Expect more of the same from Scott Walker on Health Insurance Exchange Plan

If there was ever a time for Scott Walker to prove he is willing to work with “both sides of the aisle,” tomorrow is the day. Friday, November 16 is the deadline for states to announce their plan to implement state-run exchanges, or face implementation of a Federal Exchange. Walker and other GOP Governors went all-in on a Romney win, and subsequent repeal of the Affordable Care Act (ACA).  

Romney lost. “Obamacare” was declared constitutional. Don’t expect anything from Scott Walker – except business as usual.

Once again, Scott Walker and the extreme far-right GOP Legislators are choosing ideology over good governing, and it is the majority of Wisconsin taxpayers who will pay. Sadly, it didn’t have to be this way. The structure of an exchange has been in existence for over one year.

On November 1, 2011 State Senator Kathleen Vinehout (D-Alma) introduced 2011 SB 273 “Badger Health Benefit Authority.”  From the Legislative Fiscal Bureau analysis:

This bill creates the Badger Health Benefit Authority (authority) that is a public body corporate and politic that is created by state law but that is not a state agency.

Under the bill, the authority must establish and operate a Wisconsin Health Benefit Exchange in this state, must make qualified health plans, with effective dates on or before January 1, 2014, available to qualified individuals and qualified employers, and must seek federal grants and other funding for the purpose of the exchange. A qualified health plan is defined in the bill, generally, as a health benefit plan that covers the costs of health care services and that meets the certification criteria described in the federal Patient Protection and Affordable Care Act (PPACA).

In the past, Legislators from both side of the aisle would have spent the year hammering out an Exchange unique to, and to the benefit of Wisconsin. This is how Badger Care came into existence. Not today.

Enter the ideological crusaders. So extreme are these ideologues, nine of them have gone on public record as promoting legislation authorizing the arrest of any Federal Employee who would attempt to enact ACA in Wisconsin – including a Health Exchange.

Rep. Chris Kapenga (R-Delafield), Sen. Mary Lazich of New Berlin; Reps. Don Pridemore of Hartford; Erik Severson of Star Prairie; Tom Larson of Colfax; Scott Krug of Wisconsin Rapids; and three Republicans elected for the first time last week who will be sworn in early next year – Rob Hutton of Brookfield, Mark Born of Beaver Dam and Dave Murphy of Greenville. (MJS)

These are not responsible legislators. They are hacks.

Citizen Action of Wisconsin recently released an email from DHS to Walker Administration officials containing a Power Point presentation – the closest thing we have seen to a blueprint from the Governor’s office.

We can be certain of one thing. The Walker plan for a Health Exchange will be consistent with his previous governing record. The WEDC Block Grant fiasco, the current Talgo breach of contract lawsuit, cronyism in Administration appointments and State Agencies, and corporate patronage at the expense of fiscal responsibility are now the hallmarks of the Walker Administration.

The Walker plan for a Health Exchange will be nothing more than a sub-contracted, privately operated online market “clearinghouse” serving existing for-profit insurance companies – and doing nothing to reduce costs or increase access to the nearly 500,000 uninsured Wisconsinites.

The result will be the same as well – a giant boondoggle which will set up a significant battle with the Federal Government over whether the Wisconsin Exchange conforms to the ACA. And we all will lose.

Scott Walker will again live up to our expectations of him, which are continually decreasing.

Walker, Vos and Darling Train Fiasco – Everybody Pays…twice

The day before Election Day, Badger Democracy reported on the train maker Talgo filing a lawsuit against Governor Scott Walker, DOT Secretary Mark Gottlieb, and the state for “default of contract.”  In brief:

Train manufacturer Talgo filed a “Default of Contract” suit against Governor Scott Walker and Wisconsin DOT Secretary Mark Gottlieb in Dane County Circuit Court today. Court documents filed today show that the Washington-based train manufacturer notified the state on April 4, 2012 that the “trainsets” were ready for required service testing to be conducted by WisDOT.

The state has attempted to claim that Talgo is responsible for testing, but the contract makes clear that WisDOT bears that responsibility.

The trainsets in question were not ordered for the controversial rail expansion to Madison. These trains are for use on the highly traveled Milwaukee to Chicago “Hiawatha” line. Coming on the heels of the WEDC/HUD block grant fiasco, DOT Secretary Gottlieb quickly issued a statement on November 5 to Badger Democracy, in full damage control mode:

The Department of Transportation participated in a formal mediation process with Talgo just last week in a good faith effort to resolve disputes related to the delivery of completed trainsets. We are disappointed that process was not successful.

