Chief Clerk Reports
The Chief Clerk records:
Assembly Bill 399
Presented to the Governor on Monday, July 25.
Patrick E. Fuller
Assembly Chief Clerk
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Communications
State of Wisconsin
Office of the Secretary of State
Madison
To Whom It May Concern:
Acts, Joint Resolutions and Resolutions deposited in this office have been numbered and published as follows:
Bill Number Act Number Publication Date
Assembly Bill 21022July 22, 2005
Assembly Bill 43724August 4, 2005
Sincerely,
Douglas La Follette
Secretary of State
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Executive Communications
State of Wisconsin
Office of the Governor
Madison
July 25, 2005
To the Honorable Members of the Assembly:
The following bill, originating in the Assembly, has been approved, signed and deposited in the office of the Secretary of State:
Bill Number Act Number Date Approved
AB 100 (in part)25July 25, 2005
Respectfully submitted,
James Doyle
Governor
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Governor's Veto Message
State of Wisconsin
Office of the Governor
Madison
July 25, 2005
To the Honorable Members of the Assembly:
I have approved Assembly Bill 100 as
2005 Wisconsin Act 25 and deposited it in the Office of the Secretary of State.
Over five months ago, I introduced a budget that addressed a $1.6 billion deficit by focusing on two simple goals – protecting Wisconsin's taxpayers and investing in Wisconsin's priorities. My budget froze property taxes for the next two years, but in a way that was responsible and did not sacrifice the quality of our schools and vital local services. As with my previous budget, we solved this deficit without raising any taxes – income, sales, corporate or excise. Instead, we set priorities and funded them by using savings gained by making state government more efficient and additional revenue generated from economic growth.
After five months of debate – too often in the wee hours of the morning and out of sight of public scrutiny – the Legislature returned a budget to me. It froze property taxes, but did so at the expense of our schools. At a time of record gas and utility price increases, they told schools they would have to live with only a one percent increase. The state's association of school boards and other experts suggest the Legislature's actions would be devastating to our schools: over 4,000 teachers losing their jobs, larger class sizes, and cuts to programs ranging from reading to math to arts, music, and athletics.
My first impulse was to send the budget back to the Legislature and make it start over again. But the Wisconsin Constitution entrusts the Governor with broad powers to improve on the Legislature's work and set different priorities, as long as the budget remains balanced. While some may criticize me for being too bold, I undertook to reshape this budget to one that protected both property taxpayers and our children.
The end result is a budget that much more closely resembles the one I submitted in February than the one passed in the dead of night by the Legislature. It freezes property taxes for two years and protects our schools.
I have said repeatedly that taxes are too high in Wisconsin. That is why, when I sought this office, I promised to solve the state's fiscal problems without raising taxes. Perhaps no single tax is as onerous as the property tax, especially for our seniors who want to stay in their homes and middle-class families trying to make ends meet. Additionally, rising property taxes have created an unhealthy tension between property taxpayers and our schools.
In my first budget, I made holding down property taxes a top priority. Despite a $3.2 billion deficit, I restored shared revenue, fully funded nearly $1 billion in property tax credits and increased funding for our schools. But I would not go as far as signing a property tax freeze, which would have cut spending for schools by over $400 million.
During the past two years, we have worked hard so that we can now deliver the property tax relief our citizens deserve without sacrificing the quality of our schools and vital local services. By cutting spending elsewhere in state government, and by promoting economic growth to raise revenue, we now are in a position for a responsible freeze.
The freeze I am signing today means that the average homeowner's property tax bill will be frozen this December and be reduced by an average of $5 next year. That's compared to an average property tax increase of $119 a year over the past five years.
While the end result is the same to the average taxpayer, the freeze I am signing today differs from the one presented to me by the Legislature in several key respects:
First, the Legislature's budget froze property taxes by cutting the amount schools can spend by a total of $350 million over two years. My freeze maintains the current revenue cap limits that have been in place for over a decade, under both Republican and Democratic governors. In short, my property tax freeze is responsible, while the Legislature's freeze is really a freeze on our kids' education that would force devastating cuts to our schools.
Second, the Legislature's freeze allowed localities to increase their spending only if they were experiencing growth. My freeze enables all communities to deal with the impact of inflation on providing services by allowing a minimum increase of two percent, or the rate of growth, whichever is higher.
Third, the Legislature's freeze also included technical colleges, even though they already have mill rate limits and constitute only a small portion of the overall levy. My freeze maintains the current law mill rate limits on technical colleges so they will not have to raise their tuitions or cut their vital role in worker training and economic development.
