9. Payment of Fiscal Year 2004-05 MHEC Membership Dues
10. Required Reports on Information Technology
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11. Pension Obligation Lapses and Transfers
Building Commission
12. General Fund Supported Borrowing Target
EMPLOYEE TRUST FUNDS
13. Required Nonrepresented State Employee Retirement Contributions
Regulation and Licensing
14. Transfer of Alcohol and Other Drug Abuse Counselor Certification
VETERANS AFFAIRS
15. Operational Efficiency Consultant
F. TAX
General Fund Taxes
1. Individual Income Tax Exclusion for Social Security Benefits
2. Private School and Homeschool Tax Credit
3. Adoption Expenses Credit
4. Health Savings Accounts
5. Sales Tax on Services Provided by Temporary Help Companies
6. Individual and Corporate Income and Franchise and Insurance Premiums Tax Credit for HIRSP Assessments
7. Withholding from Nonresident Members of Pass-Through Entities – Technical Veto
8. Definition of Taxable Sales – Technical Veto
REVENUE
9. Lottery Vending Machine Placements
SHARED REVENUE AND TAX RELIEF
10. School Levy Tax Credit
11. Levy Limit for Counties and Municipalities
12. Shared Revenue Utility Aid – Distribution Formula
__________________
VETO ITEMS
A.
EDUCATION AND WORKFORCE DEVELOPMENT
ARTS BOARD
1.
Required Lapse to the General Fund
Section 9204
This section requires the Wisconsin Arts Board to lapse five percent of the total amount appropriated under each of the board's general purpose revenue appropriations to the general fund in fiscal years 2005-06 and 2006-07.
I am vetoing this section in its entirety to preserve state funding for the arts. State support for the arts in Wisconsin, on a per capita basis, is only one-third of the national average, ranking Wisconsin near the bottom nationally in state support for arts programs. Given the continuing importance of cultural programs to Wisconsin's economic development and quality of life, the insignificant savings that would result from this lapse is not worth putting the arts in Wisconsin at an even greater risk.
HIGHER EDUCATIONAL AIDS BOARD
2.
Wisconsin Higher Education Grants; University of Wisconsin System Students
Section 166d
This section caps the sum sufficient appropriation for the Wisconsin Higher Education Grants for University of Wisconsin System students at $37,057,200 in fiscal year 2005-06 and $39,280,600 in fiscal year 2006-07.
I am partially vetoing this section to increase the cap to $45,057,200 in fiscal year 2005-06. I object to the Legislature's failure to keep the doors of higher education open to all Wisconsin students, regardless of their family income. The Legislature would have provided $76.3 million over the 2005-07 biennium for Wisconsin Higher Education Grants, an $11.1 million reduction from my original budget proposal. If signed into law, this reduction would make it increasingly difficult for low-income students to pay for a University of Wisconsin education. Furthermore, the Legislature rejected my proposal to increase the statutory maximum for grant awards from $2,500 to $3,000, making it impossible for the board to hold the neediest students harmless from University of Wisconsin tuition increases for the full 2005-07 biennium. As a result of the Legislature's refusal to increase the maximum grant award, the board must now send letters rescinding 2005-06 financial aid awards above $2,500 to those University of Wisconsin students with the greatest financial need.
This veto, while not able to restore my proposal to increase the maximum grant amount, more closely reflects my original proposal to protect lower income students from University of Wisconsin tuition increases over the next two academic years.
My original budget called for $87.4 million to be appropriated for Wisconsin Higher Education Grants for University of Wisconsin System students over the biennium. While the Legislature decreased the amount to $76 million, my veto will increase the amount for grants to $84.3 million, $8 million above the amount provided by the Legislature. Maintaining adequate financial aid is a critical component to keep higher education accessible and affordable and is also central to Wisconsin's long-term economic development goal of increasing the number of citizens with a college education. My veto will help to expand postsecondary opportunities for all qualified students and reverse the Legislature's decision to make the University of Wisconsin less affordable for students from low- and moderate-income backgrounds.
