How Wisconsin Government and Politics Have Changed – And What To Do About It

A column by former WISTAX President Todd Berry

(Editor’s note: The views expressed in this column are solely those of the author. The Wisconsin Taxpayers Alliance, and its successor the Wisconsin Policy Forum, does not engage in lobbying or advocate for specific policies.)

As I retire after almost 25 years as President of the nonpartisan Wisconsin Taxpayers Alliance, I can’t help but reflect on how Wisconsin government and politics have changed over the decades. Perhaps the most significant change that has occurred is the increasingly partisan and polarized nature of dialogue and decision-making in the public arena.

Part of this is due to the deterioration of our national discourse, but part is also due to Wisconsin being one of about a dozen states with a full-time, professional legislature. What makes us different from most of these states dominated by career politicians, however, is scale. California, Illinois, Massachusetts, New York, and Pennsylvania are populous, urban, and large. By comparison, Wisconsin is relatively small.

Regardless of size, many of these states have the same problems: take-no-prisoners partisanship; state budgets that are often tardy and almost always narrowly balanced, usually with gimmicks and timing tricks; official financial statements that show GAAP deficits; and subpar bond ratings. Wisconsin fits the description to a “T,” regardless of party in control.

This is not an accident. In professional legislatures, the psychology changes: The goal is to keep one’s job, and that means getting reelected. Difficult tax and budget problems are papered over, pushed past the next election.

In career legislatures, such as ours, power becomes increasingly centralized in the hands of a few party leaders. Party discipline is strictly enforced, and dissension is not tolerated. Legislative leaders have tremendous power because they control the political fate—and, therefore, career—of their backbenchers. They name committee chairs and members; they send bills to committees and determine whether they will receive serious consideration; they influence and direct special-interest campaign donations; and, in some cases, punish uncooperative caucus members by encouraging primary opposition.

The nature of primary elections and Wisconsin elections generally is part of the significant change that has occurred in our politics. In recent decades, when given the opportunity, both Democrats and Republicans have “gerrymandered” legislative districts in hopes of achieving partisan advantage. The Democrats did so in 1983; the GOP, in 2012.

The fallout is evident, as the 2016 elections indicate. After the August primary, about half of state legislators were effectively reelected, with no November challenger, or only a token minor-party opponent. Lawmakers need not be accountable to voters if there is no ballot choice. And lack of accountability is an invitation to incumbent arrogance, abuse of party power, and even corruption.

But the problem with our elections goes deeper. Because of how legislative districts are drawn and because of where people choose to live, few districts are competitive, with seats regularly changing party hands. That makes August party primaries pivotal. They are low-turnout affairs dominated by true believers and party activists, and subject to monied intervention by special interests. To win a primary in Democratic Dane County, a candidate moves to the far left; to win a primary in Republican Waukesha County, the reverse is true: GOP hopefuls compete for a subset of voters on the right.

Thus, candidates who win primaries are committed partisans, who owe their careers to single-issue or ideologically motivated voters. Arriving in Madison, they have no incentive to work with members across the aisle, or even members of their party from more diverse districts. They need only answer to the few who elected them.

With the two legislative parties populated with such members, the result is to be expected: partisan bickering, “gotcha politics,” and inability to compromise.

Wisconsin’s growing labor force shortage and transportation finance impasse illustrate the adverse effect of career politics. The argument for a full-time professional legislature was its ability to anticipate and confront emerging challenges. However, whether the issue is tax policy, transportation, changing demography, fiscal management, school finance, or higher education, Wisconsin state government—under both parties—has been largely unable to think long-term and strategically.

Critique of state government is easy. Undoing decades of combative partisan conflict among career politicians is not. Regulatory tinkering with elections or campaign spending addresses symptoms, but real change rests on lasting structural change.

A first step is a nonpartisan, citizen-driven approach to legislative redistricting. This will only be effective, however, if partisan primaries are ended in favor of all-candidate, cross-party primaries. Election changes might also include reducing state restrictions on minor candidates, instituting rank voting (where voters rank candidate choices), and adopting Illinois’ discarded use of multi-member districts and “bullet voting.” The latter would help elect an occasional Democrat from Waukesha or Republican from Madison.

Returning to a part-time citizen legislature is also key but must involve more than ending full-time salaries and benefits, cutting staff, or even instituting term limits. A citizen legislature also requires shorter, fixed-length sessions, and a larger assembly so that districts are smaller, easier to represent, and less costly to contest. Committee work by electronic means becomes important.

The state senate might also be reformed to restore the founders’ vision of the upper house as a true check and balance on the lower house. Wisconsin’s senate has become mostly a means to prolonging an assembly career. Electing senators in the spring on a nonpartisan ballot to a single eight-year or two six-year terms might also ensure a more deliberative and independent body.
Changing institutional structure and process might help diversify the ranks of professional legislators and return us to an era when public service, rather than a political career, motivated a run for the legislature. It would also bring back to the Capitol greater experience in local government, small business, and parenting.

The ideas offered here are not panaceas but could promote discussion of how to restore Wisconsin’s tradition of civil discourse, mutual respect, and citizen governance.

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State Lottery Gets Gift from Taxpayers

In the spirit of the holidays, state leaders gave the Wisconsin lottery a $48 million gift in the 2017-19 state budget. The gift will help keep down homeowners’ property tax bills this year and next. But it may come with several lumps of coal. One is the unusual use of state income and sales taxes to subsidize lottery expenses, and the other may be an end-run around the state constitution.