Talgo has failed to complete or test the trainsets and they do not meet even basic federal standards, such as those required under the Americans with Disabilities Act (ADA).
The department will defend against this action and continue to act in the best interests of Wisconsin taxpayers.” (emphasis added)
Badger Democracy forwarded Secretary Gottlieb’s response to Lester Pines, Attorney for Talgo. In an interview, Pines offered the following response:
1. As stated in the lawsuit filing, the State of Wisconsin failed to make a $4.5 million contract payment to Talgo, as a means to attempt to force Talgo into conducting “pre-revenue” testing of the trains. Per the contract, this “pre-revenue” testing is the state’s responsibility. Contract excerpt below:
All parties acknowledge and accept that 49 CFR 238.111 provides that the Operator (or railroad, as the case may be) not the Contractor is responsible for performing a pre-revenue service acceptance testing plan. Contractor will diligently work with Department and such Operator to ensure that the Operator’s pre-revenue service acceptance testing plan is efficiently implemented.
2. The state is alleging in the statement that the trainsets do not meet ADA accessibility requirements. This is not true. The trains have been warranted by Talgo to meet every FRA and ADA standard. One minor deficiency has been corrected by a simple part replacement.
3. The state has had an escape clause in the contract which it could have used at any time. It did not. The state could also have declared Talgo in breach of contract at any time for legitimate reasons. It did not.
4. The state of Wisconsin put up a $50 million capital bond issue to pay for the trains. If the state is found in breach of contract, Talgo gets their trains back, and the state no longer will own the capital for which the bond issue was made. The state would be required to repay the $50 million – out of General Program Revenue.
A Legislative Fiscal Bureau March 14, 2012 memo to Robin Vos and Alberta Darling’s Joint Committee on Finance (JCF) confirm many of Talgo’s assertions. The memo also  gave legislators plenty of advance notice on this issue, and made specific recommendations (emphasis added):

The state purchased two passenger car train sets in 2009 from Talgo, a Spanish train manufacturer.

A total of $68.9 million in passenger rail development bonds has been approved for the purchase of the rail cars ($48.5 million), as well as other costs related to construction management, purchase of maintenance equipment, and a temporary maintenance facility.

The train sets are now nearing completion, and are scheduled to be delivered to the state for initial testing in mid-March. Following testing, the cars would be ready for use on the Milwaukee to Chicago service, likely in late 2012.

Under that agreement, the state is responsible for providing a facility for the maintenance and for making payments to Talgo for
ongoing maintenance costs. [In anticipation of the completion of the Talgo cars, 2011 Act 32 provided $4,450,000 SEG in 2011-12 and $6,700,000 SEG in 2012-13 in the Department's passenger rail service appropriation for start-up maintenance costs.]

According to the LFB memo, maintenance costs were an issue of significance. Alternative solutions were offered, including a renegotiation of the maintenance agreement:


1. Approve the Department’s request for the approval of $2,500,000 in passenger rail development bonding for final design engineering for a permanent maintenance facility for the
State’s passenger rail cars.

2. Deny the request.

3. Deny the request and direct the Department to reimburse any expenditures for the maintenance facility preliminary engineering that were made with bonds from the Department’s SEG appropriation for passenger rail service, to the extent that unencumbered funds are available in that appropriation.

4. Deny the request for additional funding and direct the Department to attempt to renegotiate the maintenance agreement with Talgo to reduce ongoing maintenance costs and, if feasible, the cost of the permanent maintenance facility. Direct the Department, in any subsequent request for funding for maintenance-related services, to report to the Committee on
the status of these negotiations.

Walker, Vos, and Darling all knew exactly what this contract entailed. They wanted to kill any new rail development as payback to their transportation construction political cronies, so they did nothing – even though it would cost taxpayers millions above and beyond the cost of honoring the contract. Vos and Darling were very vocal about how they were “saving taxpayers money” in a May 2012 edition of the Conservative-Digest.

Unfortunately, they failed to tell the whole story about the Talgo contract, and the specific issues surrounding the inevitable trainset replacement costs. You can read the entire LFB memo linked above. The LFB estimates do not include extra costs associated with continuing to use Amtrak maintenance – so the Vos/Darling  article is conveniently leaving out key details. The last few lines of their joint article are the most important:

Luckily, the state has options. According to
the Legislative Fiscal Bureau, if no funds were
given for the Talgo maintenance facility, the
“agreement can be terminated by either party.”
So that’s where we are now.

Wisconsin taxpayers were taken for a ride by
Doyle and the Democrats. We’re proud to say
that the ride is coming to an end.

Not quite Governor Walker, Representative Vos, and Senator Darling. When Talgo wins this lawsuit, Wisconsin taxpayers will be the ones paying back the $50 million in revenue to replace the bond issue – as you will have lost the capital purchased by those bonds.

And the trains – they will still have to be replaced in just a few short years anyway. In essence, we will end up paying for them twice. Though, after defaulting on the Talgo contract, will anyone do business with Wisconsin? Maybe we’ll be able to ride Chinese trains from Milwaukee to Chicago.

Lost loans at WEDC, federal block grant money distributed without authority, contract breaches, lost capital from bond issue, former aides convicted…

This is acting “…in the best interests of the taxpayers of Wisconsin…?”

Walker Administration “Default of Contract” cost to taxpayers nearly $50 million

Train manufacturer Talgo filed a “Default of Contract” suit against Governor Scott Walker and Wisconsin DOT Secretary Mark Gottlieb in Dane County Circuit Court today. Court documents filed today show that the Washington-based train manufacturer notified the state on April 4, 2012 that the “trainsets” were ready for required service testing to be conducted by WisDOT.