3.
School District Revenue Limits
Sections 1915, 1915d, 1915e, 1915f, 1915g, 1915h, 1919 and 1919d
These sections reduce the allowable increase in school district revenue per pupil under the school district revenue limits to $120 for the 2005-06 school year and to $100 for the 2006-07 school year and every year thereafter. Under current law, the allowable increase in school district revenue per pupil under the revenue limits would be $248 in 2005-06 and an estimated $252 in 2006-07.
As I did in the 2003-05 biennial budget, I am vetoing these sections because they significantly reduce the resources available to invest in our children and make it extremely difficult for our locally elected school boards to provide all pupils with a quality education. Since 1993, the state has subjected school districts to the most stringent revenue controls imposed on any unit of local government in order to slow the growth of property taxes. While I believe that it is fiscally prudent to keep current law revenue limits in place, the provisions passed by the Legislature would reduce school spending to levels below inflation and would force districts to make deep cuts in the classroom.
Defenders of reducing revenue limit authority like to point out that school aids and tax credits will still increase by $458 million over the biennium, even after the $480 million cut to my original, fiscally responsible school aid and school levy tax credit proposal. They believe that, with an increase of this magnitude, schools should have little to complain about.
What proponents fail to explain is that general school aid, while critical for property tax relief, has little to do with what school districts can actually spend. Revenue limits do, and these provisions would forever cap per pupil revenue increases at $100 per year, regardless of how much school aid the Governor and Legislature provide. A $100 increase is only slightly over half of the $190 limit that existed in 1993, when limits were first implemented. Based on inflation estimates from the Congressional Budget Office, school districts would be forced to reduce their spending per pupil by over ten percent in the next decade alone, or almost $1,000 per pupil as measured in current dollar terms, if this provision is not vetoed.
As recent events in northeastern Wisconsin demonstrate, school districts already struggle under existing revenue limits to provide our children the quality education they deserve, and to keep pace with increasing staff and materials costs. These challenges have occurred during the same period that has seen Wisconsin's average teacher salaries decline from 14th nationally in 1990 and nearly $1,300 above the national average to 27th in 2003 and more than $4,000 below the U.S. average. In addition, it is noteworthy that, while the Legislature reduced the per pupil revenue limit increase for public schools to $120 in 2005-06 and to $100 in 2006-07 and thereafter, it authorized increases of $196 in 2005-06 and $123 in 2006-07 for pupils attending the Milwaukee choice and charter schools. The Legislature's priorities are clear, and they do not include our public schools.
Restoring current law revenue limits will not result in excessive spending. Revenue increases for the average school district will still be less than three percent annually. However, denying school boards access to these modest increases will seriously impair their ability to ensure that every child in Wisconsin receives a high-quality education. These cuts will also jeopardize the state's ability to maintain a highly-skilled work force and will diminish Wisconsin's reputation as a desirable place to live and raise a family.
Current law revenue limits will not increase property taxes for the average homeowner because I am also using my partial veto authority to restore more than $400 million in school aids and credits that the Legislature cut from my budget (see Public Instruction, Item #4 and Tax Section, Shared Revenue and Tax Relief, Item #10). Restoring these funds to an amount similar to what I originally proposed makes it possible for school districts to maintain reasonable expenditure levels without property tax increases and will return state support for schools to over 66 percent of costs.
4.
Increasing Funding for School Aids and Property Tax Relief
Sections 9155 (2), 9155 (3), 9155 (4) (title), 9155 (4) (a) and 9155 (4) (b)
These nonstatutory provisions authorize the Department of Administration secretary to lapse and transfer certain monies to the general fund.
