The Wisconsin State Journal editorial on the “Rainy Day Fund” deposit by the Walker Administration sang the governor’s praises for righting the fiscal ship of state:
Last year, $14.8 million was contributed to the fund, according to the Legislative Fiscal Bureau. And on Monday, the administration announced an additional $108.7 million.
Walker’s record on fiscal responsibility isn’t perfect. But this week’s contribution to the long-empty rainy day fund deserves praise.
In his weekly radio address released today, Walker took the opportunity to tout the magical restoration of Wisconsin’s economic health:
We are depositing money into the state’s rainy day fund in two consecutive years for the first time in our state’s history. Unlike other states, instead of burying the next generation under a mountain of economically crippling debt, we are making responsible decisions—leaving our children and grandchildren with funding reserves for future hard economic times.
In reality, Walker’s magic is no more than any other magic – illusion, smoke, and mirrors. His so-called surplus has been achieved not by fiscal conservatism or responsibility; but by the same accounting gimmicks he criticized his Democratic opponents of in previous elections. Worse, it has been achieved at the expense of those most in need during a deep recession, and paid those who are already well-off and wealthy. The result is a cautionary tale on what a Romney/Ryan budget would reap on a national scale…
Budget Cuts
Scott Walker and his allies made clear their moral priorities in Act 32, the biennial budget. Significant cuts were made in General Fund programs directly impacting children, education, and the economically disadvantaged. The 2012 Annual Fiscal Report from the Department of Administration (DOA) itemizes the budget choices on page 9 of the document (in millions of dollars):
1. School Aids -$412.4 -7.7% (an additional $143.6 million taken out of General School revenue was allocated to Milwaukee and Racine private charter program)
2. UW System -$189.1 -17.2%
3. WI Technical College System -$35.7 -26.2% (as a footnote – over $600 million in education cuts (K-12 + higher ed) at a time when conservatives cry out for more “skilled labor force”)
4. Correctional Services -$55.8 -4.9% (Includes $3.9 million in cuts to “Youth Aids” funding – providing local support for delinquent juvenile services)
5. Individual Tax Relief -$22.6 -7.7% ($22 million cut in the form of a tax increase on low-income adults – a result of a change in the Earned Income Tax Credit in Act 32)
Over $700 million in budget cuts were directed at students of all levels and disciplines, at-risk youth, and the economically disadvantaged. Not everyone was required to sacrifice as much for the state, however. There were a select few that received a direct benefit from the sacrifices of the aforementioned groups.
Taxes - The June 13, 2011 Legislative Fiscal Bureau Memo itemizes the tax and fee increases/decreases for the biennial budget – much of which passed as proposed in this memo. The beneficiaries and payers are well documented. Low-income families bore the lion’s share of tax increases:
Tax Increases 2011-2013
1. Earned Income Tax Credit – $56.2 million - “With the proposed changes, it is estimated that the maximum state credit for families with two children would fall from $716 to $562, and the maximum credit for families with three or more children would fall from $2,473 to $1,955.”
2. Homestead Tax Credit – $13.6 million - Act 32 repealed the existing indexing formula, virtually freezing the Homestead Tax Credit in Wisconsin. “Based on these provisions, the 2011 indexing changes that would increase the maximum income level to $24,990, the maximum property taxes or rent constituting property taxes to $1,480, and the income threshold to $8,160 would not occur. Subsequent indexing for tax year 2012 (2012-13), and thereafter, would also not occur.”
After a nearly $70 million tax increase on low-income households, the benefits of tax cuts went to less than 5% of the population, most to private corporations:
Tax Decreases 2011-2013
Capital Gains deferral for “reinvestment” in Wisconsin Business – $36.3 million - Capital Gains tax breaks benefit a very small number of taxpayers, primarily those with adjusted gross income over $200,000/year:
Under this provision, investors can sell off assets and reinvest the proceeds without being taxed on income from profits. Investors would only have to pay taxes on these profits after the new, Wisconsin-based assets are sold. The cost of this provision is $36.3 million over the next two years and $197.9 million over the next 10 years.
Domestic Production Credit – $10.1 million in 2012-13 - This astonishing tax credit to big manufacturing and agriculture production is phased in over the next 4 years. The only qualifier is that the income claimed for the credit must be a result of production in Wisconsin. The credit phase-in schedule is as follows:
a. 1.875% for tax year 2013;
b. 3.75% for tax year 2014;
c. 5.526% for tax year 2015; and
d. 7.5% for tax year 2016 and thereafter.
The credit reduces state revenue by an estimated $10,100,000 in 2012-13, $44,200,000 in 2013-14, $72,300,000 in 2014-15, $104,400,000 in 2015-16, and $128,700,000 in fiscal year 2016-17 and thereafter. This budget provision alone creates a structural deficit in 2 years.
Combined Reporting loss revisions – $46.4 million – Simply stated, large multi-unit corporations can use pre-2009 losses from one business unit to offset current profit in other business units, out to the year 2031.
The tax score – $69.8 million in tax increases to poor families who already can’t afford it, and $92.8 million (ballooning to over $200 million in 2016) in credits to the wealthy and large corporations resulting in a loss of revenue during a recession.
