,000,000 annually from the general fund and gives it to residents whose children are not in public schools. Even homeschooling activists have registered their dislike of this credit, objecting to additional government involvement in homeschooling.
3.
Adoption Expenses Credit
Sections 1286Lm, 1311ia, 1312o and 9341 (4k)
These sections eliminate the state income tax deduction for adoption expenses and create instead a nonrefundable adoption tax credit that would be available to anyone who is eligible for, and claims, the federal adoption tax credit. The credit would be allowed for qualified adoption expenses that exceed the amount of the federal credit for which a claimant is eligible and claims. The state credit may not exceed $5,000, but unused portions of the credit may be carried over to future tax years for up to five years.
I am vetoing this provision because the state already provides adoptive parents with a tax benefit through our adoption expenses deduction. The estimated $7,500,000 annually saved through this veto will be used to fund education and provide property tax relief, offering further benefits to both adoptive parents and their children.
4.
Health Savings Accounts
Sections 1432m, 1450g and 9341 (5m)
These sections update state tax references to the internal revenue code in order to conform to federal income tax exclusions and deductions for health savings accounts (HSAs). Under the federal HSA provisions, an eligible individual covered by a high-deductible health insurance plan may make pretax deductions to an HSA to cover qualified medical expenses. These provisions would first apply to tax year 2005.
A418
I am vetoing these provisions on HSAs, as I have in the past, because HSAs are inextricably linked to high deductible medical insurance and, therefore, could decrease employer-sponsored insurance coverage. Additionally, HSAs are only viable for persons with higher incomes. Without a clear and demonstrated benefit for the residents of this state as a whole, I believe these provisions should only be taken up in the context of a larger debate on a comprehensive health care package that would effectively and affordably address the health care needs of seniors, children, and middle- and low-income families.
While I have vetoed these provisions, I am signing a tax cut for individuals paying health insurance premiums. This tax cut will help those whose employers do not contribute to health insurance premiums, meet the immediate cost of health care and will improve access to health insurance for persons who have no employer.
5.
Sales Tax on Services Provided by Temporary Help Companies
Sections 1632n and 9441 (7w)
These sections exempt taxable services provided by temporary help companies [as defined in s.
108.02 (24m)] from the state sales and use tax, as long as the client controls the means of performing the services and is responsible for the satisfactory completion of the services.
I am vetoing this provision because it does not take effect until July 1, 2007, and, thus, does not need to be decided in the context of this budget.
6.
Individual and Corporate Income and Franchise and Insurance Premiums Tax Credit for HIRSP Assessments
Sections 1311i, 1312r, 1319m, 1354m, 1385h, 1385p, 1386m, 1406m, 1428k, 1428p, 1474q, 1474s and 1686f
These provisions create a nonrefundable credit under the insurance premiums tax, the corporate and individual income and franchise taxes, and the tax on investment income paid by life insurance companies. The credit is equal to a percentage of the amount of assessments paid by the insurer during the taxable year under the Health Insurance Risk-Sharing Plan (HIRSP). The Department of Revenue and the Office of the Commissioner of Insurance must set the credit percentage for each year so that the annual cost of the credit is as close as practicable to $2,000,000 in fiscal year 2006-07 and $5,000,000 in each fiscal year thereafter. Unused credits may be carried over for up to fifteen years.
I am vetoing this provision because it is an unaffordable benefit to HIRSP insurers. Revenue associated with this credit is more effectively used to adequately fund public schools and deliver property tax relief.
7.
Withholding from Nonresident Members of Pass-Through Entities – Technical Veto
Section 1431
This section establishes rules that require corporations, trusts, limited liability companies, etc., that are treated as pass-through entities for federal tax purposes and that have Wisconsin income allocable to nonresident partners, members or shareholders to pay withholding taxes. However, the language does not provide a method for computing withholding from the income attributable to individuals and corporations.
