Earlier this week, the Governor announced the State of Budget for 2017-19. This announcement is the first step in a budget process that will extend through the legislature over the next several months. The WRA lobby team has been extremely active not only in introducing economic development initiatives, but ensuring that our industry interests are protected. Going forward, we hope you will engage with our communications and efforts related to this effort. Government Day is coming up on March 15th, and we will be sending out calls for action soon. Click here for the text of the Governor’s Budget Address and to see more details in the Budget in Brief. For questions related to this, please contact Tom Larson, Adam Williquette or Tracy Johnson.
PROPERTY TAX RELIEF
- General — Given the Governor’s ongoing commitment to hold the line on property taxes, the tax bill for the median value home in December 2018 tax bill is expected to be $139 lower than the December 2010 tax bill.
- Levy limits — Continue the Governor’s commitment to property tax relief by increasing the School Levy Tax Credit by $87,000,000 in fiscal year 2018-19 to pay for credit distributions in the 2017/18 property tax year. This, combined with an increase in school equalization aids and continued prudent controls on property tax levies, will ensure that the Governor’s promise of keeping the bill for the median value home below its levels in the 2014/15 property tax year is achieved.
- State property tax — Eliminate the state portion of the property tax beginning in 2017 and provide the forestry account with a GPR appropriation equal to 0.1697 mills multiplied by the state’s total equalized value. This will provide $88,759,300 in property tax relief in fiscal year 2017-18 and $91,695,600 in fiscal year 2018-19 while eliminating the state’s portion of the property tax bill.
- School levy tax credit — Keep the bill for the median value home below its 2014-15 property tax level by increasing the School Levy Tax Credit by $87,000,000 in fiscal year 2018-19 to pay for credit distributions in the 2017-18 property tax year. This, combined with an increase in school equalization aids of $72,750,000 and continued prudent controls on property tax levies, will ensure the Governor’s promise of continued property tax relief is achieved.
- Debt service — Require county and municipal governments to reduce property tax levies by the amount by which pre-July 2005 debt service decreases from the previous year. More heavily-indebted local governments have been able to take advantage of a loophole in the levy limits by shifting levies for older debt service onto the operating levy while issuing new debt. The Governor recommends leveling the playing field and protecting property taxpayers by closing this loophole.
- Lottery credit — Increase the Lottery’s general program operations by $3,000,000 SEG for additional Lottery product information activities to ensure continued tax relief to Wisconsin homeowners through the lottery and gaming credit.
- Property tax credits — Beginning with distributions in 2018, allow municipalities which receive in total at least $3,000,000 from the sum of the school levy credit, the first dollar credit and the lottery credit to make one ongoing, rather than annual requests, to receive these payments directly from the Department of Revenue, instead of through the county.
- Energy efficiency exemption –– Mitigate property tax increases by eliminating the energy efficiency exemption in revenue limits on a going-forward basis. Property tax levies associated with the exemption grew 115 percent in last three years and in calendar year 2016 alone, districts obtained authorization to spend $327,052,400 above revenue caps. School districts will continue to have the ability to use referenda for these projects.
GROWING OUR ECONOMY
- Historic tax credits — Modify the Historic Rehabilitation Tax Credit by limiting the credit to annual awards of $10,000,000 to be competitively awarded on the basis of job creation potential while creating a clawback provision to ensure credits are repaid if pledged job creation totals are not met. The imposition of a $10,000,000 annual cap is expected to save the state $3,000,000 in fiscal year 2017-18 and $14,100,000 in fiscal year 2018-19. These modifications will focus state resources most directly on those projects with the greatest job creation potential. Limiting the annual state exposure to this program is prudent to ensure that its rapidly growing expenditures do not crowd out other economic development priorities. Without a cap, the program has grown to being one of the state’s most expensive tax expenditures.
- WEDC funding — Increase funding to the Wisconsin Economic Development Corporation in fiscal year 2018-19 by $6,300,000 to provide the corporation with greater resources to assist Wisconsin businesses. In addition, modify the corporation’s funding structure to allow larger amounts of the Economic Development Surcharge to fund the corporation’s operations and reduce the state’s general fund commitments.