General Fund Raid
The June 14, 2011 Legislative Fiscal Bureau memo itemizes a broken campaign promise by Scott Walker. In a time of supposed budgetary crisis, Walker inserts a boondoggle for one of his largest constituent groups – private transportation construction. From the LFB memo:
General Fund to Transportation Fund
–2011-13 Transfer (Page 605, #5) $125,000,000
–Ongoing Transfer of 0.25% of General Fund Taxes (Page 605, #6) $35,127,000
A two-year total of $160.1 million taken out of an already decimated General Fund (see tax decreases above).
Mortgage Settlement Raid
As a part of the nationwide mortgage services abuse settlement, the state of Wisconsin was set to directly receive $31.6 million was to “be used for future law enforcement efforts, additional relief to borrowers, civil penalties, funding of foreclosure relief programs and compensation to the state for its losses from the crisis.” Instead, the Walker Administration put $25.6 million of that money into the General Fund – eventually accounting for a large portion of the “Rainy day” fund.
Debt Restructuring
A May 18, 2012 Legislative Fiscal Bureau memo itemizes another broken Walker promise. Walker promised not to “kick the can down the road” or use any “accounting gimmicks” in “balancing the budget.” Not only did Walker kick the can down the road, he assured future generations of paying off more interest than accrued by the Thompson/McCallum/Doyle debt from 2001-2010. The total restructured by Walker will be paid off until the year 2030-31 is $558,275,756 principal, $156,122,992 interest, $714,398,748 total.
CHIPRA-Medicaid Bonus Raid
A $24.5 million bonus from the Federal Government for increasing child enrollment in the Medicaid program was used not as intended (to support the Badger Care program), but rather to pad the budget surplus. From page 6-7 of the February 15, 2012 LFB memo on budget lapses :
(Wisconsin) showed that it had increased the average monthly number of children enrolled in the program by 85,557 above the FFY 2009-10 baseline for the state (368,429), for a total average monthly enrollment in that year of 453,986.
Wisconsin’s performance bonus payment for this year is $24,541,778. This amount was based on a FFY 2010-11 monthly average number of unduplicated qualifying children of 467,963.
Money earmarked for supporting an increase in poor children’s healthcare access was rerouted to pad a “budget surplus” in a purely political exercise.
What Walker and his legislative allies have done is nothing more than shifted the revenue burden onto those who can least afford it in a deep recession; and placed the burden of state debt onto the backs of our children already suffering the consequences of this economy. This “surplus” has been taken directly out of our pockets. The wealthy, corporatist barons have succeeded in plundering the good people of Wisconsin in their time of need. Robin Hood in reverse – “Dooh Nibor.”
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Investigation: Walker Administrations in Milwaukee and Madison – incompetence or corruption?
The Joint Legislative Audit Committee held a public hearing today to take testimony and commence an audit of the Wisconsin Economic Development Corporation (WEDC). Unfortunately, Rep. Robin Vos (R-Rochester) left the hearing prior to the testimony of outgoing WEDC CEO Paul Jadin. If he had stayed, Vos would have heard Jadin call for “more legislative oversight and accountability” of WEDC in his testimony.
The recent criticism of WEDC and the Department of Administration (DOA) mismanagement of the Community Development Block Grant program (CDBG) from US Housing and Urban Development (HUD) directors uncovered what appears to be a pattern following Scott Walker from his County Executive office in Milwaukee to the Governor’s office in Madison. Is it sheer incompetence, or inherent corruption and cronyism?
On March 15 2012, just one month prior to HUD suspending WEDC from administering the block grant program, HUD sent a letter to the new Milwaukee County Director of Health and Human Services Hector Colon (Full March 15 2012 letter here). The letter informed DHHS Director Colon that after a HUD review of additional information supplied by the County, 23 of 29 block grant awards failed to meet federal requirements, and the County could face repayment of over $500,000 in grants. An additional 3 programs required further documentation.
The Milwaukee County program was being administered during that time period by Timothy Russell, at the time Walker’s housing director now facing trial in the John Doe investigation. Another key Milwaukee Walker Administration person in the block grant program was Lisa Jo Marks, director of DHHS under Walker. Marks is now the DOA Housing director in the current Walker Administration.
Lisa Jo Marks was Walker’s Child Support Enforcement Director from 2007 – 2009 before being named interim director of DHHS. Marks replaced Corey Hoze as DHHS director when Hoze left for a job as Associated Bank Vice President of Government Affairs. Hoze also now serves on the WEDC Board of Directors – another agency currently involved in CDBG program controversy under Walker. Marks and Hoze undoubtedly work together in their capacities in DOA and WEDC (respectively) grant programs. Marks has also appeared as a presenter at the ultra-conservative think tank American Enterprise Institute during her Walker Administration tenure.