I am partially vetoing this section to conform the language to the original legislative intent of the provision. If the veto is not made, the state will not collect some portion of the $7,500,000 in fiscal year 2005-06 and $5,000,000 in fiscal year 2006-07 that was included in my budget proposal and approved by the Legislature.
8.
Definition of Taxable Sales – Technical Veto
Section 1518m
This provision was among a series of changes I recommended to conform to the Streamlined Sales and Use Tax Agreement. 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.
REVENUE
9.
Lottery Vending Machine Placements
Section 2423v
This section requires the Department of Revenue to place lottery ticket vending machines in certain airport terminals and Milwaukee Amtrak stations, subject to approval by each location's administration and the availability of qualified lottery retailers at each location.
I am vetoing this section because it is unnecessary. The department is already in discussions to place lottery machines at a number of airports around the state.
SHARED REVENUE AND TAX RELIEF
10.
School Levy Tax Credit
Section 1717
This section defines the annual appropriation for the school levy tax credit for 2005, 2006, 2007 and beyond.
I am partially vetoing this section to set a higher appropriation for the school levy tax credit beginning with property tax bills mailed December 2006. My partial veto has the effect of setting the appropriation amount at $593,050,000 beginning in 2007 and continuing thereafter.
While I cannot restore all of the funding that I originally proposed, this partial veto does help property taxpayers by providing an additional $73,745,000 in school levy tax credits beginning with tax bills mailed in December 2006. Since this partial veto affects payments made in July 2007, there is no increase to the appropriations for the 2005-07 biennium.
A419
11.
Levy Limit for Counties and Municipalities
Sections 1251c, 1254m, 1257, 1258, 1258m, 1259, 1260b, 1260c and 9435 (4) [as it relates to charter sport fishing boats]
These sections set limits on the percentage by which counties' and municipalities' property tax levies can increase in a given year. With certain exceptions and adjustments, the levy limit is equal to the percentage increase in a political subdivision's equalized value that is due to net new construction. Exceptions and adjustments are made for tax increments, debt service, service transfers, annexations, children with disability education boards, first-class city school levies, referendum-approved spending increases and town meeting-approved spending increases. These sections also set forth a penalty for exceeding the levy limit, and sunset it after three years.
I am partially vetoing these sections to make it more responsible and fair to all communities while still holding down property tax increases. My partial vetoes affect the provision in a number of ways.
First, the minimum levy limit for all communities will be set at two percent per year. Thus even lower-growth communities will have the option of raising their levy by a modest two percent per year, which will allow them to at least partially keep up with inflation. Higher-growth communities will still have the ability to raise revenues up to the limit dictated by their growth due to new construction. The Legislature's proposal would have severely harmed lower- or negative-growth communities in Wisconsin. This partial veto corrects that inequity.
Second, my veto eliminates the requirement that new debt be authorized by a referendum in order for debt service on that new debt to be excluded from the levy limit calculation. Instead, new debt simply needs to be "authorized" and backed by the full faith and credit of the political subdivision. Exempting new debt service allows communities to make investments and undertake capital projects that are essential for economic growth. Additionally, without the exemption, bond houses would be reluctant to underwrite bond issuances by municipalities and counties, which would hurt, for example, the city of Milwaukee's issuance of operating notes.
Third, the levy limits under my veto would sunset January 1, 2007, after the 2005 and 2006 property tax bills have been mailed. I object to a three year duration for the limits because I do not believe we should set levy limits beyond the current biennium for which we are budgeting. We cannot know beyond the two year budget timeframe what the state's commitments to shared revenue and school aids will be and cannot ask local governments and schools to freeze their taxes without the guarantee that they will receive the state aid they need to maintain their services.
To partially veto the provision to a two year sunset, I had to strike sections dealing with comprehensive planning provisions, birth certificate issuance fees, charter sport fishing boats and shared revenue utility aid payments. The shared revenue utility aid payment revision and the repeal of the comprehensive planning provisions are already struck in separate vetoes. The birth certificate issuance fees and charter sport fishing boats revisions should be reconsidered under separate legislation.