Fourth, the Legislature's freeze lasted for three years even though the state budget extends for only two. My freeze is for two years because it only works if the state keeps its commitment to funding schools and shared revenue. As I said in my budget address, the state shouldn't put a freeze on communities longer than we can guarantee our funding commitment to them.
Fundamental to a sound school system and real property tax relief is the level of state financial support for schools. The bill I am signing today returns the state to the goal of funding two-thirds of local school costs. The increase in state school aid necessary to reach two-thirds will be funded by increasing the general fund balance by almost $360 million through my vetoes of excessive state spending, unnecessary financing strategies, ill-conceived tax giveaways and pork barrel projects. Over 95 percent of this increase will be allocated under the bill to deliver real property tax relief. The remainder will help eligible University of Wisconsin students pay tuition, restore planning grants to communities and reinstate funding for quality child care.
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I also used my veto pen to increase direct property tax relief by over $73 million through the school levy tax credit. Taken together, the budget I am signing today will increase state funding for schools and property tax relief by over $400 million compared with the Legislature's budget. Schools will receive a modest 3 percent cost-of-living increase, just as they have received annually for many years under Democratic and Republican administrations alike. The additional funding I am providing through my vetoes will enable the state – rather than local taxpayers – to shoulder the burden of paying for the increased costs of education over the next two years so that property taxes can be frozen.
When we think of property taxpayers, we think of the elderly couple or the young family. But many Wisconsin businesses pay property taxes as well. In fact over the next two years, the property tax freeze will save Wisconsin businesses over $270 million compared to estimated levy increases without a freeze. This tax cut will give businesses the resources they need to expand their operations and create new jobs to grow Wisconsin's economy.
Balancing two budgets without raising taxes and enacting a property tax freeze are just the beginning of reducing the tax burden on Wisconsin citizens. The budget I am signing includes $325 million in tax cuts over the next four years. It cuts a penny off the gas tax. It allows parents to deduct the cost of college tuition up to the cost of the average University of Wisconsin tuition. Working people who are not provided health insurance benefits at their jobs will be able to deduct the full costs of their health insurance. Unemployed persons will also be aided in maintaining their health coverage by allowing them to deduct the costs of their policies. Those serving our country will be able to deduct their military income, and those disabled veterans and widows of those killed in action will get credits for their property taxes. I have also used my veto pen to accelerate by one year (to 2008) the implementation of a full exclusion of social security benefits from taxation for Wisconsin seniors. Supporting education, health care, veterans and our seniors – the tax cuts I am signing today invest in our priorities and help to foster a Wisconsin that is optimistic about its future. These tax cuts, along with holding the line on state taxes and freezing property taxes, are a major step in reducing the tax burden on Wisconsin citizens.
We would not be in the position to invest in our schools, freeze property taxes and afford tax cuts if it were not for aggressive actions in reducing government spending in the rest of state government and for economic growth. This budget, along with the previous one, achieves
major reductions in the government spending so we can invest in priorities. Some of these reductions include:
• Cuts $272 million from agency operating budgets and reduces the state government work force by 1,900 positions. Over four years, my administration will have reduced the state work force by a total of 3,900 positions through elimination of agencies and programs, streamlining of state government and increased efficiency of agency operations.
• Implements my Accountability, Consolidation and Efficiency (ACE) Initiative, with savings of $35.5 million in the 2005-07 biennium and almost $150 million over the next four years. Savings will be realized through bulk purchasing of commodities, better commodity contract negotiation strategies, consolidating computer network servers and streamlining of human resources management.
• Includes $36 million in savings associated the sale of low-priority state buildings and related assets due to improved use of state-owned office space.
• Continues innovative approaches that control state employee health insurance costs by leveraging the state's purchasing power. These approaches have already saved millions of dollars by holding this year's health insurance cost increases to 4.9 percent (less than half of the national average increase of over 11 percent), by reducing prescription drug costs by $25 million through use of a pharmacy-benefits manager, and through a $14 million savings from initial health care provider organization bids.
• Reduces excessive spending and pursues more reasonable financing strategies to save nearly $160 million in transportation spending during the 2005-07 biennium. My vetoes maintain the robust highway spending increase of 16 percent included in my original budget.
• Eliminates over $7 million of legislative earmarks and pork barrel projects.
• Accomplishes state Medicaid cost savings of over $130 million, including $40 million proposed by the Governor and adopted by the Legislature and approximately $90 million saved through vetoes. Savings will be realized through further prescription drug cost containment measures, improvements in quality control and fraud prevention, expansion of managed care, increases in federal support, and vetoes of targeted rate increases for certain providers due to insufficient GPR funding. State Medicaid program costs are also benefiting from a renegotiated fiscal agent contract that will save $93 million over the five year contract period.