The state has attempted to claim that Talgo is responsible for testing, but the contract makes clear that WisDOT bears that responsibility (emphasis added):

All parties acknowledge and accept that 49 CFR 238.111 provides that the Operator (or railroad, as the case may be) not the Contractor is responsible for performing a pre-revenue service acceptance testing plan. Contractor will diligently work with Department and such Operator to ensure that the Operator’s pre-revenue service acceptance testing plan is efficiently implemented.

Wisconsin was sent an invoice for $4.599 million dollars on April 23, 2012 which has remained unpaid. On July 25, 2012 Talgo served a “notice of default” on Mark Gottlieb, DOT Secretary. The notice gave the state 30 days to cure default (emphasis added):

In short, Wisconsin is in default of its testing obligations under Section 14.02 of the Purchase
Contract, which has caused significant and costly delays on the project. Talgo is also very concerned with WisDOT’s stated intent to place the train sets into storage rather than in revenue service, which also constitutes a material breach and default under the Purchase Contract, as the Purchase Contract clearly requires WisDOT to place the train sets into revenue service (see, for example, Article 9 of the Purchase Contract).

Meanwhile, Wisconsin is also in default of its payment obligation regarding Invoice number 2012- 1.6, dated April 23, 2012. In addition, WisDOT has also wrongfully terminated the December 30,2009 Maintenance Agreement between WisDOT and Talgo - constituting an Event of Default under both that agreement and the Purchase Contract – which Talgo will address by separate letter.

Wisconsin did not reply within the required 30 days to cure default. The Maintenance Agreement referenced in the default letter between Wisconsin and Talgo was terminated by the trainmaker on November 1 as another breach of contract (emphasis added). Gottlieb was hand-delivered notice of Purchase Contract termination on November 1. If the state is found in breach of contract, Wisconsin (and its citizens by default) would lose all rights under the contract, and be on the hook for nearly $50 million plus court costs(emphasis added):

It has been more than one hundred days since Talgo served its Notice of Default upon Wisconsin.
Wisconsin has still not cured its default.

Accordingly, pursuant to the terms of the Purchase Contract, Talgo is hereby immediately
terminating the Purchase Contract. Wisconsin remains obligated to pay all its “previously accrued liabilities” under the Purchase Contract. You have received invoices for the balance of the Purchase Contract prior to your receipt of this Notice of Termination.

Talgo CEO  Antonio Perez hits the nail on the head with his statement today (emphasis added):

“We invested in the State of Wisconsin by building a manufacturing facility in
Milwaukee and creating manufacturing jobs. We built the trains and
otherwise performed our obligations under our agreements with the State of
Wisconsin. In return, rather than being “open for business” the State used
every conceivable excuse, whether fair or not and whether lawful or not, to
ensure that Talgo did not receive what it bargained for, including by refusing
to pay for the trains that Talgo completed. I don’t see how any company
would in the future choose to do business with the State of Wisconsin when
the State has shown that it cannot be trusted to honor contracts that it

“Talgo has become the innocent victim of a political agenda. Before
Governor Walker was inaugurated, he wrote an open letter to President
Obama saying, “Governor Doyle and Secretary La Hood say we can’t stop
the train. I say, just watch us.” The Governor chose to “stop the train” by
breaching its contract with Talgo.”

WEDC and Walker’s budgeting tricks are just the tip of the iceberg. Ideology and cronyism over responsible governance have become the hallmarks of the Walker Administration. Not only did Walker’s actions regarding Talgo COST jobs, they will now COST taxpayers millions of dollars payable long after he is out of office.

The Office of DOT Secretary Mark Gottlieb emailed the following comment to Badger Democracy:

The Department of Transportation participated in a formal mediation process with Talgo just last week in a good faith effort to resolve disputes related to the delivery of completed trainsets. We are disappointed that process was not successful.
Talgo has failed to complete or test the trainsets and they do not meet even basic federal standards, such as those required under the Americans with Disabilities Act (ADA).
The department will defend against this action and continue to act in the best interests of Wisconsin taxpayers.”

The Walker Administration has yet to respond to request for comment.


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Walker “Rainy Day Fund” a result of Dooh Nibor – Robin Hood in reverse

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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Americans for Prosperity will pay for your gas…for votes??

A post on the Americans for Prosperity Wisconsin website today claims the partisan, conservative organization will pay for people’s gas. The publicity stunt walks a fine campaign finance law line over a highly politicized topic – gas prices. From the AFP website:

When President Obama took office in January 2009, gas cost just $1.84 per gallon…To help relieve the pain at the pump and show Wisconsinites that there is a better way, AFP-Wisconsin will be paying the difference for you Tuesday, October 30th from 11am to 3pm at the Mount View Mobil Station (County Road NN exit on I-39) in Wausau.


AFP is directly linked to David and Charles Koch of Koch Industries, staunch supporters of Mitt Romney and ultra-conservative candidates nationwide. The Koch brothers started AFP, and continue to be the organizations’ largest financial supporters. From a 2009 interview of David Koch (the Washington Independent):

“Five years ago my brother Charles and I provided the funds to start the Americans for Prosperity. And it’s beyond my wildest dreams how the AFP has grown into this enormous organization.”

