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Gov. Walker proposes income tax cut

Photo

Associated Press

Wisconsin Governor Scott Walker delivers his state budget address in the Assembly chamber of the Wisconsin State Capitol in Madison, Wis. Wednesday, February 20, 2013.

MADISON — Gov. Scott Walker proposed an income tax cut targeted to the middle class as part of a state budget introduced Wednesday that would keep property taxes nearly flat, expand the private school voucher program, continue a public school spending freeze and tighten Medicaid income eligibility.

The $68 billion two-year budget Walker delivered to the Republican-controlled Legislature would increase state spending 3 percent the first year and 2.1 percent more the second. Democrats blasted Walker's priorities, saying he should have done more to help public schools, taken a federally funded expansion of Medicaid that's being rejected, and done more to help the middle class.

"Our focus is simple — more prosperity, better performance and true independence," Walker said in his 40-minute speech. "Our middle class tax cut is a down payment on my goal of reducing the tax burden in our state every year I'm in office. I want to cut taxes over and over and over again until we are leading the country in economic recovery."

Walker's proposal will be debated by the Legislature's budget committee over the next four months, then be voted on by both the Senate and Assembly sometime before it takes effect in July.

Much of Walker's plan will find broad support among Republicans, but other key portions will run into trouble with members of his own party and nearly all Democrats.

"The governor's proposals are bad for the short term and bad for the long term in Wisconsin," said Rep. Peter Barca, Democratic minority leader in the Assembly.

One of the most problematic of Walker's proposals is his planned expansion of the private school voucher program to any district that has at least 4,000 students and two schools receiving a D or F grade on new state report cards.

Enough Republican state senators have already voiced opposition to the plan to block it in the Senate. Walker has pledged to work with them to address their concerns.

Walker said that his goal is to "ensure that every child — regardless of where they are from or what their family income is — has access to a great education."

Walker's proposed $181 million increase in funding for the University of Wisconsin System drew praise from UW leaders. In the last budget, Walker cut UW funding by $315 million.

"This is the best budget we have seen in many cycles," said UW-Madison Chancellor David Ward.

Walker's proposal to eliminate requirements that public employees live in the city they serve, an issue that's been debated for years in Milwaukee but is the law in dozens of communities statewide, will trigger a fierce debate.

Walker had released most of the major portions of the budget in the weeks leading up to his address before the Legislature, except for how the income tax — which equates to a 2.2 percent reduction — would be structured.

Under this plan, a family of four with an income of $80,607 would save $212 over two years.

Walker calls for cutting the taxable rates on individuals up to $161,180 and couples earning up to $214,910. The lowest rate, for individual income up to $10,750, would drop from 4.6 percent to 4.5 percent. The rate on income in the next bracket, for individuals earning up to $21,490, would decrease from 6.15 percent to 5.94 percent. And the third bracket, for individuals making up to $161,180, would decrease from 6.5 percent to 6.36 percent.

The rate cut would be permanent and not phased in over time as Walker had previously said he was considering.

The budget cuts income taxes, includes no general sales tax increases, and continues local government and school district spending limits that Walker said would hold increases on property tax bills for the median-valued home to no more than 1 percent a year.

Walker's budget keeps spending limits for schools in place, while state aid to schools will go up about 1 percent. That money will go toward keeping local property taxes down, not more spending on schools. This has angered Democrats and public school advocates, especially since it comes on the heels of an $800 million aid cut and a 5.5 percent reduction in spending authority in the last budget.

Steve McNeal, superintendent of the Beloit School District, blasted Walker's proposal as not doing enough to help districts like his that have already made millions in cuts.

"The low-hanging fruit is gone for us," he said. "We've pulled every rabbit out of the hat."

His proposal also calls for cutting income eligibility for poor adults in the state's BadgerCare program from 200 percent of the federal poverty level to 100 percent. While he's also lifting an enrollment cap for childless adults, the net effect of the changes will be a drop of about 5,400 people in the Medicaid program.