- WEDC loan programs — Reform the Wisconsin Economic Development Corporation’s loan programs by permitting the corporation to originate new loans provided that they are funded by the proceeds of repaid loans while prohibiting funding from state appropriations to the corporation and also prohibiting the practice of offering forgivable loans. These modifications will strengthen the corporation’s portfolio of economic development tools while improving the integrity of its lending programs. By requiring that loans be funded via the repayment of existing loans, the success of these lending programs will be tied to the quality of the loans made by the corporation.
- Angel and Early Stage Seed Credit programs — Increase the cap of investments eligible for the Angel and Early Stage Seed Credit program from $8,000,000 to $12,000,000 for each qualifying business to expand opportunities for those businesses to obtain more capital. In addition, allow the Wisconsin Economic Development Corporation to carryforward unutilized credits under these programs to the next calendar year for purposes of requesting reallocations to the Business Development Credit program.
- Rental weatherization program — Eliminate the Rental Weatherization Program in the Department of Safety and Professional Services. Elimination of the program will reduce fees for property owners by $121,000 in fiscal year 2017-18 and $121,000 in fiscal year 2018-19.
- REINS Act — Adopt state version of federal REINS Act by requiring the Legislature to approve all administrative regulations that have an impact of $10,000,000 or more on regulated individuals and entities. Provide for greater transparency of an administrative rule’s potential impact on businesses, local governmental units, and individuals by requiring, at Joint Committee Review of Administrative Rules’ (JCRAR) request, a preliminary hearing and comment period to allow for stakeholder feedback earlier in the process. In addition, allow an independent economic impact analysis of regulations at the request of Department of Administration or JCRAR. Provide a process for agencies to follow regarding guidance documents to ensure that public comment is considered. Additional modifications to the process include: require Department of Administration approval of economic impact analyses, changes to emergency rule extensions, an expedited process for repealing unauthorized rules, and sunset of rule-making authority for agencies that have not promulgated a rule in ten years or more.
- PECFA — Reestimate the funding for petroleum environmental cleanup fund awards by $2,900,000 SEG in fiscal year 2017-18 and $850,000 SEG in fiscal year 2018-19 to ensure there is sufficient appropriation authority to pay remaining claims for the program.
- Petroleum inspection fee — Repurpose $73,200 SEG in petroleum inspection fee revenue in fiscal year 2017-18 and $73,200 SEG in fiscal year 2018-19 for air quality and vehicle emissions oversight, replacing the use of general fund revenues.
- Per pupil aid — Provide the largest increase in per pupil aid since the creation of the program. The state is investing an additional $197,417,300 in fiscal year 2017-18 and $451,474,900 in fiscal year 2018-19, or $648,892,200 over the biennium, which includes $10,100,000 in fiscal year 2017-18 and $20,200,000 in fiscal year 2018-19 to be funded with savings resulting from execution of a contract to self-insure health benefits for state employees. Consequently, per pupil aid payments will increase from $250 in fiscal year 2016-17 to $450 in fiscal year 2017-18 and $654 in fiscal year 2018-19. School districts must certify compliance with 2011 Wisconsin Act 10 before receiving aid, and aid must be directed to individual school buildings.
- Rural schools — Target aid to rural schools to help them provide a high-quality education despite declining enrollment. Investments include: $9,961,100 in fiscal year 2017-18 and $10,119,500 in fiscal year 2018-19 for sparsity aid ($12,328,600 above the Department of Public Instruction’s request); $46,000 in each year plus increases in high mileage and summer school reimbursement rates for pupil transportation; and $5,200,000 in each year to fully fund high cost transportation aid. Biennially, the budget allocates an additional $30,572,600 for rural schools under these programs
- General — The Governor’s budget invests approximately $6,100,000,000 in Wisconsin’s transportation network during the 2017-19 biennium to improve state highways, bridges, local roads, airports, rail lines, and harbors. Including investments made in this budget, combined with previously authorized funding, Wisconsin has invested more than $24,000,000,000 since 2010. This is $3,000,000,000 more than the previous eight-year period.
- Local road aids — This budget contains the most funding ever provided to local governments for local road aids. This increase will provide additional resources to local governments to improve the local infrastructure Wisconsin’s citizens use on a daily basis. Combined general transportation aids to counties and municipalities will increase by $40,072,400 to a total of $459,733,100 annually beginning in 2018 which represents a 9.5 percent increase over the 2017 aid payments.
