Here & Now

Here & Now for July 21, 2017

Frederica Freyberg:

I’m Frederica Freyberg. This week on “Here and Now” our first look at the move to break a deadlock among Republicans over the state budget. A closer look at shifting budget plans that could help Wisconsin land thousands of jobs. Republican and Democratic leadership give us their perspective. Then another setback for repealing the Affordable Care Act. This week in our look ahead, we examine different scenarios moving forward and what that could mean for Wisconsin. It’s “Here and Now” for July 21.

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Scott Fitzgerald:

I was very hopeful that this thing would be done by the first of July. That deadline has come and gone. So now it’s a matter of simply, “Let’s get the Finance Committee back in there and get this thing done.”

Frederica Freyberg:

This week new developments in the budget impasse between Senate and Assembly Republicans. In our first look the main stumbling block has been transportation funding. The Senate Republican plan would borrow $712 million to fund roads. Assembly Republicans have said, “Find a way to pay for it without borrowing.” The new Senate budget proposal would also eliminate the prevailing wage and the personal property tax while allowing more families to qualify for the statewide private school voucher program. But now Governor Walker says he would be willing to forgo his income tax cuts in order to send that funding to roads. Late this week Assembly Republicans said they’ll accept the governor’s offer to redirect more than $200 million originally earmarked for income tax cuts, money that would offset the bonding they don’t like. But is it a deal? Not quite yet. So this week we take a closer look at the latest budget proposals. It’s all fluid because it appears Republicans are also eyeing a deal that is flexible as they attempt to land Foxconn. That’s the Taiwanese cell phone manufacturer that could bring 10,000 new jobs to southeast Wisconsin. In exchange Foxconn would be looking for subsidies, tax breaks and other government incentives. We were able to talk with Scott Fitzgerald Thursday about that and how it’s tied to the budget stalemate now entering its fourth week. But we started by asking about borrowing for roads. Senator Fitzgerald, thanks very much for joining us.

Scott Fitzgerald:

Good to be with you.

Frederica Freyberg:

Why do Senate Republicans think you can break this budget impasse by calling for even more bonding for highways than the governor did?

Scott Fitzgerald:

Because it brings some projects online that otherwise are not going to be completed under the governor’s budget. It’s pretty much that simple. Some of those projects are important to some of those members. They’re regional. And I think probably your viewers would agree, if you have been in southeastern Wisconsin, and you see, you know, the third phase of the zoo needs to be completed. Certainly you need to complete between the Marquette interchange and the construction that’s going on right now related to the zoo. You want to bridge that gap, and that is the east-west. And then the north-south is I-94 from the state line, and there’s a lot of clamoring to make sure, for a lot of different reasons, probably including economic development that gets completed as well.

Frederica Freyberg:

Two years ago though you thought that bonding was a bad idea and rejected it? What has changed?

Scott Fitzgerald:

GPR. We have a lot more general purpose revenue. We’ve been fortunate in that the economy has been growing and expanding in Wisconsin. And that was the first thing I noticed is that, “Hey, listen, we’ve got some general purpose revenue that might be able to help us through this transportation budget.” That just simply didn’t exist last time. $8 million in this budget buys you $350 million in bonding which keeps those projects on course. So it’s pretty straightforward.

Frederica Freyberg:

Assembly Speaker Vos and his Republican caucus had wanted new sources of revenue to pay for roads like increasing the gas tax as you know or vehicle fees. Why are those sources strictly a no go?

Scott Fitzgerald:

For two reasons. First and foremost Governor Walker just flat out said, “I'm not going to go along with the gas tax increase and a vehicle registration increase,” which always puts a damper on whether or not the caucus wants to go there. Because you’re not going to override the governor on something in that area. And certainly with DOT, there’s still a lot of concerns as to whether or not that agency is operating efficiently. So there’s kind of two different prongs to that. It’s let’s get DOT back in a good form. And we’ve got a lot of reforms that are going to be included in this budget as well as probably a separate piece of legislation related to an audit that might do that as well.

Frederica Freyberg:

As to efficiencies at DOT, that has been an agency obviously that has been headed by a secretary that has been appointed by a Republican governor for all of these years. Why now are you looking at that?