Koch Industries has recently been criticized for mailing letters to 45,000 Georgia Pacific employeesthreatening financial and employment consequences if Mitt Romney is not elected president.

Charles Koch penned an op-ed criticizing President Obama that was included in the mailing sent to all 45,000 employees of Koch Industries’ Georgia-Pacific subsidiary. The packet included a flyer with a list of candidates supported by Koch companies or its political action committee KOCHPAC. Mitt Romney tops the list. It also included an op-ed by Charles Koch slamming President Obama and one by David Koch praising Romney.

The AFP statement uses language that sounds strikingly familiar to Romney campaign ads:

President Obama’s failing agenda has had a disastrous effect on the pocketbooks of Wisconsin families for almost four yearsBy reminding drivers how different things were just a few short years ago, we can continue to show folks that by embracing energy independence and economic freedom, we can get America back on track.”

AFP hides behind its non-profit, “non-partisan” status to avoid prosecution for violation of campaign finance laws. It is claiming to merely be “educating” voters on issues.

On the contrary, this is an overt attempt to campaign for Mitt Romney at the pump – and pay for 300 votes at $1.84 a gallon…priceless propaganda.



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While Rome burns…Walker sells Wisconsin to the lowest bidder – China

Scott Walker is in Texas today with Governors Rick Perry (R-Texas) and Rick Scott (R-Florida), courting Chinese investors in the hopes of attracting “investment” in their respective states.  Walker and the Wisconsin Economic Development Corporation are attempting to attract millions of dollars in Chinese capital investment into Wisconsin, from the PiYi Investment Management Co. 

Meanwhile, back in Wisconsin, the monthly ritual of analyzing jobs data continues, with the same result. No matter how the far right attempts to spin the numbers, Wisconsin is still far behind the rest of the nation in job growth. The weekly unemployment claims report showed Wisconsin at the top of the list  of first-time unemployment filings.

The largest increases in initial claims for the week ending September 8 were in Louisiana (+6,678), Puerto Rico (+1,679), Mississippi (+1,067), Wisconsin (+988), and Washington (+833).

Right behind Louisiana, Puerto Rico, and Mississippi. Nearly 1,000 first time unemployed. Yes, it’s working – so much that Walker and WEDC will be happy to sell Wisconsin workers and resources to the Chinese, and their followers will be  lemmings diving in. Since Walker took office, job growth has come to a grinding halt.

Here’s a look at the numbers Walker actually accepts – the Local Area Unemployment Statistics (LAUS).

Labor Force is at its lowest point in 6 months, and down 10,000 from August in 2010. The population in Wisconsin is growing at about 1% per year – we are not creating enough jobs to even keep up with population growth.

Statewide employment is stagnant since Walker took office in January 2011 (2.833 million 2011 – 2.832 million in August 2012). That increase is consistent with August 2010 – August 2012 – 10,000. With 10,000 fewer people in the workforce, the net is a zero gain.

The number of unemployed is down 8,000 since Walker took office (237,000 January 2011 – 229,000 August 2012), but is at its highest level in nearly a year – September 2011. Again – 10,000 fewer people in the work force.

The unemployment rate is at its highest level since September 2011 as well. Since the passage of the Walker budget in July 2011, any decrease in the rate is virtually gone – again, with 10,000 people less in the labor force.

Scott Walker has chosen ideology over governance. The opportunity has existed to create actual job legislation, and it was squandered. Acts 10 (collective bargaining) and 32 (budget) have done more to dampen the employment hiring climate in Wisconsin than any protest could ever have.

The Bain Capital of China, PiYi, will be enthusiastic to “invest” in Wisconsin. What will that mean?

Public Education defunding to support more state “partnering” with these venture capitalists – socialized risk, privatized profit. Simply stated, the selling out of Wisconsin’s workers, resources, and ideas to Chinese investors.

Rest assured, Scott Walker will make sure our kids have enough education to stack the boxes and work the cheap production jobs for their “venture capital” bosses. Take a hard look at Freeport, Illinois and Sensata for the future of manufacturing in the Midwest. This story has been much ignored in the media.

Welcome to the new economy in Fitzwalkerstan, and the United States.

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Rahm Emanuel, TIFs, Exelon, CPS and greed…it’s kids and community that suffers

The Chicago Teacher’s Union strike is in its second full day, and there is little sign the two sides are any closer to an agreement. Rahm Emanuel made more public appearances in the last 48 hours than he has in his entire first year in office. Emanuel was always seen with children the past two days, talking about how CPS and his office just wants “what is best” for the children.

Both sides claim they want what’s best for the kids. Emanuel elevated the rhetoric by calling the strike a “choice” of the union, saying it is unnecessary. What is going unreported by Chicago media is that the mayor is correct – this is a strike of choice. The choice, however, was not one made by CTU, teachers, or parents. It was made at the highest levels of corporate power that now dominate the city of Chicago. Teachers, students, taxpayers, and parents are just pawns.

