Regular readers know that state finances were worse than the Doyle administration admitted during its eight years of fiscal incompetence. But state finances are also worse than the Walker administration admits now.
The proof is the state’s Comprehensive Annual Fiscal Report, an inch-thick annual tree-killer that summarizes the differences between politicians’ claims about the state’s fiscal health, and the reality of the state’s fiscal health.
When does an expenditure occur — when a credit card is used to make a $10 purchase, or when the $10 charge on the credit card bill is paid? Elected state officials would say the latter: No cash transaction occurs until the credit card bill is paid. CPAs who follow generally accepted accounting principles (GAAP) in preparing the CAFR would disagree: When an item is charged is key, for it creates an obligation that must be paid. In technical terms, the difference between the two viewpoints is the difference between cash and accrual accounting.
What this means practically is that governors and lawmakers can “balance” a budget—as state law requires—even when the relevant CAFR later shows a deficit for the same period.
State law requires that the state budget be balanced on a cash basis. It is, to put it bluntly, insane for an enterprise that spends nearly $35 billion every year to balance its books with the same accounting method as a four-employee business. (Shareholders of a $35 million business would fire its CEO if he claimed that cash accounting was OK for a business of that size.)
Failure to correctly balance the state budget violates, at least in spirit, Article I, section 22 of the state Constitution:
The blessings of a free government can only be maintained by a firm adherence to justice, moderation, temperance, frugality and virtue, and by frequent recurrence to fundamental principles.
Keep this in mind before you read on: Between the 1999 and 2009 fiscal years, only 15 states had a GAAP deficit in any of those fiscal years. But between the 1990 and 2011 fiscal years, Wisconsin had a GAAP deficit every single fiscal year, starting at $740 million in 1989–90, to $1.08 billion in 1990–91, to $2.24 billion in 2002–03. The GAAP deficit grew every fiscal year during the Doyle administration from 2004–05 onward.
At the end of the 2008–09 fiscal year, Wisconsin’s GAAP deficit was $2.71 billion, better than only California, Illinois and New York, four of the 12 states that had GAAP deficits in 2008–09, according to the WTA. The 2008–09 GAAP deficit was $479.53 per capita and 1.11 percent of GDP, better than only Illinois. Wisconsin was one of only 15 states to have GAAP deficits in any year between the 1999 and 2009 fiscal years, but Wisconsin and Illinois were the only two states in the nation to have GAAP deficits in every one of those fiscal years.
On June 30, 2010, the end of the 2009–10 fiscal year, the state had a cash balance of $89.6 million. But measured by the more accurate Generally Accepted Accounting Principles, the state had a deficit of $2.94 billion, or $517 per capita.
So how is the state doing after a year of the Walker administration? By at least two measures, worse.
The general fund balance deficit of $2.94 billion in the last full fiscal year of the Doyle administration has grown, as listed on page 44 of the CAFR, to $2.995 billion. The only good thing about that number is that it is a smaller percentage of state government spending, 13.5 percent vs. 13.8 percent in the previous fiscal year.
Eight months ago, I wrote that the state’s Unrestricted Net Assets (gross assets minus money owed on those assets) was a negative number, $9.46 billion, better than only seven states in dollar amounts and, at 3.7 percent of GDP, better than only five states. The WTA’s report noted that “this means ‘no funds were available for discretionary purposes,’ such as paying off creditors.” One fiscal year later, the definition of “no funds were available” expanded to a bigger (in absolute value) negative number, $9.7513 billion.
It should be pointed out that the state was operating on its 2009–11 budget, crafted (if that’s what you want to call it) by the Doyle administration and enacted into law (with, remember, $2.1 billion in tax increases) by the Democratic-controlled 2009–10 Legislature. It also should be pointed out that Walker and the 2011–13 Legislature passed the controversial (to say the least) budget repair bill early in 2011 to address the $136 million deficit in the existing 2009–11 budget. It also should be pointed out that the 2011–13 budget was enacted to eliminate the $3.6 billion structural deficit the 2009–11 budget created for the 2011–13 budget cycle.
The WTA adds:
The good news is that the descent into debt slowed. The state added more than $200 [million] to the GAAP deficit in each of the prior two years but only about $50 [million] in 2010-11. Moreover, with few, if any, budget-balancing maneuvers used in the new 2011-13 budget, the deficit reported on the CAFR appears to have “bottomed out.” Whether the trend can now be reversed is up to the state’s current and future elected officials.