Scott Fitzgerald:

I think there’s a lot of interaction with the federal government when it comes to transportation. I think what we’re starting to see is a lot of the megaprojects, and there are six of them in southeastern Wisconsin. The draw that those projects are having off the segregated transportation fund is so massive that it’s leaving very little revenue for other out-state projects. And I think if there was any fault that could have been cast on DOT probably over the last four to six years, it’s been that they have breathed life into some of these projects that should have been simply eliminated. And this came to light as a result of the audit. I think before that we just kept plugging along and hoping that we had enough revenue to get this done through some of the other things we’ve done.

Frederica Freyberg:

What do you think a company considering moving to the state of Wisconsin with its 10,000 jobs thinks about a state with problems funding important infrastructure like highways, and not only that but fighting amongst yourselves over it?

Scott Fitzgerald:

The first part, I would say, this is not just a Wisconsin problem. This is a national problem. Our infrastructure is crumbling. And it’s in every state for the same reason. All of these projects were built, 40, 50 years ago. And the bill’s coming due. And that’s why we find ourselves in the same position that many other Midwestern states as well as the east coast has a huge problem with infrastructure cost. The second part is I think we’re arguing and we’re disagreeing on the right things. The discussion right now is about tax cuts. And the discussion right now is about putting in place probably, you know, some guardrails when it comes to other areas of the budget to make sure that we’re doing the right thing fiscally. I like that. I think that’s part of it.

Frederica Freyberg:

Your Senate plan eliminates the state personal property tax. Is the governor now okay with your plan eliminating his income tax cuts?

Scott Fitzgerald:

That's one of the moving parts. I mean income tax, personal property tax, do you want to do something related to the alternative minimum tax? There’s a lot of smaller items as well that I think, you know, that’s what we’re negotiating on. That’s what we’re trying to figure out right now as kind of we sit here in mid-July.

Frederica Freyberg:

Are there other negotiating points that we can look ahead to in the coming week or so?

Scott Fitzgerald:

Yeah, I mean we do have this project, Foxconn, that is out there. We don’t have a lot of details. And I'm talking about the legislature. But there is negotiations going on. And as a result of that, that could have an impact not only on this budget but probably the agenda that continues late summer, early fall.

Frederica Freyberg:

How so?

Scott Fitzgerald:

It's a big deal. It sounds like it could have a huge impact on southeastern Wisconsin and really the entire state. So I think it’s going to dominate a lot of the discussion moving forward for the legislature.

Frederica Freyberg:

Are you suggesting we’re close to getting it or that we have a shot?

Scott Fitzgerald:

I don’t know. I say that — I'm hopeful that things can come together and this ultimately turns out to be the deal that many of us hope it is, but I don’t have enough information right now.

Frederica Freyberg:

How much would we offer them?

Scott Fitzgerald:

I don’t know. I don’t know exactly the level of detail that would let me even describe that at this point.

Frederica Freyberg:

Let me leave it there. Thanks very much.

Scott Fitzgerald:

Thank you.

Frederica Freyberg:

The Joint Finance Committee is expected to reconvene on the budget in the next two weeks. Amy Loudenbeck is a state representative from Clinton, Wisconsin and she sits on the Joint Finance Committee. She joins us this week with the perspective of Assembly Republicans to the Senate proposal and the start of a budget break-through this week. Thanks for being here.

Amy Loudenbeck:

Thanks for having me.

Frederica Freyberg:

We hope it’s a break through. The governor’s approval of putting the $200 million income tax revenue toward roads, did that break the impasse between the Senate and the Assembly?

Amy Loudenbeck:

It doesn’t appear it has with the Senate. But I will tell you that Assembly Republicans are on board with what the governor proposed. We think it could break the impasse and be a real win for both of our caucuses and the governor and the taxpayers and help to meet the transportation and infrastructure needs that we know are all across Wisconsin.

Frederica Freyberg:

How does the $200 million offset $712 million in bonding? Where’s the rest of that revenue?

Amy Loudenbeck:

It's going to be a leaner transportation budget. For Assembly Republicans, as you know, we had contemplated even going to base if we had to because we recognized the trajectory of debt payments and debt ratio to revenues was becoming unsustainable. This impasse would actually free up an additional $200 million we could use to pay cash for our road projects. I’m sure we’re willing to accept some additional bonding, but it will be a leaner, overall transportation dollar amount versus what the Senate has proposed.

Frederica Freyberg:

Any idea how much bonding the Assembly would be willing to accept?