The CPS School Board is appointed by the mayor, not elected by taxpayers and parents. In 2011, newly elected mayor Rahm Emanuel appointed seven people – only one with a public education background (Dr. Mahalia Hines). The board President (David Vitale) is in high finance, former President of the Chicago Board of Trade. The Vice President (Jesse Ruiz) is a corporate attorney who is an Exelon Board Member (this is important). There is another corporate attorney (Andrea Zopp), also an Exelon Board Member (again, important). The balance of the board is an economist/political scientist (Henry Bienen), real estate developer/multi-millionaire Penny Pritzker, and journalist/communications consultant Rodrigo Sierra.

The corporate dominant politics of Chicago have made it TIF (Tax Increment Financing project) central. Under Illinois state law, TIFs may only be used to prevent or remediate urban blight; or foster industrial development.  In Chicago, TIFs have become an addiction for developers and politicians looking to line their pocketbooks and garner influence. In the past decade, TIF districts have nearly doubled, from 87 in 2000 to 162 in 2010.

In Illinois, a TIF district is authorized for a period of up to twenty‐three years, with the possibility of renewal for an additional twelve. At the time of designation of a TIF district, the current Equalized Assessed Value (EAV) of all property is measured by the Cook County Assessor’s Office and
established as a baseline, which is often referred to as the “frozen” EAV.

During a TIF district’s duration, no tax revenue created from increases in property values are allocated to overlapping taxing  bodies such as Cook County, Chicago Public Schools, or the Chicago Park District. These jurisdictions are able to continue to collect taxes on the base level of EAV within TIF districts during its 23‐ year lifespan. Briefly stated – TIFs take money out of the CPS revenue stream; including loss of inflationary property value.

An academic study presented by Dr. Bruno Quesada, University of Illinois, in December 2011 quantified the CPS revenue applied to TIF districts from 1995-2010.  The fifteen year total reported in the study was over $2.2 Billion. The 2010 figure topped $260 Million. Huge numbers in a revenue challenged economy and district – CPS is facing a $700 Million+ deficit in the current budget. The study concludes that the TIF allocation presents a tremendous burden; allocated in a non-transparent process, on CPS. The study has been completely ignored by CPS and the mayor’s office.

A recent report from the Cook County Treasurer in August 2012 disclosed that $867 Million in TIF funds remained available, but unallocated for the current year. A public schools advocacy group petitioned Emanuel to use these funds to help plug the budget hole. Emanuel refused – at the same time he was pushing for a 90 minute longer school day without compensation to teachers under contract.

CPS Board Member Penny Pritzker (also a Hyatt Hotels Board  member) has drawn fire for a $5.2 Million TIF project to build a Hyatt Hotel in Hyde Park. The same area of the city was subjected to $3.3 million in school budget cuts, and 27 full-time positions cut.While the project development company received the TIF money, Hyatt will profit from franchise fees and profit share in the new hotel development.

The corporate influence on CPS is direct, and is placing private charter school development over real public school reform and improvement. To succeed, they must break the union. Leading the charge behind Emanuel are privatizing charter advocates on the CPS Board.

In the year 2000, Rahm Emanuel was an investment banker who played a key role in the formation of Exelon, along with David Axelrod. Recall, from above, that two current CPS Board Members have direct ties to Exelon as corporate attorneys and board members – Jesse Ruiz and Andrea Zopp.

The newly retired Chairman and CEO of Exelon is John Rowe. Rowe was a chief founder of the Renaissance Schools Fund (RSF) for the establishment of private charter schools in Chicago, along with Arne Duncan and Richard M. Daley. The top donors to the fund are privatization champions, and have direct connections with current CPS School Board Members:

Exelon Corporation and Exelon Foundation , Bill and Melinda Gates Foundation, Rowe Family Charitable Trust, The Searle Funds, The Chicago Community Trust, The Walton Family Foundation, Inc., Pritzker Foundation, Bain & Company (yes, that Bain).

RSF boasts of its accomplishments on its website:

RSF has been the catalyst for the charter school movement in Chicago, raising over $50 million to open 70 new schools which will serve over 40,000 students at capacity.  We established the due diligence process and infrastructure for the selection, evaluation, and authorization of quality new schools.

In 2011, Rowe used funding from Renaissance Fund to launch “New Schools for Chicago” – and serves as its Chair. The New Schools fund has revised its mission, and it would appear that the CPS Board is complicit in its plan to dismantle and render obsolete public schools, public school teachers, and the union that represents them:

We will ramp up the growth of the best national and local charter schools, invest in next-generation school models, and drive innovation and accountability so only schools that deliver results serve children.  Our programs also engage parents and communities to demand and obtain the best education for their children. (emphasis mine)

The CPS push for teacher evaluation directly linked to test scores makes sense, in the above context. The corporate model, private charter school advocacy is being led by the CPS Board – the group charged with improving public schools in Chicago, for all students, not the select few served by select private charters with a narrow educational mission.