There is no question that the 2011-13 state budget is a tight and painful one that cuts most major programs, except Medicaid, but it will not erase the deficit reported on state financial statements next year at this time. It will, however, accomplish something not done since the mid-1990s: Lay the foundation for a new state budget (in 2013) that does not first require paying off budget-balancing IOUs from the prior year.
What this means according to state budget experts is that, entering the 2013-15 budget period, Wisconsin would have no “structural deficit” for the first time since the mid-1990s. Lawmakers would be able to prepare a budget with an eye to future opportunities, rather than past obligations.
Before state legislators and lobbyists begin planning future spending increases, however, they would be wise to remember that underlying state fiscal problems remain. State financial statements will still have large general fund deficits that require repair.
As a bipartisan state legislative committee (on which I served) urged 10 years ago, now is the time to begin scaling back the deficits on these financial statements. Those evaluating state bonds will respond with higher ratings, and markets will respond with lower interest rates that the state must pay. Then Wisconsin citizens can say that state finances are truly “back on an even keel.”
It boggles the mind that most states are able to balance their budgets on a GAAP basis, but Wisconsin has not been able to for more than two decades, with Republican and Democratic governors, and with Republican, Democratic and split party control of the Legislature. Any state legislator or commentator who claims state government is lean is not telling the truth.
Berry claims the 2011–13 budget was “a tight and painful one,” but truth be told, it was not nearly “tight and painful” enough. The Walker administration credits itself for having eliminated the 2007–09 deficit through making government employees pay more for their benefits without large-scale state employee layoffs. All that did was to reduce the GAAP deficit on a percentage-of-state-spending basis, not in an actual dollar amount.
If eliminating the GAAP deficit means cutting state general-fund spending by 13.5 percent, that is what is required, and that is what should have happened in the 2011–13 state budget. If that means permanently laying off thousands of state employees and eliminating state programs, that is what is required. (The only jobs worth creating are private-sector jobs.) Every budget cycle state legislators put off actually balancing the state budget, state finances get progressively worse.
Fortunately, some people realize the ugly state of state finances. Walker created the Governor’s Commission on Waste, Fraud and Abuse, whose mandated report came out this week. The fourth of the commission’s five recommendations, according to the MacIver Institute:
The State of Wisconsin should be doing business on a GAAP basis. In my opinion the modified cash basis currently in place allows for cutoff issues and could be used to circumvent the State’s balanced budget requirement.
“Could be used” should have been written instead as “is being used” to make a mockery of the state’s balanced-budget requirement. That should be fixed in two ways — the state law that requires only cash balancing should be changed to require GAAP balancing, and then that GAAP-balance requirement should be added to the state Constitution. (Along with constitutional limits on year-to-year spending increases and supermajority or referendum requirements for tax increases.)
The state of state finances — whether you’re slightly optimistic about the current direction or not — demonstrates once again the necessity of protecting us taxpayers from our elected officials.
Warning: If you’re online this weekend, it will be hard to avoid me.
On Friday, I will be on Wisconsin Public Radio’s Joy Cardin program doing the 8 a.m. Week in Review segment.
Wisconsin Public Radio’s Ideas Network can be heard on WHA (970 AM) in Madison, WLBL (930 AM) in Auburndale, WHID (88.1 FM) in Green Bay, WHWC (88.3 FM) in Menomonie, WRFW (88.7 FM) in River Falls, WEPS (88.9 FM) in Elgin, Ill., WHAA (89.1 FM) in Adams, WHBM (90.3 FM) in Park Falls, WHLA (90.3 FM) in La Crosse, WRST (90.3 FM) in Oshkosh, WHAD (90.7 FM) in Delafield, W215AQ (90.9 FM) in Middleton, KUWS (91.3 FM) in Superior, WHHI (91.3 FM) in Highland, WSHS (91.7 FM) in Sheboygan, WHDI (91.9 FM) in Sister Bay, WLBL (91.9 FM) in Wausau, W275AF (102.9 FM) in Ashland, W300BM (107.9 FM) in Madison, and of course online at www.wpr.org.
That, I suppose, will serve as warmup for the four college basketball games I’m announcing this weekend — Lake Forest at Ripon Friday, women at 5:30 and men at 7:30 p.m., and Illinois College at Ripon Saturday, women at 1 and men at 3 p.m. (Similar to other broadcast sports, if you want to watch the Red Hawks, Foresters or Lady Blues/Blueboys, you have to watch us; you have no choice of announcers.)