Amy Loudenbeck:

I believe if we did an offset of the $200, maybe we would do the $300 million to basically have the same commitment that the governor had put forward. I also know we have talked in our caucus that we would be willing to go forward with additional bonding if we could put additional revenues in place to pay for the debt service associated with that bonding.

Frederica Freyberg:

Where would that revenue source come from?

Amy Loudenbeck:

There are several revenue options. For example in the Fiscal Bureau papers. If any of those were acceptable to both caucuses, I think that we would — even if we could do $20 million in additional revenue that we put into the segregated transportation fund that would give us the leverage we needed for an additional $100 or $200 million worth of additional bonding.

Frederica Freyberg:

As we’ve discussed, Senator Fitzgerald as of today is saying there isn’t a deal. What’s your message to him?

Amy Loudenbeck:

Our message is hopefully we can come together. Hopefully we can take advantage of an opportunity that has been presented that we know the governor supports and we know the Assembly supports. And maybe reconsider their position or really look at what other options might be available because we know that if it’s down to transportation — and I think we agree on so many areas, and it’s a good budget. We have property tax reductions. We’re investing significant dollars into K-12 education. Meeting our MA obligations to say there’s always going to be work that we need to do next session. So the priorities of the Senate are also priorities for our caucus, but what can we do in this budget and let’s sit down and hammer this out.

Frederica Freyberg:

Meanwhile, describe the role of having to prepare for an incentive package to Foxconn has in all of this.

Amy Loudenbeck:

I think the flexibility of what the governor proposed is going to be key to give us some breathing room not only in this budget. But if incentives needed to be put forward in the next biennium that were not locked into any sort of structural commitment. If you look at what the governor proposed initially and Senate proposed initially, the tax cuts or the personal property tax cuts would have been in place over the next biennium as well. Where if we’re using one-time money of $200 million to basically backfill the gap that we have in transportation, that’s going to reduce our structural deficit by about $200 million. We have that built-in flexibility, and I think that’s smart for a lot of reasons. But Foxconn being one of them.

Frederica Freyberg:

Are you ready to take the budget to Joint Finance next week?

Amy Loudenbeck:

I'm ready. We have tried to be really flexible and tried to make ourselves available whenever the time was to meet. We have met as our Assembly finance team and made our decisions on DNR and DATCP and some of the other remaining issue areas. Education, I think we’re really close. I think we can start to make progress on the things were we do have agreement and just hopefully keep that momentum going. And if transportation is the last thing that we vote on, I think we still have at least two days of work, if not three, and so we could continue to meet and vote and close out different issue areas so that we’re close. But yes, I'm ready.

Frederica Freyberg:

Representative Loudenbeck, thanks very much.

Amy Loudenbeck:

Thank you.

Frederica Freyberg:

With Republicans in control of both the Wisconsin Senate and Assembly, state Democrats are shut out on the sidelines as the Republicans try to find a path forward. One Democrat is calling the budget infighting by Republicans dysfunctional. At the same time Republicans are hoping Democrats will get on board with their plans to land Foxconn. This week Senate Minority Leader Jennifer Shilling joins us from La Crosse. Senator, thanks very much for doing so.

Jennifer Shilling:

Thank you.

Frederica Freyberg:

First as to this question whether Democrats would work with Republicans to fashion a major incentive package to land Foxconn, are you in?

Jennifer Shilling:

We have offered–first on the budget, we have offered to sit down with the Republican officials. We’ve sent a letter saying we’d like a real long-term sustainable fix. And we would sit down at the table if we had equal representation of Democrats and Republicans, Assembly and Senate members to hammer out a real deal. If they need our help, if they want our help, they can’t propose something without having us included. I think as we look back over previous legislative sessions, the Milwaukee Bucks arena is an example. We had a voice. We were able to get it done. And so we have been rebuffed. There’s not been an answer to our letter to legislative leaders and the governor saying, “If you want our help, we’re are ready. But you need to be willing to sit down and talk to us, include us in the negotiations.”

Frederica Freyberg:

Are you talking about your help in the budget or in any Foxconn incentive package or both?

Jennifer Shilling:

I think cooperation builds on cooperation. And as we have a budget that is now going on three weeks past its due date. And it is three weeks late. We’ve been willing to want to sit down and talk about some of these harder issues that have not been able to be resolved by a majority party who controls the governor’s office, the Assembly and the Senate. It’s not just transportation. It’s making our schools whole. It’s making sure that we have directed tax breaks for middle class families, not for the super wealthy in this state that benefits 11 people in Wisconsin.

