MADISON — The governor’s proposed 2017-19 biennium budget puts an emphasis on motivating people to join and/or rejoin the workforce’s “Parade to Prosperity.”
Stopping at the Daily Union newsroom Friday, Lt. Gov. Rebecca Kleefisch noted that the executive state budget is organized around three main priorities: student success, accountable government and rewarding work. These priorities aim to address the challenges Wisconsin today faces.
“Our biggest challenge today is very different than the one we faced when (the governor and I) first got these jobs,” Kleefisch said. “We were coming out of a very deep recession and we had lost 133,000 jobs. Our friends and neighbors were suffering and it stunk. Our biggest challenge was, ‘How do we get more jobs that our friends and neighbors can take so that they have the benefit of a paycheck and the dignity that comes with work?’
“Well, our economy has recovered considerably and we’ve put into place really good policies so that, all of a sudden, our challenge has essentially reversed itself,” she continued. “Now, we have so many jobs and not enough people who have the skills to fill them.”
Kleefisch pointed to the number of jobs available on the Department of Workforce Development website, jobcenterofwisconsin.com, as an example.
“Although we have 96,000 open jobs on that website, we only have 53,000 folks who have posted their resumes or who are on unemployment insurance,” she explained. “So you overlay those two numbers and there is your trouble. We’re about 43,000 qualified workers short. All these job openings are basically just sitting there waiting for people to take them. That means we need to start getting folks the training they need in order to take the jobs that we have open.”
Wisconsin has a 3.9-percent unemployment rate, Kleefisch noted.
“That’s really, really, really low because 5.5 percent is what most labor market economists consider full employment in the economy,” she said. “I’m not complaining that a lot of folks have jobs. This is a great problem to have — so many opportunities, not enough folks. It’s way better than so many folks, not enough opportunities.
“But, we need to get those folks who are currently on the sidelines of our economic recovery back in,” Kleefisch added. “We need our labor market participation rate to increase a little bit. Today, Wisconsin has a 68.5-percent labor market participation rate. We need everybody who can to get back into our economy.”
The lieutenant governor used a parade as an example to illustrate her point.
“If you imagine a parade and everyone’s excited, working, paychecks in the parade and dignity and the whole bit and there’s prosperity — we have a whole bunch of people just watching right now,” Kleefisch said. “We need spectators to get involved now. Those folks who are long-term unemployed because they thought that the economy had nothing to offer them, we have a surprise in store: We’re ready for them, we have jobs for them and we need them to get trained up and ready to go. We have all the programs in place and we are starting to move some policy levers to get them back into the ‘parade to prosperity.’”
• Grades K-12.
People begin learning important job skills as young as kindergarten, such as right and wrong, telling time, time management and conflict resolution, Kleefisch said. Even two plus two is essential in today’s economy. As such, the state is planning to invest $648.9 million of additional state aid into grades K-12.
Kleefisch said speaking in a per-child context is more helpful than talking in millions and billions.
“Right now, per pupil, our students in Wisconsin get $250 per year,” she said. “That money goes directly to the classroom, it doesn’t go to school administration or anything like that. In the first year of our two-year budget, every child in Wisconsin is now going to get per pupil funding of $450 per year. In year two of this budget, it will be $654 per pupil.”
In addition, there is proposed to be a large infusion of $6.5 million in K-12 to improve and expand school mental health services.
• University of Wisconsin System.
“We’re maintaining our commitment that we’ve already made to freeze tuition at our University of Wisconsin System schools,” Kleefisch said. “In year one of the budget, we are going to extend that tuition freeze and do it another year. In year two of the budget, we are going to cut tuition at our University of Wisconsin System schools by 5 percent.”
The cost of the tuition freeze and cut will be backfilled with money from general purpose revenue, according to Kleefisch. The system will receive a $35 million increase to offset the cut.
“That is not something that is coming out of our money we had allotted toward our University of Wisconsin System,” she said. “That’s a separate commitment that we’re making because we believe in this. The governor spent all of last year doing listening sessions in all 72 counties. One of the things he heard with great consistency was, ‘Hey, thanks for the tuition freeze; now, what can you do about the future?’ This is what we can do.”
Also, there is proposed a “historic investment” in financial aid of $10 million for the UW System, increasing needs-based grants within the Wisconsin Grant program to the highest-ever levels in state history.
Overall state support for the UW-System will total $2.2 billion at the end of the biennium.
• Wisconsin technical colleges.
“We want to get folks who are nearer to entering the workforce the skills they need,” Kleefisch said. “So we, with the understanding that 50 percent of new Wisconsin jobs are going to require something more than a high school diploma yet less than a bachelor’s degree, are going to freeze tuition at our Wisconsin technical colleges.
“More people can get in there and afford it and know what to expect,” she added. “Half of it is just the certainty and knowing, ‘OK, I have to save this much and tuition is not going to go up on me.’”
The freeze will be offset by a $10 million increase in aid to the Wisconsin Technical College System and will save the typical student an estimated $279 over the next two years.
Overall state support for the Wisconsin Technical College System will total $1 billion at the end of the biennium.
“We want to make sure that people are pleased with staying in Wisconsin, working in Wisconsin,” Kleefisch said. “Knowing that we have a considerable amount more money in this budget than we expected — about $712 million more than what was initially projected — we wanted to make sure that we were giving the change back that taxpayers put in, so there’s a tax cut in this budget as well.”
The proposed budget cuts taxes by reducing the bottom two tax brackets and extending the second bracket by 25 percent.