The $48 million transfer from the state’s general fund—supported mainly by income and sales taxes—to the separate lottery fund was nestled snugly into the budget bill, and drew little attention when it was passed in the fall. The tax money will pay some lottery costs, specifically compensation to retailers for selling tickets. This beefs up the amount available for lottery tax credits to homeowners.

More property tax relief is, no doubt, welcome. But there is a hitch because the lottery is different from other state programs. Until voters amended the state constitution to permit the lottery, Wisconsin had banned all gambling for nearly 140 years. At the time of the constitutional amendment, the lottery was intended as a freestanding fund that relied solely on its own sales to operate. Shifting $48 million in general fund revenues to the lottery breaks with that understanding.

Unlike other transfers between separate funds when state leaders moved money to stabilize shaky budgets, the lottery does not appear to need such support. Though lottery sales peaked in the mid-1990s, they have remained relatively constant since and have risen modestly in recent years.
Instead, the motivation appears to be an effort to increase the lottery property tax credit. Lottery credits were initially projected to decline in 2017-19; lawmakers and the governor may have wanted to avoid such a drop just before the 2018 elections. Thanks to the transfer, appropriations for the credit will increase $8 million in 2017-18 and $40 million in 2018-19, to almost $207 million, the highest in almost 20 years.

The boost could prove short-lived, however, if past experience is a guide. In the 1999-2001 budget, lawmakers attempted to pour $440 million of general tax money into the lottery, a move that drew fire from both the attorney general and a prominent tax attorney. They reasoned that, because the lottery credit is constitutionally targeted only to homeowners—and not to businesses or other property owners—using general fund taxes rather than lottery proceeds to fund the credit could violate the state constitution. Wisconsin’s constitution requires that all types of property be taxed uniformly.

Then-Gov. Tommy Thompson (R) echoed those concerns when he vetoed the provision, citing “grave doubts” about its constitutionality. Thompson also said he did “not believe we should be paying administrative expenses of the lottery with general tax dollars on a permanent basis.”

If similar questions arise about the latest budget move, both the Wisconsin lottery and property taxpayers might eventually discover that their pre-election property tax treat was actually two lumps of coal—a questionable tax subsidy of the independent lottery fund and a violation of the state constitution.

 

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FoxConn Project Poses Unasked, Unanswered Questions for Local Officials

Much has been written about state incentives to bring high-tech manufacturer FoxConn to Wisconsin.   Little has been written about proposed local incentives.  The local commitment will likely be significant, so what follows are a few questions that local officials may want to consider.

A Foxconn TID?

The FoxConn plant would be located in a tax incremental finance district (TID) in a Racine or Kenosha county municipality. A TID allows a municipal government to borrow by issuing bonds to pay for infrastructure, such as roads, lighting, sidewalks, and sewers in the district. In some cases, the local government can also provide cash incentives to a developer.  Over the next 20 or so years, property taxes collected within a TID are mostly used to repay borrowing.  Pending legislation asks lawmakers to extend the life of a Foxconn TID to 30 years.

Questions for Locals

Typically, the process of approving a TID takes months or years. Given the desire to place the FoxConn project on a fast track for approval, these questions take on additional urgency.

Q1:  How much local investment will be needed, and do the one or two participating municipalities have the fiscal capacity to handle such a large investment?

State officials have said the FoxConn “campus” is expected to be at least 1.58 square miles, or roughly the size of Belleville in south central Wisconsin.  While the plant would occupy a major part of that area, the district would still require significant infrastructure, especially since the plant is likely to be built on undeveloped land.  The project could require a record amount of local investment—and borrowing—but how much?

Q2:  How risky would this unusual TID be?

Most TIDs are “successful”:  Property taxes collected over the life of a district are sufficient to pay off borrowing.  A FoxConn plant would likely be a boon to the region and the host municipality.  The plant and other businesses created in the TID could generate billions in tax base sufficient to repay the municipal investment.  A recent TID created in Verona for Epic Systems was repaid ahead of schedule and provided a tax windfall to local governments in the area.

That said, some TIDs are not successful. If the TID does not generate enough tax revenue, local taxpayers are responsible for remaining debt.  One concern with a high-tech TID is rapid change.  What if technology leapfrogs FoxConn, and it is left with an obsolete product and a plant it must abandon?  Is a plant the size FoxConn proposes marketable to another buyer?  If not, would its value drop significantly? Would tax revenues be insufficient to repay municipal investment in the TID?

Q3:  If a local TID fails, what happens? Does the state pick up the tab?

The governor and state legislators propose to partially protect municipal taxpayers from a failed TID.  If pending Foxconn legislation is approved and a local TID fails, the state would have a “moral obligation” to pay up to 40% of municipal investment.  Should lawmakers commit to absorbing local borrowing costs, regardless of project size?

Q4:  A final question relates to timing:  How long will it take for local government to approve a TID?

State officials say FoxConn would like to break ground as soon as possible.  According to the state Department of Revenue, the process of creating a TID takes a minimum of two months. With Foxconn needing 1,000 acres of contiguous land, would a TID require a longer period of time for a municipality to design, approve, and implement such a large and complex TID?  Given the magnitude of the project, might local officials in a small community less experienced with TIF need extra time and advice to do their due diligence?  In short, can a sound, workable TID plan be developed and a district created in the short time state officials envision?

As the project moves from concept to implementation, many of these questions may be answered. But given the stakes involved—with jobs, tax incentives, and a potentially huge impact on the communities involved—local officials would do well to keep them in mind.

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