Frederica Freyberg:

Let me get back to that first question. If the Republicans are seeking Democrats help in fashioning an incentive package for Foxconn, are the Democrats in?

Jennifer Shilling:

We certainly want to be helpful in growing our economy in this state. We are supportive of expanding the tax base and adding jobs in the state. But it also comes down to what we need to do for work force development and worker training. And to make sure that our corporate neighbors in the state are responsible in paying their fair share. We certainly want to be helpful that this could land a significant economic boost in our state and in the region.

Frederica Freyberg:

Where would you like to see the money come from for any such package for Foxconn?

Jennifer Shilling:

Well, as we look at, short of, we are in the last creations of this budget as far as we are at an impasse, but a lot of this stuff has already been passed through Joint Finance with an agreement. I think they should be intertwined together because as we are putting together this budget, we need to look ahead to what the next budget will look like the next two years. The officials of Foxconn have come to this state. They are looking at sites. They are interested in work force development and tax incentives. We want to know what that’s going to look like down the road and what that will ultimately effect taxpayers in the state. We need to be responsible to the taxpayers.

Frederica Freyberg:

You feel like any Foxconn package should be inside the current budget?

Jennifer Shilling:

I think we need to look at the budget and have those negotiations in context. And maybe the Foxconn officials are not ready to have to — and the state’s not ready for a complete roll-out. But I think we need to be cognizant of the budget that we are in right now looking ahead two years down the road to 19 and 21. It doesn’t have to be one or the other. I think we can work on tandem but recognizing they both have long-term implications to revenue and to expenditures in this state.

Frederica Freyberg:

As you know, meanwhile Senate Republicans put out their budget plan this week with its increased bonding but then later this week the governor gave the okay to put $200 million from his desired income tax cut to offset that bonding pleasing the Assembly majority. Where do Democrats stand on all of these permutations to quote get it done?

Jennifer Shilling:

We understand Senate Republicans have rejected the latest Walker-Vos plan of moving income tax cuts to transportation for another couple hundred million dollars into transportation. So I think we’re still back to square one. And there still is an impasse. There is not agreement. And again, we want to sit down. They have not reached out to us to look at this transportation package. I think–it shouldn’t be a surprise because in February when the governor unveiled his package, the fact was transportation was one of the big points of contention with the legislature and the governor. And it’s a little bit of a timing head-scratcher that the Senate Republicans three weeks after the budget should be passed is putting forward their own negotiation package and why this wasn’t put forward in May and June when it should have been.

Frederica Freyberg:

Just very briefly with about a half minute left, you have a problem with proposed tax cuts in any of these plans. How so?

Jennifer Shilling:

Well, as you look at directed tax cuts for the middle class and how that really impacts hard-working middle class families, that is where the biggest impact can be for hard-working Wisconsinites. And the fact we continue with a tax cut for 11 millionaires in this state that make over $30 million and receive $23 million in tax credits, I think many of my friends and neighbors here in western Wisconsin can’t relate to that. So as we look at tax relief in this state, it needs to be targeted to the middle class and working families.

Frederica Freyberg:

All right. We leave it there. Senator Shilling, thanks very much.

Jennifer Shilling:

Thank you.

Frederica Freyberg:

Now despite the lack of agreement on a budget, state operations continue under the old spending limits. In our look ahead this week what are the options for Republicans in Congress to repeal and replace the Affordable Care Act? President Trump this week turned up the heat saying Congress should not leave for its August recess until a new health care plan is passed. This week we look at what some of the different scenarios could mean for Wisconsin. Joining us is Justin Sydnor, University of Wisconsin associate professor in risk management and insurance. Thanks for being here.

Justin Sydnor:

Glad to be here.

Frederica Freyberg:

Let’s tick through these. We’ve got the repeal and replace. We’ve got repeal and not replace. We’ve got repeal and replace later. We’ve got nothing happens and the ACA is allowed to quote fail. What does this uncertainty do to insurance markets including those plans operating in Wisconsin?

Justin Sydnor:

I think uncertainty is the right word there. The insurance carriers in Wisconsin and everywhere else have a hard job of trying to establish exactly what their plans are going to look like. And that’s affected by a range of regulations coming out of Washington. And right now they really don’t know what to do. There’s substantial uncertainty.

Frederica Freyberg:

When do they have to kind of have these plans ready for people to choose from?