Badger Democracy has obtained a 2009 HUD spreadsheet from the CDBG program demonstrating continuing administration problems with accountability in the program. The spreadsheet lists 2008 programs for “LMJ and LMH” (low-mid income housing and jobs) which failed to document accomplishments as required under federal law. HUD analysts informed Badger Democracy that two of the three had eventually fulfilled the reporting requirements. One had not. Program number 3254 in the amount of $12,258.52 was made to Wisconsin Community Services in 2008. WCS has received no block grant money since 2008, and to this day has not fulfilled the reporting requirement.
Key individuals in the Milwaukee Walker Administration not under investigation in the ongoing John Doe investigation have been selected by the governor to be involved in the current CDBG program. A series of department memos from May-June 2010 show that Timothy Russell, Lisa Marks, and Cynthia Archer were all involved in the block grant award process, and had to have firsthand knowledge of grantors and awards. Only 29 awards were distributed in 2011.
A subsequent memo from October 2010 shows that Walker, Russell, and Archer were directly involved (along with the County Board and DHHS) in grant awards. A full list of past and present grants are included in the memo. On September 10, 2010, DHHS Interim Director Lisa Marks presented the list of CDBG awards to the Committee on Economic and Community Development for approval. In spite of the numerous checks and balances in the system, the grants were made and approved on the basis of trust in the Walker Administration’s assurance of their qualifications.
A close examination reveals a pattern of questionable awards, personnel, and activities. County CDBG funds must go to non-city programs in Milwaukee County. The basic violation of the programs is that they serve constituents in the city of Milwaukee, not the county (non-Milwaukee city). Of note is the money awarded to similar organizations for similar purposes. A vast majority of the grants are awarded to private charities for either job training or facility improvements/construction. While the mission of these charities is largely legitimate, who receives the grant money at the contractor level is a very large question. Under the circumstances, it should receive much greater scrutiny – especially in the following three cases.
Milwaukee County Community Business Development Partners (CBDP) is a county agency that administers the Disadvantaged Business program, and is a public/private partnership. The CBDP received over $27,000 in federal block grant money in 2011 for “micro-enterprise development.” HUD has determined that this violates the program guidelines, as all clients are in the city of Milwaukee, not the County (non-city). On July 19, 2012, then director of CBDP, Frieda Webb, was arrested by the Milwaukee County Sheriff’s Department. Webb stands accused of defrauding the County through falsifying contracts for services not fulfilled and double-billing the county for some classes and services rendered. The FBI has been involved in the investigation. Webb was hired by Scott Walker to serve as the agency’s director.
Webb allegedly conspired with Homer L. Key, owner of 5 Star Construction and Renovation in Milwaukee in the scheme to bill the County for thousands of dollars in services. While neither Webb or Key have yet been charged, the Milwaukee County DA’s office “could not comment on the investigation.” All indications are this is an ongoing investigation. Webb has since been released from county jail. Key is having extensive legal issues in Milwaukee County. Neither party returned calls for comment.
Northcott Neighborhood House received $27,720 of block grant funds for renovation and construction in 2011. Executive Director of Northcott, McArthur Weddle, has recently been appointed to the Wisconsin Housing and Economic Development Authority (WHEDA) board for a four-year term by Scott Walker. Weddle joins close Walker associate and ally Wyman Winston (WHEDA Director) on the WHEDA Board.
Winston recently came under scrutiny after a report surfaced that he was over one year late in paying property taxes on rental property amounting to payments over $30,000.
The WHEDA connection leads to a third grant award in question – in Milwaukee’s Park East Corridor now under development using millions of dollars in tax credits, subsidized loans, and grants. For years, the city and county have been on the hook for development in the corridor amid a series of lucrative financing deals for developers.
The St. Catherine’s Residence received a veto override vote from the County Board in 2007. Since that Walker veto, St. Catherine’s has even received donations from the Walkers on an annual basis. The residence has been built and continually renovated, remodeled, and expanded largely with public money from block grants and WHEDA. St. Catherine’s recently received a share of 2012 grant awards from WHEDA to “expand security measures, remodel kitchens and bathrooms, replace or repair roofs, elevators and boilers, and make restrooms handicapped accessible.”
It is not the charitable organizations themselves that should receive heightened scrutiny. Both Walker administrations rife with cronyism have demonstrated a consistent level of incompetence – or they are corrupt. It cannot be both. Walker has taken the same people with him to Madison to run these programs, and they should (by now) know the rules. Which makes the WEDC/HUD/DOA fiasco even more outrageous.
Who are the contractors who have been paid millions of dollars over the years from the CDBG program in Milwaukee County under Scott Walker, and has this program become a giant boondoggle for them? How many no-bid contracts have been awarded by allegedly corrupt officials like Frieda Webb? Is this what Walker hoped to accomplish with WEDC – on a statewide scale? At risk are millions of dollars to municipalities which are critical to local development – particularly in areas of poverty.
No one from the previous Walker Administration in Milwaukee, WEDC, DOA, or WHEDA returned calls for comment. An open records request pertaining to this information has been filed and acknowledged with WEDC and DOA.
This story will be updated as it continues to develop.
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Posted by Badger Democracy on October 17, 2012
http://bdgrdemocracy.wordpress.com/2012/10/17/investigation-walker-administrations-in-milwaukee-and-madison-incompetence-or-corruption/