I am partially vetoing these provisions to authorize the Department of Administration secretary to transfer $330 million from the general fund to the general equalization aids appropriation in the Department of Public Instruction. This veto, combined with my veto to provide additional funds to the school levy tax credit (see Tax Section, Shared Revenue and Tax Relief, Item #10), will largely restore the responsible property tax relief initiative that the Legislature unwisely deleted from my original 2005-07 biennial budget proposal. As noted in my veto message restoring current law revenue limits for school districts (see Public Instruction, Item #3), it is critical that Wisconsin's public schools have the resources needed to ensure that all our children will continue to be able to receive a quality education regardless of their circumstances.
I object strongly to what the Legislature has done to schools in this budget. The Legislature's budget would reduce future annual school revenue increases to about half the amount authorized for the 1993-94 school year, when limits were first implemented. Some school district administrators believe that, at these levels, their allowable increases may not even cover anticipated growth in fuel and maintenance costs, even if teacher compensation were frozen. At a time when Wisconsin's and the nation's economy is under siege from global competition, it is foolhardy to think that providing a quality education is a luxury we can no longer afford. Our children must have more opportunities to learn, not fewer. A strong public education system is what made Wisconsin a great place to live, and it is what will make Wisconsin a great place to live and do business in the 21st century.
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Unfortunately, the Legislature gave Wisconsin taxpayers the unacceptable choice of either cutting schools or emptying their pocketbooks. My original budget proposal provided the only reasonable option, which was to protect both taxpayers and schools. With this veto, I will restore that balance. It is no secret that Wisconsin property taxes are too high and that we must continue to find ways to reduce this burden. By cutting spending in other parts of the budget and reallocating the savings to real property tax relief, my veto provides $330 million to help us reach that goal.
As a result, unlike the Legislature's reckless proposal, we will not achieve this goal by sacrificing high-quality public schools. These funds will be used to offset the property tax impact of restoring school district revenue limit authority to the level needed to maintain quality schools. To ensure that the entire $330 million is used for property tax relief, I am requesting the Department of Administration secretary to transfer $155 million in fiscal year 2005-06 and $175 million in fiscal year 2006-07 to the Department of Public Instruction's general equalization aids appropriation, where it will be paid out directly to school districts. In combination with my veto that partially restores my proposed increase to the school levy credit, we can restore current law revenue limit authority to public schools, preserve educational quality and freeze property taxes for the average Wisconsin homeowner.
5.
Milwaukee Parental Choice Program Eligibility
Sections 1895h, 1895p and 9337 (6m)
These sections make changes to pupil eligibility criteria for participation in the Milwaukee Parental Choice Program. Section 1895h allows pupils to remain eligible to participate in the program until family income exceeds 220 percent of the federal poverty level. Under current law, pupils may no longer participate if family income exceeds 175 percent of the federal poverty level. Section 1895p repeals the requirement that pupils entering the choice program must have either been enrolled in a choice school, been enrolled in a Milwaukee public school, been enrolled in grades kindergarten through three in a Milwaukee private school or not been enrolled in school in the previous year.
I am vetoing these provisions because they need to be part of a comprehensive proposal that addresses the needs of both choice program and Milwaukee Public Schools students. As included in this bill, these provisions will do little more than increase the number of pupils who will be denied access to the choice program because the number of eligible applicants will likely exceed the statutory enrollment cap sometime in this coming academic year. In addition, recent reports about the quality of some choice schools, including the lack of classroom materials and teachers and administrators lacking suitable training or experience, raise serious questions that need to be addressed before the program is expanded. While the No Child Left Behind Act requires the annual testing of all public school students (in grades three through eight and one high school grade), the Milwaukee Parental Choice Program still does not require testing in any grades despite the expenditure of more than $87 million in state tax dollars. Most of the choice schools offer a good quality education, but expanding the program without proper safeguards will allow the establishment of more schools that do not deliver the education that Milwaukee's children deserve.
I believe the modifications included in these sections have considerable merit, but should be part of a more comprehensive package that raises the choice cap, improves educational and operational accountability in the choice program, and benefits all students in Milwaukee, not just those in the choice program. I look forward to working with legislators and interested parties to resolve this issue in the fall session.
6.