Walker estimates that about 224,600 currently uninsured people will access federally subsidized private insurance coverage through the marketplace known as an exchange, which is scheduled to begin operating in 2014. He called for those changes instead of accepting money from the federal government under President Obama's health care overhaul law to pay for expanding Medicaid eligibility to cover 175,000 additional people.

Walker's Medicaid proposal and other parts of his budget are shaped by his desire to run for president in 2016, said Scot Ross, director of the liberal advocacy group One Wisconsin Now.

"Wisconsin's middle class needs a balanced approach that targets tax relief to them and invests in long-term growth strategies and services they need like public education and health care," Ross said.

Walker also is rejecting the recommendations of a task force created in his last budget that studied ways to plug a projected $2 billion funding gap over the next decade for road maintenance, repair and other transportation projects.

That group, headed by Walker's own secretary of the state Transportation Department, recommended a gas tax increase, fee hikes and other changes to provide long-term growth and stability to pay for roads projects. None of their recommendations are in Walker's budget.

Instead, Walker said he would look into selling the state's power plants and other assets to pay off bonds for transportation projects such as the Zoo Interchange near Milwaukee. Prisons, state parks and other land that has protections in the law from being sold would not be considered for sale.

Walker's budget would end with a $43 million positive balance, but unfunded commitments would total $188 million. Using more comprehensive private-sector accounting measures, the so-called structural deficit after two years would be $2.6 billion.

Details of major proposals in Walker's budget

Here's a look at some of Gov. Scott Walker's key proposals in the state budget he released Wednesday:

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TOTAL SPENDING

— $68 billion over two years. That equates to a 3 percent spending increase in the first year and a 2.1 percent increase in the second.

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TAXES

— Cut individual income taxes by $343 million over the two-year budget. The spending plan would reduce tax rates on the first $161,180 annually for individuals and married couples up to $214,910 annually. A family with two adults working and two children making $80,607 would save about $106 each year.

— Sales taxes would not increase and property taxes are projected to grow less than 1 percent, with limits on schools and other local governments remaining in place.

— Provide $12.6 million to hire 61 additional workers at the Department of Revenue to focus on tax collection and fraud prevention. The governor says projections show the effort should generate nearly $89 million in additional taxes owed over the two-year budget. He also wants to add six new workers using lottery proceeds to enhance lottery security and accounting.

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EDUCATION

— Expand the state's voucher school program to students in any school district where at least two buildings have a D or F grade on state report cards and have at least 4,000 students. Nine districts would qualify right now, including Green Bay and Madison. Currently the voucher program, which provides state subsidies for students to attend private schools, is limited to Milwaukee and Racine.

— Provide a roughly 1 percent increase in aid to state public schools as well as $64 million available in incentive payments for schools according to their state report card grade.

—Allocate an additional $181 million for the University of Wisconsin System and an additional $5 million for technical colleges.

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HEALTH CARE

—Cut income eligibility for poor adults in the state's BadgerCare program from 200 percent of the federal poverty level to 100 percent. The enrollment cap for childless adults would be lifted with the net effect being a drop of about 5,400 people in the Medicaid program. Walker estimates that about 224,600 currently uninsured people will access federally subsidized private insurance coverage through the marketplace known as an exchange, which is scheduled to begin operating in 2014.

— Add 280 positions at the Department of Health Services. The governor says 117 are needed to meet mandates under the federal health care overhaul law, 85 are needed to improve Medicaid "integrity and efficiency" and 78 are needed to expand community-based mental health services.

—Provide $30 million for mental health programs in the state, including community-based care for adults and children with severe mental illness. The spending plan also would establish an Office of Children's Mental Health.

— Charge state employees who smoke an extra $50 per month for health insurance.

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PUBLIC SAFETY

— Require police to take DNA from anyone arrested on suspicion of a felony or any of a number of sex-related misdemeanors. Currently the state collects DNA only from convicted felons and sex offenders. Walker has proposed paying for the collection expansion with a $250 surcharge on felony offenders and a $200 charge on other offenders.