• Achieves savings by reducing the number of state automobiles by 1,000.
Added to these reductions in spending are increases in state revenue resulting from an improved economy. From fiscal year 2004-05 through fiscal year 2006-07, the nonpartisan Legislative Fiscal Bureau projects the average growth in state tax revenues will be 5.2 percent a year. This rate of growth is almost two and one-half times the 2.2 percent increase experienced in the prior three fiscal years (fiscal year 2001-02 through fiscal year 2003-04). Revenue growth for the base year and the two years of the 2005-07 biennium exceeds the estimated five percent average increase in net GPR spending over the biennium.
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The budget I am signing today contains 139 vetoes. In total, when the cuts in other programs are balanced against the added support for public schools, my vetoes will reduce appropriations from all funding sources by $115 million compared to the Legislature's budget. Many of these vetoes were needed to reduce state spending while adequately funding schools so that we can freeze property taxes. A number of these vetoes are technical in nature and were required to make provisions workable. Many of the vetoes curb attempts by the Legislature to micromanage the day-to-day operations of state agencies by eliminating burdensome new reporting requirements. The Legislature has a legitimate interest in knowing how state programs are working, but at a time when we are trying to streamline state government and make it work efficiently and cost effectively, it is counterproductive to impose unnecessary new reporting requirements.
While I have serious concerns about many aspects of the budget passed by the Legislature, in many other areas we were able to work together. All too often in Madison, the ten percent of issues where we disagree get far more attention than the 90 percent of issues where we agree. From protecting critical health care programs – to supporting Wisconsin's veterans – to reforming corrections policies – to cutting the size and cost of government – to funding special education and school transportation – to cutting taxes, my administration worked with Republicans and Democrats in the Legislature and got important things done in this budget. In other states, budget debates broke down into partisan paralysis and government shutdowns, but Wisconsin passed its budget on time. I want to thank Republicans and Democrats in the Legislature who worked with my administration over the past several months to forge consensus on many important issues. While what we achieved in the areas we agreed on will probably not get the same level of attention as the areas where we disagreed, the progress we made on a bipartisan basis is significant and will have real benefits to the people of Wisconsin.
Despite our many areas of agreement, there are several key problems in the budget that my vetoes address and which are highlighted below.
My budget increased the state's investment in the University of Wisconsin System and financial aid by nearly $100 million. For the first time in a decade, the proposed increase in funding for the University of Wisconsin System and financial aid exceeded that for the Department of Corrections. The proposed increase in financial aid, when added to the progress we made in the last budget, would have resulted in more than doubling financial aid over four years. My budget made significant cuts to University administration by eliminating 200 positions, but used those savings to invest in adding 120 new faculty members to improve the quality of instruction provided to our students. Unfortunately, the Legislature, responding to sensational news stories rather than the needs of students and parents, cut $86 million from my modest proposals for the University of Wisconsin System budget and financial aid. While I share their concerns about disturbing examples of administrative excess, we should still invest in financial aid, teaching and research.
Access to higher education is critical for Wisconsin's economic growth and diversification. The Legislature reduced my proposed increase for University of Wisconsin System student financial aid by $11 million and ignored the need to increase the maximum grant from $2,500 to $3,000 a year. Thousands of students who had already been notified of their financial aid for this fall would have had their aid slashed when the Legislature changed the law in order to reduce their benefits. By using the current law funding mechanism for the Wisconsin Higher Education Grant program, my vetoes increase student financial aid by 22 percent compared with the Legislature's budget. While I cannot increase the maximum grant through a veto, the overall funding increase will help nearly 26,000 students pay for a quality education. Combined with the last budget, the financial aid increase provided through my vetoes will fulfill my promise to more than double the state's commitment to financial aid for University of Wisconsin System students in my first term as Governor – from $41.6 million in the 2001-03 fiscal biennium to $84.3 million in the 2005-07 fiscal biennium.
I do want to acknowledge that the Legislature did include in their budget my proposal to make college tuition tax deductible up to the cost of an average University of Wisconsin System tuition. This is an important step, along with the increases in financial aid, in making college education more affordable for middle-class families.
Educational achievement in later school years is highly correlated with receiving quality child care. My budget had sought to refocus the state's current $300 million investment in child care subsidies for low-income families on higher-quality child care centers and providers through additional funding for child care staff training and implementation of a provider reimbursement system based on measures of quality. It simply makes no sense that the state pays the best child care center the same as the worst one.