The lowest tax bracket will go from a 4.6-percent rate to a rate of 3.9 percent. The second bracket, which now would be applied to those making up to $37,450, lowers from 6.15 percent to 5.74 percent. The third and fourth bracket are combined and go from 6.5 percent and 6.75 percent, respectively, to 6.27 percent. The top bracket lowers from 7.75 percent to 7.65 percent.
These cuts reduce income taxes on a median-income family of four by an estimated $69 in tax year 2017 and $70 in tax year 2018. The $203 million income tax cut over the biennium is targeted to middle-income families.
“Property taxes, we’re maintaining our commitment to keep those lower this year than they were back in 2010 when we first got these jobs,” Kleefisch said.
Under the proposed budget, the owners of a median-valued home will have saved a cumulative $706 over eight years compared to where they were in 2010.
“Basically, people are just doing really well,” Kleefisch said. “They’re doing way better. You can see that from the numbers. When people do well, they make more money. Wages are up 7 percent year over year, so that’s a pretty significant number. We know people are paying more in taxes and taxes come to us, so we know a lot of that simply needs to be returned to the taxpayers.
“We also want to be looking out for the future, so we’ve put $20 million in the rainy day fund,” she added. “That makes it over $300 million. So, if we ever have a rainy day in Wisconsin, we have saved up for it.”
• FoodShare Employment Training Program.
“We administer the federal food stamps program at the state (level),” Kleefisch said. “For years and years and years, pretty much every state just applied for a waver to the federal government for the work requirement that was attached to food stamps. Nobody knows (about the work requirement) because, for years, nobody required work for food stamps.”
In the type of economy Wisconsin has today, not requiring work actually is harmful because it prevents the type of job training and matchmaking that will help get more people into the economy, she said.
“In 2015, we asked childless, able-bodied adults who were on FoodShare to work or get work training for 80 hours a month,” the lieutenant governor said. “I understand that that sounds little, but some of these folks are long-term unemployed, so it may take them a minute to adjust to the reality of going back to the workplace and, in some cases, folks may not have had work experience.
“It is what it is and we’ve acknowledged that,” she added. “We’ve said, ‘OK, we’re going to do the hard thing, the expensive thing, but the right thing and we’re going to pay for training and we’re going to get people ready to work.’ We saw, within months, that we had about 60,000 people drop off our rolls and about 20,000 people immediately go get jobs.”
With the 2017-19 budget, those opportunities are extended to adults with school-aged children. It does not apply to adults with children still at home.
“Not only can (parentsguardians) go and model good behavior, good workplace practices and financial responsibility to their kids, but they have a chance to get work skills and still get their FoodShare benefit if they do this,” Kleefisch said. “Eventually, the goal is for them not to need FoodShare anymore. It’s 80 hours a month with the hope being you’re going to get the right training you need, you’re going to find the job that you love and you’re not going to want food stamps anymore because you have your paycheck.”
Kleefisch explained that, if someone on FoodShare refuses to work or get work training, then his or her benefit will be reduced, though the children’s benefits will be held harmless.
• Wisconsin Shares.
Wisconsin Shares is a tax dollar-funded program that pays for peoples daycare. The 2017-19 budget aims to eliminate a “benefits cliff” that was built in over time.
“Imagine in your head a cliff that’s dangerous and horrible and, ultimately, can be a bit of a dream-killer, if not a prosperity-killer or a paycheck-killer,” Kleefisch said. “(The reason is because) we have, in our Wisconsin Shares program, a rule that says that, ‘You can earn up to X number of dollars above the federal poverty line and then we’re going to cut you off. We’re not going to help you pay for daycare at all.’ So imagine if you’re a mom and you were offered a promotion or more hours or a pay increase, but that didn’t fully cover the difference of going from (paying) 0 percent of daycare cost to 100 percent of the cost in an instant.”
That person now faces choices such as, “Do I take this raise, which I know will get me to the next job? Do I take more hours, which will get me to the next opportunity? Do I take the promotion knowing that I can’t ever become regional manager unless I’m manager first? Or, do I not and still have my daycare paid for?”
They’re horrible choices, Kleefisch said. She noted that, often, people are forced to make the choice that gives them the most security as opposed to the thing that will help them on the ladder to the American dream.
This proposed budget provides childcare subsidies to families participating in Wisconsin Shares whose income rises above 200 percent of the federal poverty level, but with co-payments that increase $1 for every $3 in additional income.
“We can’t have people drowning because of what government put in place with its good intentions years ago that wasn’t fully thought out,” Kleefisch said.
• Earned income tax credit (EITC).
The rate of the Wisconsin EITC for filers with one dependent child is proposed to be increased from 4 percent to 11 percent of the federal EITC, beginning with tax year 2018.
The credit change will provide $20.8 million in fiscal year 2018-19 to more than 131,000 low- and moderate-income families.
“It’s a large increase, but that is the type of incentive we’re talking about because, we know, if you get into the workforce and you start making choices toward moving up that ladder, you’re going to be able to do it,” Kleefisch said.
“But, you can’t have government sliding these artificial ceilings over top of you so that every time you try and move up, you bump up against some barrier put in place by some well-meaning politician or bureaucrat. We’re trying to remove artificial barriers and give people a free opportunity to climb that ladder as fast as they want.”
The economy has realigned itself, according to the lieutenant governor.
“We’ve got to live for the jobs that exist today,” Kleefisch said. “Some of the jobs that exist today are advanced manufacturing jobs and brand new tech-savvy ag jobs, a lot of healthcare jobs, a ton of jobs in transportational logistics. People are really needy for talent. We know that we have latent talent resources. We just need to wake them up and get them into the economy.”
After the executive branch budget is proposed, it goes to the state Legislature, which then formulates its own version of the budget. Eventually, the amended proposed budget ends up back in front of the governor.