— Provide $3 million in grants for GPS monitoring of high-risk offenders subject to restraining orders. The governor developed the plan after a man killed his wife and two other women at a Brookfield spa in October after the wife obtained a restraining order against him. State law already allows authorities to use GPS to track people who violate a domestic abuse restraining order, but Walker wants judges to be able to order monitoring for first-time restraining order recipients if the judge feels that person might hurt someone.

—Provide $4.4 million for raises for assistant district attorneys and nearly $3 million for raises for assistant state public defenders and assistant attorneys general.

—Eliminate the state Office of Justice Assistance, which administers law enforcement grants, and move the agency's functions into the state Corrections, Justice and Military Affairs departments.

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THE OUTDOORS

—Require the Department of Natural Resources to create new deer mini-hunts, create updated maps of the state and continue surveillance for chronic wasting disease. The proposals stem from recommendations Texas researcher James Kroll made to the DNR last summer on how to improve deer management and improve its relationship with hunters.

—Provide an additional $24 million to reduce nonpoint water pollution as well as $85,000 to develop a remote sensing program to measure lake water quality.

—Provide $778,100 to open new facilities at parks and southern forests and increase limited-term park employee hours.

—No increases in hunting or fishing license fees.

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TRANSPORTATION

—Increase the total transportation budget by $500 million to $6.4 billion. Devote about $550 million toward rebuilding Milwaukee's Zoo Interchange; $236 million for work on the city's Hoan Bridge; $10.7 million for improving commercial harbors; $60 million for preserving railroad tracks; an additional $55 million for road maintenance; and $2.7 million to train State Patrol recruits. The money would come from a mix of gas taxes, vehicle registration fees, the state's general fund, the petroleum inspection fund and bonding.

—Add 180 new engineering and engineering support positions within the state Department of Transportation. The governor says the move would reduce costs for outside consultants by $5.6 million annually.

—Add 28 more inspector positions at weight enforcement facilities.

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PROPERTY FOR SALE

— Allow the sale of state property, including the state's power plants, to help pay down the state's debt and bonds. All state agencies would have to submit a list of property to the Department of Administration, which would obtain appraisals for any properties offered for sale. Prisons, parks and land owned by the Board of Commissioners of Public Lands would be off the table. Stewardship land would be eligible for sale.

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RESIDENCY

— Remove the residency laws that require local government workers to live in the municipality or school district where they live. More than 100 municipalities across the state have such rules, and Milwaukee city officials have said they would staunchly oppose removing the requirement.

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JOBS

— Allocate $25 million for a venture capital fund to help startup companies get off the ground. Private entities also could contribute to the fund.

— Provide the Wisconsin Economic Development Corporation with an additional $17 million for promoting business within the state, including money for entrepreneurs and start-up companies and promoting Wisconsin as "a great place to do business."

— Provide an additional $75 million for the state's economic development tax credit program and repeal the $47.5 million lifetime cap on the angel investment tax credit program.

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STATE EMPLOYEES

—Increase the total number of state workers by 710 to 69,973.

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CORRECTIONS

— Create an 11-employee Office of the Inspector General to combat waste and fraud with the Department of Corrections and ensure the agency meets federal rape elimination requirements.

—Add 76 employees within the agency to handle increased sex offender GPS tracking, meet federal rape elimination requirements and increase mental health treatment.

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VETERANS

— Provide $43.3 million for new or expanded veteran programs, including expanding property tax credits for spouses of people who died of a service-related disability; adding 110 workers at the veterans home in King and 40 more positions at the Union Grove veterans home; exempting state veterans homes from the nursing home bed tax; and preserving the state Veterans Museum's archives.

— Give service members returning from active duty vouchers for free hunting and fishing licenses and waive state park and trail admission fees for all veterans every Memorial Day and Veterans Day weekend.