That is why the strike matters. It is about access, fairness, accountability for EVERY student – be it Chicago or Madison, or anywhere else there are grave inequities in the educational system. The crony educational system in Chicago is rotten from the mayor’s office, to the Board of Education, to the privateers.

At this moment, it is only the teachers walking the picket line and their supporters who stand in their way.

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WMC has the corporate solution to health insurance costs…just drop employees

Two high-level executives at separate Wisconsin Manufacturers and Commerce (WMC) member corporations have informed Badger Democracy of a quiet conspiracy within its membership. According to the executives, WMC is promoting a policy which would have private employers completely drop any employer-paid insurance programs by 2014 – forcing employees into (at the moment) non-existent exchanges in Wisconsin.

Rumors of such an action by employers have been circulating since early 2012.   A May 2012 report from Fox News questioned the ethics, and points out the politics of such an action:

A new survey of Fortune 100 companies finds that the health care overhaul, contrary to the claims of its authors, created some perverse incentives for employers to drop workers from company insurance plans…

“The penalties for the employers who drop coverage are very low, and the subsidies for the workers in the exchanges are very high,” said James Capretta, with the Ethics and Public Policy Center.

If the companies indeed take this step, the move would fly in the face of pledges by the law’s backers, including President Obama, that U.S. workers would not lose their employer-provided health plans.

The Fortune 100 “study” by the partisan Republican House Ways and Means Committee published in May, 2012 ignores the net effect of ACA to control health care costs. Two veteran health economists, David Cutler of Harvard and Karen Davis, president of the Commonwealth Fund, have calculated that over the first decade of Obamacare total spending on health care, in part by employers, will be half a trillion dollars lower than under the status quo.

The  House Ways and Means “study” cites no facts to support these cost increases. It merely cites a survey based on the beliefs of the conservative National Federation of Independent Businesses about what they think the impact of the ACA will be:

Consistent with the findings of this report, a separate survey of benefits and human resources executives managing health care costs shows the vast majority of respondents—about 85 percent—said they expect health care costs to rise in the next five years as a result of the law. 68 percent said they plan to re-evaluate their benefits strategy to offset the law’s impacts.

The report ignores the economic reality of the ACA reported in non-partisan studies (i.e. Cutler/Davis above). Rather, the “study” focuses on rationalizing the action of large employers who would drop any employer-funded health plan. In complete ignorance of the economic consequences of such a cynical, political, and ethically challenged action; the US Chamber of Commerce also sounded a warning:

“Despite promises that the health reform law would build on the existing employer sponsored system, the [employer] mandate will in fact undermine it. It will be more affordable for employers to pay the penalty for not offering coverage than to offer coverage
itself. And so, ironically, the employer mandate incents employers to stop offering health care coverage.”

The economic repercussions of such an action would be severe – especially during the current recession. Just what is the cost to employers for health insurance benefits?

The March 2012 report from the Bureau of Labor Statistics breaks it down by the hour. “Employer costs for private industry workers averaged $2.34 per hour worked for insurance benefits (life, health, and disability insurance).” A year of 40 hour work weeks amounts to 2,080 hours per year. The average cost to employers, from BLS data, is $4,596.80. Let’s give corporations the benefit of the doubt – $5,000/year on average for health insurance premiums.

The savings is obvious. The ACA assessment per employee (over 30 employees) for employers who offer no health insurance is $2,000. The average employer would save $3,000/year for each employee (after the first 30) by dumping their health plan, and just paying the assessment.

The cost to the average employee (and the broader economy) would be devastating. A search on the US Government website for health insurance coverage in Wisconsin, based on a similar, employer-provided health plan; show the cost to the employee would be nearly double the cost to the employer. $7,800 in premiums, coupled with a $2,000 deductible…versus $5,000 in cost to the employer.

The following email was sent to WMC spokesman Jim Pugh on Friday AM, September 7:

Hi Jim,

Having spoken recently to a CEO/President of a WMC member corporation in Milwaukee, I was told by this person that WMC is advising its members that to avoid having to comply with the full scope of the Patient ACA in 2014; if the law still is in force, member corporations should drop its employee benefit regarding health insurance. This would force formerly covered employees into the exchange, and more expensive (for them) premiums.

Do you have any comment on this? I will be forwarding any response to the person who gave me the information for a response.
In the absence of a response, I will assume “no comment.”
No reply has been received as of this writing.
The motivation here is simple – ideology and greed. Many corporations (including those led by Badger Democracy sources) are profitable under the current scenario. Indeed, many of the largest are currently paying little to zero in taxes. As medical costs decrease, and the insured pool expands, those costs to the employer will continue to decline (as most non-partisan studies have reported). The motivation and ideology of profit is taking precedence over simple societal, human decency.

Any corporate entity or lobby which participates in this type of activity, which would be ruinous to a broader economy, should be vilified for the cynical ideologue they truly are. Wisconsin Manufacturers and Commerce, The US Chamber of Commerce, and any of its GOP lackeys are showing their true priorities – profit. At any cost.

Follow Badger Democracy for daily reports from Chicago, and the Chicago Teachers Union strike…starting with Monday night’s post!