Milwaukee Charter School Pupil Eligibility
Sections 1883f, 1883r and 9337 (7m) (b)
These sections modify the pupil eligibility criteria for participation in the Milwaukee charter school program. Under this provision, pupils residing outside the Milwaukee Public Schools district boundaries would be permitted to attend a Milwaukee charter school.
I am vetoing this provision because I object to the expansion of the Milwaukee Charter Schools original intent to serve as an educational option for families residing within Milwaukee Public Schools' boundaries. The Milwaukee Charter Schools Program should continue to focus on providing alternative educational opportunities for city of Milwaukee children. While the provision requires these charter schools to give preference in admissions to pupils who reside in Milwaukee, over time it is likely that nonresident pupils will diminish the ability of children in the city of Milwaukee to attend these schools.
7.
Milwaukee and Racine Charter School Program Funding
Sections 1897g, 1897i, 1898b [as it relates to a charter school operating under s.
118.40 (2r)], 1898e, 1898m, 1898s, 1899m, 1912m, 9137 (4p) and 9337 (9m)
This provision modifies the current funding mechanism for the independent charter schools operating in the Milwaukee and Racine school districts. Under current law, these independent charter schools are funded as a first draw on the general equalization aids appropriation. Under the modified formula created by this provision, the pupils attending independent charter schools would be counted as pupils in the Milwaukee and Racine school districts, respectively, and be funded under the current equalization aid formula in the same manner as pupils attending regular public schools.
I am vetoing this provision because I object to the immediate distributional impact that this change will have on school districts and the potential longer term impact it will have on Milwaukee and Racine. Under the current equalization aid formula, the fiscal impact of independent charter schools is distributed across all school districts that receive equalization aids, including the most affluent districts, which only receive aid under the "first tier" of the formula. The modified formula would exempt these affluent districts from any charter school cost impact, while distributing the costs across the remaining school districts. About 120 Wisconsin school districts would lose approximately $5.4 million in aid, with school districts in Madison, Middleton, Waukesha and Wauwatosa among the most negatively affected.
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Second, while analysis indicates that the change appears revenue neutral for the Milwaukee and Racine school districts in the short-term, it is unclear what the long-term impact on those districts revenues would be, especially if charter school enrollments continue to increase. Without clear data on the long-term impact of this formula change on Milwaukee and Racine, I do not believe modifying the formula justifies the risk.
Lastly, the Legislature's primary intent in making this change appears to have been to create the appearance that the cost of these independent charter schools will be paid entirely by the Milwaukee and Racine school districts. The fact that the aid that pays for these charter schools will no longer be explicitly itemized in the aid notifications sent to school districts does not mean that other districts are not affected, it only means that the effect will not be apparent. Allowing the Milwaukee and Racine school districts to count pupils attending independent charter schools will increase the equalization aid allocations to Milwaukee and Racine, thereby reducing the aid allocations to all but the most affluent districts. Paying for these charter schools by running the program through the formula may redistribute and hide the impact, but it will not eliminate it.
I support the independent charter school program. These schools are chartered by the city of Milwaukee and University of Wisconsin System campuses, which are both accountable to the public. These schools also participate in the state's student testing program. Vetoing this funding change is not a criticism of the program, but simply reflects my concern that the benefit of not reporting the impact of independent charter schools on the distribution of equalization aid does not outweigh the potential financial risk to the Milwaukee and Racine school districts.
8.
Student Achievement Guarantee in Education (SAGE) Program
Sections 1888m, 1888r, 1888s, 1891t and 1893m
Sections 1888m, 1888r, 1888s and 1891t permit school districts that currently participate in the SAGE program to opt out of grades two, three or both. Section 1893m would expand the eligible uses of SAGE funding in the Milwaukee Public Schools district to include meeting the criteria for the prekindergarten through grade five (P-5) program. The P-5 program allows up to 25 students per teacher in grades prekindergarten through five, while the SAGE program requires a class size of no greater than 15 students in grades kindergarten through three.