In response, the Legislature ignored my quality improvement initiatives and cut $16 million in funding for current programs that help improve the quality of child care providers. The Legislature combined these cuts with a 15 percent increase in the amount that low-income families pay out-of-pocket for child care. For a family earning less than $30,000 a year, the extra cost of child care would be nearly $500 a year.
The budget I am signing today includes partial vetoes to restore $8 million in funding for the TEACH and REWARDS programs that help to improve the quality of child care professionals, removes the 15 percent added fee increase and makes other investments to help ensure our kids get the best start in life. Unfortunately, my veto pen cannot restore my proposal for the innovative Quality Care for Quality Kids quality reimbursement and rating system. I am also unable to restore the funding for the Early Childhood Excellence Centers, another key program for improving the quality of child care in Wisconsin. I will continue to pursue these initiatives and hope the Legislature will revisit the merits of the proposals outside the context of the budget debate.
Wisconsin's quality of life and tourism economy are closely tied to our beautiful and plentiful natural areas, lakes and rivers. Preserving Wisconsin's natural beauty has been championed by many Wisconsin Governors, most notably Gaylord Nelson and Warren Knowles. Their namesake, the bipartisan Warren Knowles-Gaylord Nelson Stewardship 2000 Program, helps local communities develop parks and leverages millions of dollars of private resources for land preservation. Protecting the Stewardship 2000 Program should be a top priority for all who believe, as I do, that Wisconsin's future is directly tied to preserving its wild and scenic areas.
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The Legislature, as they did in the 2003-05 budget, continued its assault on the Stewardship 2000 Program, adopting two proposals aimed at weakening the program. One proposal would drain the funding for the program by requiring it to purchase nearly 80,000 acres of land the state
already owns – land that is already protected. One part of state government would buy land from another part of state government, but not one additional acre of land would be protected and there would be no money left to protect valuable natural areas, wildlife habitat, water quality and fisheries; nor any funds to expand opportunities for outdoor recreation.
The other proposal by the Legislature to undercut the Stewardship 2000 Program would reduce state aids-in-lieu of property tax payments to communities that have land within their boundaries that has been purchased with program funds. Not only does the first proposal raise serious constitutional issues, it is nonsensical and weakens efforts to preserve and protect Wisconsin's wild areas. The second proposal will increase local property taxes. I have vetoed both of these provisions.
The bill I am signing today maintains current law on the recycling tipping fee and surcharge. Lowering the tipping fee, as the Legislature proposed, would make Wisconsin an attractive dumping ground for trash from all over the Midwest. It is a special interest favor of the worst kind. Not only is the tipping fee a critical element in reducing the amount of out-of-state waste deposited in Wisconsin landfills, the revenue supports property tax relief through grants to local governments for their state-mandated recycling efforts. With this veto, I am protecting both Wisconsin's environment and its property taxpayers.
In another, and perhaps its most inexplicable, attack on Wisconsin's environment and its future economic success, the Legislature eliminated the entire comprehensive planning law. Better known in the real estate and planning community as "Smart Growth," this law provided $2 million annually to towns, villages, cities and counties to help them make sensible decisions about housing construction, business development, land preservation and transportation investments. This program is all about small government, local control and economic growth. I have vetoed the Legislature's short-sighted repeal of this important program and restored planning grant funding to Wisconsin's communities.
With my veto pen, I have changed this budget to better reflect the priority most Wisconsin citizens place on quality public schools. Not only have I been able to reverse the unwise lowering of the revenue caps, but I have also provided funding for mentoring for new teachers without having to resort to raising taxes on teachers to pay for it. I was also able to veto the attempts to cripple the successful SAGE small classroom initiative. These proposals, under the guise of "flexibility," could have cut the program essentially in half and increased class sizes in Milwaukee by as much as 60 percent. They contradict everything academic researchers tell us and what parents and teachers know: there's nothing better to help kids learn math and reading in the early grades than a quality teacher and a small class size. Unfortunately, my veto pen does not allow me to recreate what I proposed for the SAGE program which was to increase the per student reimbursement for the first time since it was started nearly a decade ago. I sympathize with school districts who find it harder each year to pay for this worthwhile program, and I pledge to work with them to get the funding our students deserve.
I commend the Legislature for having the common sense in this budget to maintain funding for our important four-year-old kindergarten program, which is a national leader in providing quality early education for our children. I am disappointed, however, that they did not approve my proposal to provide extra funding so school districts that want to start a four-year-old kindergarten program do not face a financial disincentive because of the quirks of the school finance formula.