WMC, Corporate Conservatives pushing the lie of government regulation costs

A filing with the Wisconsin Public Service Commission this week requested the deregulation of public utilities. In its filing, the “Compete Coalition” cites the need for “free market” principles to reduce costs to consumers:

“Electricity consumers can only win if Wisconsin takes steps to reduce the adverse impact of protected monopolies and adopts laws and policies allowing competitive market forces to provide incentives for increased efficiencies, lowest available costs, and environmental improvements.”

The Compete Coalition is a front group for Washington DC lobbyists affiliated with three powerful firms – Wexler & Walker PPA, The Nickles Group, and Covington & Burling LLC. Each of these firms individually spend tens of millions of dollars annually on behalf of corporations looking to influence energy, health, and financial legislation. In addition, Compete Coalition members contribute millions more to this lobbying effort. The group’s request with the PSC is, in reality, self-serving, and holds no benefit for taxpayers or consumers. Further study reveals this to be the case with Wisconsin Manufacturers and Commerce (WMC) and conservative lawmakers’ calls for regulation reform.

In its 2011-2012 Legislative Policy Agenda, WMC lists “foster a competitive regulatory environment” as first priority. According to WMC, regulation easing and reform:

…will improve the business climate by
reducing the costs and barriers to business expansion and job creation, imposed by government.

On July 26, 2012, WMC praised Congressman Reid Ribble’s (R-WI 8th CD) “Midnight Rule Relief Act,” passed by the House as part of the “Red Tape Reduction and Small Business Jobs Creation Act” (HR 4078). Ribble’s Act would serve to:

…have an economic impact of $100 million or more annually with the exception for emergency health, safety, criminal, and national security purposes.

Just one day before, Ribble spoke in support of the bill; citing the high cost of regulation and impact on job creation. In the remarks, Ribble speaks from experience as a small businessman – suggesting that data to the contrary be ignored in favor of his anecdotal testimony.

Yesterday (August 23, 2012) Green Bay Rep. John Klenke (R-88th) issued a statement praising an activist Appeals Court opinion striking down EPA authority to strengthen coal emissions standards. According to Klenke’s statement:

These mandates are also costing thousands of jobs yet provide marginal  environmental benefit.”

Conservative think-tanks and “scholars” have published their own studies supporting policy advocates like WMC, and conservative legislators like Klenke.  The most highly regarded and cited study was commissioned by the Small Business Association Advocacy Office in 2010, “The Impact of Regulatory Costs on Small Firms” by Nicole V. Crain, Lafayette College. The study quantifies the regulatory costs to business at $1.75 trillion. For conservative legislators and corporate, free market advocates, that number is gospel. In reality – it misses the big picture, ignoring significant data. Just how does regulation impact jobs and the economy?

For the first time, in 2011, The Office of Management and Budget (OMB) issued a report to Congress on the costs of regulation and unfunded federal mandates. The key findings show that current regulation benefits far outweigh the costs to taxpayers:

1. The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 2000, to September 30, 2010, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $132 billion and $655 billion, while the estimated annual costs are in the aggregate between $44 billion and $62 billion.

2. Some rules are estimated to produce far higher net benefits than others. Moreover, there is substantial variation across agencies in the total net benefits produced by rules. For example, the air pollution rules from the Environmental Protection Agency (EPA) produced 62 to 84 percent of the benefits and 46 to 53 percent of the costs.Most rules have net benefits, but several rules have net costs, typically as a result of statutory requirements.

To reiterate – the benefit to taxpayers of current regulations and mandates far outweighs the costs – particularly EPA regulations. Benefits measured include medical/health benefits as life expectancy and cost savings, environmental safety and protection, and actual costs of programs. These benefits include protections and benefits to business – not just consumers.

But government regulations are “job killers…” Are they? The Bureau of Labor Statistics (BLS) documents statistical reasons for business closings and layoffs. In the most recent release of Mass Layoff Statistics (MLS) (August 14, 2012), the numbers clearly show that government regulation has a very small impact on employment.

In 2011-2012, Government Regulation/Intervention  accounted for 8 of 3,100 Mass Layoff events (.2%). By contrast, 301 layoff events were caused by “insufficient demand” (10%).

In 2011-2012, Government Regulation accounted for 1,218 separations (individuals) out of a total of 563,447 separations (.2%). “Insufficient demand” caused 38,788 separations (7%).

A five-year study published in 2010 by the BLS shows the data is consistent. From 2006-2010 there were 3,815 Mass Layoff Events; 26 were a result of Government Regulation (0.7%). Of 851,767 separations, 7,843 were a result of regulation (0.09%). This data is based on surveys of the affected businesses.

The facts do not bear out the argument against necessary regulation; nor do they support deregulation as a cost/job saving mechanism. In fact, the very Crain/SBA study being cited by conservatives as proof of economy – killing regulatory practices appears to be a fraud.

Sidney Shapiro, Professor of Law at Wake Forest Law School, examined why the $1.75 trillion regulatory costs  cited in the Crain/SBA study (link above) far exceeded the $62 Billion cited by the OMB study (link above).