- Local roads improvement program — Increase state funding for the Local Roads Improvement program by $7,000,000 annually and increase the maximum state share for local projects funded with discretionary grants from 50 percent to 60 percent. Increasing this cost share will allow more local governments to participate in the program by lessening the local funding burden.
- Local bridge improvements — Provide an additional $6,031,500 over the biennium for local bridge improvements.
- State highways — Allocate $3,155,703,400 in total funding over the biennium for state highways.
- State highway rehabilitation program — Provide $1,705,750,800 in funding over the biennium for the State Highway Rehabilitation program to increase investments in the maintenance/rehabilitation of our current highway system. This proposed allocation would be the largest amount ever provided for this program.
- Major highway development program — Provide $669,865,500 in funding for the Major Highway Development program to ensure all active projects such as USH 18/151, USH 10-441, STH 15, and I-39/90 remain on schedule. This represents an increase of $107,772,400 over the department’s request—nearly 20 percent more.
- Southeast Wisconsin — Provide a total of $121,943,200 in funding for the Southeast Megaprojects program to continue construction and ensure the core of the Zoo Interchange project remains on schedule. Funding of $31,000,000 would also be provided for work on the I-94 North/South project. Combined with funding authorized from fiscal years 2011-12 to 2016-17, $1,473,543,300 will have been invested into this program over eight years. However, the proposed budget does not include funding for the I-94 east-west project.
- Transportation fund — Enhance the Transportation Fund’s future revenues by annually depositing to the Transportation Fund, beginning in fiscal year 2019-20, excess revenues from the existing petroleum inspection fee. This action is projected to provide approximately $107,000,000 for transfer to the Transportation Fund in the 2019-21 biennium and approximately $431,000,000 from fiscal year 2019-20 to fiscal year 2026-27
INCOME TAX RELIEF
- Income tax brackets — Reduce the two lowest individual income tax brackets by 0.1 percent each to bring them to 3.9 percent and 5.74 percent, respectively, while also expanding the second bracket to bring more income into a lower tax bracket. These changes are especially beneficial to the middle class and build on prior individual income tax rate reductions in the 2013-15 biennium. These modifications will reduce taxes by $104,377,800 in fiscal year 2017-18 and by $99,077,000 in fiscal year 2018-19.
SALES TAX RELIEF
- Construction contracts — Expand the lump sum contract sales tax exemption to all construction contracts involving real property construction activities if the total sales prices of the taxable products are less than 10 percent of the total contract price, and allow the exemption to also apply to all subcontractors of a qualifying general contractor. This change will decrease the cost for the construction and renovation for general contractors and homeowners. This modification will decrease collections $1,250,000 in fiscal year 2017-18 and $1,500,000 in fiscal year 2018-19.
- Licensing Review Council — The Governor recommends creating a 13-member licensing review council that is administratively attached to the department. The council shall make recommendations regarding occupational licensing to the Governor and Legislature by December 31, 2018. The Governor also recommends that the report of the licensing review council be drafted as a bill and that the Legislature must act upon the bill by June 30, 2019. Finally, the Governor recommends that the statutory language authorizing the licensing review council be repealed on July 1, 2019.
- DSPS Information Technology Modernization — The Governor recommends increasing expenditure authority for the department to upgrade information technology components. ($2,200,000)
- Local Government Property Insurance Fund — Reduce the size and scope of state government by closing the Local Government Property Insurance Fund to new policies after July 1, 2017, and renewals after December 31, 2017. The fund was created to ensure local governmental units had access to affordable property insurance. That situation no longer exists since a wide array of affordable property insurance products are available in the insurance market today.
- Judicial compensation — Establish a process by which the Director of State Courts can develop a pay plan for judges and justices, which is submitted directly to the Joint Committee on Employment Relations for approval, rather than as part of the state compensation plan submitted by the Department of Administration to the committee. The pay plan may utilize savings within the Wisconsin Court System from existing appropriations. Provide $334,000 GPR one-time in fiscal year 2018-19 to reflect an amount equal to the wage increase provided to other state employees. Nonjudicial staff will continue to be covered under the state compensation plan.
Click Here To See The Top 10 Provisions Impacting The Commercial Real Estate Industry.
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