As recent news stories clearly evidence, we must do something as a state to help many of our school districts like Florence that are struggling with increasing costs and declining enrollment. I offered a practical solution which would have aided the nearly 60 percent of districts facing declining enrollment. Unfortunately the Legislature ignored this proposal, and I am unable to address it with my veto power.
We also must do something as a state to improve the way we pay teachers. My budget included two proposals that were rejected by the Legislature and which I am unable to change. First, I recommended the repeal of the qualified economic offer (QEO) law which stifles creative bargaining over better ways to pay teachers and innovative means to hold down health insurance costs. Second, I suggested helping communities explore better ways to pay teachers so that we could attract and retain the best teachers for our children. Instead of paying teachers based solely on their number of years of teaching and advanced degrees earned, we could find ways to pay teachers for the skills and knowledge that actually matter in a classroom. It would also help us find ways to reward teachers for taking tough teaching assignments or accepting hard-to-fill positions ranging from special education to math and science.
Finally, I remain mystified as to how the Legislature could approve a two-year budget of over $50 billion and not find $1.3 million to increase funding for the school breakfast program. We rank last in the nation in providing our children with school breakfasts, and it is an embarrassment. While I cannot fix this omission through my veto pen, I will continue to lead the fight to ensure that Wisconsin does better in giving every child the opportunity to start the day with a healthy breakfast.
From the day I introduced my budget, I have been very clear about my priorities: freezing property taxes and protecting the quality of public schools. To achieve this goal, especially when I must work from the options presented in the budget the Legislature passed, I have made a number of tough decisions. Doubtless some of these decisions will be unpopular, and will upset the special interest groups that got them placed in the budget, but they are needed so we can provide property taxpayers with the relief they need and our children with the quality public schools they deserve. Budgets are about choices – and I choose the property taxpayers and schoolchildren of this state.
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Transportation is the lifeblood of Wisconsin's economy. My budget proposed a 16 percent increase in highway spending over the next two years. The Legislature, opting for more road spending rather than adequate funding for schools and property tax relief, passed a 19 percent highway spending increase. The additional spending includes $38 million just for a
preliminary study of reconstructing the Milwaukee Zoo Interchange – a project that won't be built for at least another eight years. Spending $38 million on this preliminary road study on the same day that the Legislature voted to cut small class sizes by $38 million was one of the most flagrant examples of misplaced priorities in the entire budget process.
The Legislature also added $60 million to reduce the amount of bonding used to finance the cost of reconstructing the Marquette Interchange. At a total cost of $810 million, the Marquette Interchange is the largest single highway construction project the state has ever undertaken. The Legislature proposed using debt to finance only 14 percent of the cost. That's like you or me putting down $129,000 in cash to buy a $150,000 house – and then not having any money left over to buy groceries, put gas in the car or help the kids get a good education.
Wisconsin families know they have to be careful about how much they borrow for major purchases like a house, but they also need to make sure they can pay their other bills and take care of their children. Similarly, the state needs to make sure it can meet important priorities like providing property tax relief and protecting Wisconsin's schools.
In fact, we already have a balanced strategy for using debt to finance highway projects. Most large highway projects rely on bonding for around 50 percent of the total cost. Highway 29 in central Wisconsin was built that way, as were Highways 41 and 53, and 141 and 151. Once rebuilt, the Marquette Interchange is expected to last at least 50 years. My vetoes will result in using 20 year bonds to finance 36 percent of the cost of the project. Compared with previous major highway construction projects, this remains a conservative financing approach.
In the 2003-05 biennium, $120 million was directly allocated from the transportation fund for state aid to schools and property tax relief. My budget proposed increasing this allocation to a total of $172 million in the 2005-07 biennium by using transportation revenues to help school districts pay the cost of transporting students to their local school. It makes no sense to me why the transportation fund helps pay for adults to ride buses to work, but not to support the costs of children to ride buses to school. In their budget, the Legislature removed the entire transportation fund allocation for schools.
By pursuing more reasonable financing strategies for major highway construction projects and reducing excessive spending in the Legislature's transportation budget, my vetoes will save almost $160 million. The budget I am signing today will transfer these savings to the general fund in support of property tax relief through funding two-thirds of school costs.
In my budget, I offered a balanced approach for financing the state's SeniorCare, BadgerCare and Medical Assistance programs. This approach employed strategies used by many other states to secure additional federal Medicaid revenues and control prescription drug prices. Adopting those strategies would have brought more than $120 million in new federal revenue to the state. But instead of containing health care costs and securing a fair share of federal revenues for Wisconsin, the Legislature opted to divert state support from our schools and, thereby, place property taxpayers at risk.