Justin Sydnor:

Most of the filings with state regulators that lock down the prices, the premiums for these plans have been coming in and going on over the summer. And insurers are struggling to figure out exactly what prices to set because they’re not quite sure what the plan marketplace will look like next year. Ultimately they have to get ready to promote these plans and sell them by October, November, early enrollment periods.

Frederica Freyberg:

There’s always this talk that Obamacare is in a death spiral. President Trump has talked about just letting it fail. Is it in a death spiral as it is right now?

Justin Sydnor:

In fact throughout most of the country and certainly in Wisconsin, it’s very much not in a death spiral. It’s really a situation where it’s not really that you could let it fail. If the ACA just moves on forward as it’s been established, it’s very unlikely to fail, especially in places like Wisconsin. Part of the reason people think it might be in a death spiral, in recent years, there has been some increases in premiums. We’ve seen that in Wisconsin as well. But if you think about Wisconsin we’ve seen smaller premium increases than the country as a whole. And the really big indicator is that we haven’t seen drops in enrollment in the state and actually through most of the country. And that’s what we’d see if these premium increases signaled that the market was collapsing. So instead what we see is people are still enrolling. And most of the early evidence from this year suggests the premium increases were enough to stabilize the markets and make them profitable.

Frederica Freyberg:

Why were there these premium increases though?

Justin Sydnor:

Many insurance companies were losing money on the plans they were selling through the Affordable Care Act exchanges. And that was largely because the mix of people buying plans is a little less healthy than they anticipated when they first established their plans. They also had to do some premium increases to catch up with some rising medical costs that affect everyone, including what we’ve seen for employer-sponsored plans.

Frederica Freyberg:

Yet were these premium increases historic, or were they potentially smaller than they might have been without the ACA?

Justin Sydnor:

Most of the ACA markets saw somewhat larger increases for instance in the past year than what you saw for employer-sponsored plans. But they weren’t wildly different. And over all if you look at the premiums for ACA plans, the individual market plans in Wisconsin, they’re actually very close to the total premiums that get paid in employer-sponsored settings for similar levels of coverage.

Frederica Freyberg:

How could policy makers help it along toward failing though? That is a possibility.

Justin Sydnor:

Yeah, very much. If we conduct the ACA as it was designed, it’s unlikely to fail on its own. But the administration and Congress have a number of things they can do to cause it to fail if that’s what they want to do. Probably the most important of those that’s been in the discussion right now is what happens with the so-called cost sharing reductions. In the Affordable Care Act plans, insurers are required to offer plans for people with very low incomes that give them low deductibles and low levels of co-pays and co-insurance. And the federal government in response helps to pay the additional cost of that extra coverage. And they’ve made promises to pay that. But there’s a debate about exactly how that money has been appropriated and whether or not the government will continue to make those payments. And the administration and Congress have some power to remove those payments and have a lot of power to keep uncertainty as to whether those will go on. That’s a big effect on insurers. Because if those payments aren’t made, the insurers lose substantial amounts of money and would have to either pull out of markets or raise their premiums to make up for that.

Frederica Freyberg:

Is this something being talked about in Washington?

Justin Sydnor:

Quite actively. Every day there’s a debate. And words coming out of Washington, often very conflicting, about whether or not these premium payments will be made to insurers and whether they’ll make any long-term commitment to paying them. So far the administration has refused to make any long-term commitment to making these payments.

Frederica Freyberg:

Unfortunately we need to leave it there. A lot more to talk about. Justin Sydnor, thanks very much.

Justin Sydnor:

Thanks for having me.

Frederica Freyberg:

In our Wisconsin look, an update on the flood waters ravaging Wisconsin. The hardest areas are in Buffalo, Crawford, Grant, Monroe, La Crosse and Vernon Counties which saw up to 7 inches of rain along with straight-line winds. In Arcadia, hundreds of people had to be evacuated from homes. And the business district was flooded. The Kickapoo River in Vernon County remains a concern. Some state parks and trails have also been closed as a result of flooding and downed trees. More heavy rain coupled with flooding last week is making it hard to assess the damage in southeast Wisconsin. Burlington has been swamped. Residents with wells are being advised to chlorinate and test their water for bacteria. Damage in Kenosha, Racine and Walworth Counties is expected to exceed $26 million. That is our program for this week. I’m Frederica Freyberg. Have a great weekend.

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Funding for “Here and Now” is provided in part by Friends of Wisconsin Public Television.