I am vetoing sections 1888m, 1888r, 1888s and 1893m, and partially vetoing section 1891t, because they are contrary to the intent and spirit of the SAGE program. Research has shown that smaller class sizes in the early years of a child's education increases academic performance; the benefits are even greater for students from low-income families. Further, research indicates that the class reductions must occur over several grades in order for those gains to be sustained in later years. For example, studies of the Tennessee Student Teacher Achievement Ratio (STAR) program, which reduces class sizes to 13-17 pupils in grades kindergarten through three, have shown that pupils in small classes for at least three years had significant sustained benefits through grade eight, while those in small classes for fewer than three years showed mixed long-term effects. That finding was replicated in separate studies conducted by researchers at Eastern Michigan University and the U.S. Department of Education. The positive results of sustained, small class size include reduced achievement gaps, greater student engagement, more time spent on active teaching, less time spent on classroom management and behavior problems, and lower rates of grade retention.
The positive impact of the SAGE program in Wisconsin is reflected in the most recent third grade reading achievement scores. In 1998, there was a 21-point difference between SAGE and non-SAGE schools in the percentage of students scoring proficient and advanced in reading achievement. The gap closed to just 8 points by 2005. This is solid evidence that Wisconsin's SAGE program is working for our children.
Allowing the Legislature's provisions to be implemented would reduce access to smaller class sizes for children throughout the state and diminish the benefit of the SAGE program. We should be working to expand, rather than eliminate, smaller class sizes for our children. My budget proposal included a $44 million increase in SAGE funding, which was reduced to just $6 million by the Legislature, and an increase in the per pupil reimbursement rate, from the current $2,000 to $2,500 per child by 2006-07. What is needed to support SAGE schools and encourage new ones is greater funding and the first reimbursement rate increase since the program was started in 1996, not flexibility that will destroy the positive impact of smaller class sizes. As Governor, I will continue to make funding increases for the SAGE program a priority.
9.
Mentoring Grants for Initial Educators
Sections 140 [as it relates to s.
20.255 (2) (kg)], 173m, 187m, 1854g, 1854m and 9337 (6f)
These provisions require the Department of Public Instruction to increase fees for teacher and administrator licenses from $100 to $150 as of July 1, 2006, and direct the department to use the revenue generated from the fee increase to distribute grants to school districts that provide mentors for new educators. The budget I submitted included GPR funding in each year to help pay for teacher mentors.
I fully support the mentoring grant program, but I object to raising teacher license fees for this purpose. This fee increase would be a tax on teachers who have already sacrificed salary increases under the provisions of the qualified economic offer. The 50 percent increase in teacher license fees would make Wisconsin's one of the highest in the country. Furthermore, the major benefits of a teacher mentoring program are to increase the quality of classroom instruction, support beginning teachers in their first years on the job, and reduce hiring and recruitment costs for school districts by improving teacher retention. These are costs that should be broadly distributed.
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I am partially vetoing sections 140 [as it relates to s.
20.255 (2) (kg)], 173m and 187m and vetoing sections 1854g, 1854m and 9337 (6f) to eliminate the teacher license fee increase and the requirement that the department use licensing fee revenue for the mentoring grant program. My partial veto of section 140 [as it relates to s.
20.255 (2) (kg)] will also delete the reference to program revenue-service as the fund source of the appropriation created for the grant program. Under s.
20.005 (3), all appropriations are made from the general fund unless otherwise indicated. Therefore, this partial veto will preserve the mentoring grant program and restore GPR as the fund source, beginning in fiscal year 2006-07. Under s.
20.003 (2), the Revisor of Statutes has the authority to renumber the appropriation for mentoring grants to make it consistent with the numbering system under s.
20.003 (3).
10.
Federal Administrative Funding
Sections 1856f and 9437 (3v)
These sections require the Department of Public Instruction to obtain approval from the Joint Committee on Finance, through a 14-day passive review process, for plans to use federal funding to support the department's general program operations.