Crain’s calculations for the regulations not covered by OMB’s report appear to be based largely on a decidedly unusual data source for economists – public opinion polling, the results of which Crain and Crain massage into a massive, but unsupported estimate of the costs of “economic” regulations.

That’s right – they extrapolated data not from actual statistics, but opinion polling. The skewering of the study continues.

Crain and Crain have refused to make their underlying data or calculations public – apparently even withholding them from the Small Business Administration office that contracted for the study — it is difficult to know precisely how they arrived at the result that economic regulation has a cost of $1.2 trillion dollars, comprising more than 70 percent of the total costs in their report.

Secret data based on opinion polling. Not a good source for an economic “study.” It turns out even the source of the poll used disputes the validity of the data from the poll.

…their numbers are based on the results of public opinion polling, specifically a poll concerning the business climate of countries that has been collected in a World Bank report. The authors of the World Bank report warn that its results should not be used for exactly the type of extrapolations made by Crain and Crain, because their underlying data are too crude.

The self-serving attacks by the corporatic Robber Barons aimed at regulation have no valid place in a responsible debate on governance. The very studies they commission and cite are a fraud. The data are sifted and sorted to support a foregone conclusion, receive no peer review, and are used for one purpose – to influence gullible, ideologically driven legislators.

As Ronald Reagan once said, “…facts are stubborn things.” Things too ignored today by conservatives.

(BD note: WMC and Congressman Ribble were contacted for a response to this article by phone and email on August 22, 2012. They did not respond)

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Tommy Thompson – a Bain Capital connection with much to hide, everything to lose

In 2003 when Tommy Thompson was still George Bush’s Secretary of Health and Human Services (HHS), an extraordinary amount of money was spent lobbying for Medicare prescription drug reform. Powerful lobbyists represented global pharmaceutical interests at HHS, and spent millions of dollars to gain profitable “reform” to prescription drug laws. Leading the charge was Secretary Thompson’s future partners at Akin, Gump, Strauss, Hauer, and Feld; spending $2,020,000 on the effort (see page 28 of the document).  What Thompson has never disclosed is his firms’ financial connection to Bain Capital – possibly one reason he is hiding his tax returns for the past 10 years.

In addition to the 2003 Medicare profiteering for Thompson, the companies he worked for in 2006 stood to profit greatly from reforms to Medicaid. The shift to greater state-managed programs turned out to be a boom for Thompson and his employers:

Thompson, who served during President Bush’s first term, is on the board of Centene Corp., a St. Louis-based company that operates Medicaid-funded health maintenance organizations in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin. His proposals to move more Medicaid beneficiaries and uninsured people onto such (state) plans could improve the company’s bottom line.

Thompson also is chairman of the Deloitte Center for Health Solutions, part of Deloitte & Touche USA LLP, a consulting firm that has contracted with states to help improve their Medicaid programs. (BD note – Deloitte now manages Medicaid health systems and reporting in Wisconsin)

Immediately after leaving the Bush Administration in 2005, Thompson took a number of high level positions. Two of the most visible were at Deloitte (Adviser and Independent Chairman) and Akin Gump (as a partner).  Thompson became part of the “revolving door” culture of Washington DC, far removed from Elroy, Wisconsin.

The most recent financial statement from Thompson, reported earlier this year, list Thompson’s assets at $13 million.  The last Public Financial Disclosure Statement available for Thompson is from 2006, when he was briefly a Presidential Candidate. The disclosure is only one year removed from his time at HHS; and is revealing as to where Thompson gets his millions, how he got them, and why he won’t turn over his taxes. Here are some income highlights:

Deloitte Touche – $1,062,500

Picis (Healthcare solutions) – $90,000

Novartis – $200,000

Heritage Medical Systems – $200,000

AGA Medical – $180,000

Pure Bioscience – $237,500

Akin Gump LLP – $1,148,421 (Income only)

To be clear – in 2006, one year after leaving the Bush Administration and deciding to not serve a second term; Thompson was paid over $1 million by a key lobbying firm for powerful and profitable (because of Thompson’s efforts) pharmaceuticals. In 2007, just one year later, Thompson and his partners at Akin Gump began representing a different type of interest – financial.

Records show that in 2007 – just before the largest economic recession since the Great Depression; Akin Gump began representing Bain Capital in lobbying for favorable securities and investment policy/legislation. Thompson and partners were paid $500,000 by Bain in 2007. In 2008, Akin Gump was paid $480,000 by Bain for financial lobbying efforts. The economy has crashed and jobs have been outsourced through the actions of firms like Bain; Thompson and his partners continue to reap the benefits.

The list of top contributors to Thompson’s current campaign  include a $20,750 contribution from Akin Gump (among other health care interests). Akin Gump still lobbies for Bain Capital.

This is not the Tommy Thompson that served as Governor of Wisconsin and negotiated with public employee unions. Thompson has changed. His refusal to disclose his taxes in light of historical information above is troubling – as it begs the question, whom does he serve? The new Tommy Thompson is far removed from the farm, has much to hide, and everything to lose.

That makes him dangerous.

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