The U.S. Supreme Court will get to decide whether the following (minus the poster’s editorial additions) is worth a $1.43 million fine:
The Federal Communications Commission fined 52 ABC stations in the Central and Mountain time zones after the aforementioned opening to ABC’s “NYPD Blue” Feb. 25, 2003. A federal appeals court overturned the fines, leaving it in the hands of the Supremes, who heard oral arguments Tuesday, reports the Los Angeles Times:
The Supreme Court seemed reluctant Tuesday to end the government’s historic policing of the broadcast airwaves and to strike down the “indecency” rules that guide prime-time TV shows.
Broadcasters use the public airwaves, and the “government can insist on a certain modicum of decency,” said Justice Antonin Scalia during oral arguments on the constitutionality of a ban on four-letter words and nudity.
“All we are asking for is for a few channels” where parents can be confident their children will not hear profanity or see sex scenes, said Chief Justice John G. Roberts Jr., who is a parent of two young children. …
Lawyers for the networks urged the Supreme Court to throw out the fines and strike down the FCC’s indecency rules. They said federal policing of broadcast content was outdated and no longer warranted. They said most Americans receive entertainment and news though cable TV or the Internet, and these media have full 1st Amendment rights. Broadcasters deserve the same rights, they said.
They also argued that current FCC policy against indecency is vague and arbitrary and should be voided on those grounds. They noted, for example, that the broadcast of “Saving Private Ryan,” the World War II movie by Steven Spielberg that portrayed the Normandy landings, was permitted, even though it included plenty of four-letter words. At the same time, other broadcasters were fined for allowing a single four-letter word.
The ABC fine is the latest in a period of fine-happiness on the part of the FCC. Before 2000, according to the Washington Post, the FCC levied fines against a TV station once, for a Kansas City station’s 1987 discussion of the movie “Private Lessons.”
After the George W. Bush administration took office, the FCC issued fines for Telemundo’s 2000 showing a couple in a bubble bath during a sexually-themed show (merely because the scene was “suggestive”), a San Francisco station’s 2002 showing of the objects of the puppet show “Puppetry of the Penis” (I kid you not), Fox’s 2003 showing of “Married by America” that included “digitally obscured nudity,” and, of course, the infamous display of one of Janet Jackson’s breasts (which I managed to miss seeing) during the Super Bowl XXXVIII halftime show in 2004.
CBS was fined $3.6 million for a 2003 episode of “Without a Trace” that featured a disappearance of a high school student tied to “very wild parties that the students have been having.” (Oddly enough, the effort to get the FCC to fine CBS didn’t take place until after the episode was repeated 13 months later.)
The millennium has brought more than the FCC has fined. Cher got away with using a certain word that rhymes with “luck” in a 2002 awards show, one year before Bono of U2 described his group’s Golden Globe Award as “f—ing brilliant.” After Jackson’s flashing the CBS audience, the FCC decided that “fleeting expletives” such as Cher’s and Bono’s could indeed be fined, though they didn’t retroactively issue fines.
The aforementioned “fleeting expletives” fine threat has resulted in TV and radio stations’ broadcasting live sports events on seven-second delays (because, you know, players might call each other rude names or object to officials’ calls), which is utterly stupid. (I would have selected another word besides “utterly” in keeping with the theme of this piece, but I have standards.)
It is interesting to note that that “NYPD Blue” scene got the fine, but other “NYPD Blue” scenes did not, including …
… or the infamous Dennis Franz shower scene, which arguably should have gotten a fine solely for aesthetic reasons. (Similar to the Madison naked bicyclist protests, you cannot un-see something.) Anyone who has lived in a house with children knows that children sometimes walk in on their parents when their parents would have preferred the door had stayed shut. If, as Roberts claimed during oral arguments Tuesday, “context counts,” the context of the scene that got the fine is completely different from my other two examples.
It probably is foreshadowing to point out that I was a big fan of “NYPD Blue” (along with other cop TV) and I am not a fan of the FCC. The fines are incompatible with what the FCC tells anyone who goes to its website:
The First Amendment, as well as Section 326 of the Communications Act, prohibits the Commission from censoring broadcast material and from interfering with freedom of expression in broadcasting. The Constitution’s protection of free speech includes that of programming that maybe objectionable to many viewer or listeners.
What is a fine if it is not an attempt at “censoring broadcast material” and “interfering with freedom of expression in broadcasting”? TV station owners whose tolerance for FCC fines reaches its limit will ultimately tell their network to stop airing FCC-objectionable material, or not carry potentially FCC-objectionable material. (There is a long history of the latter, including the boycott by Southern NBC stations of the original “Star Trek” because NBC dared to carry a series with a black actress. That boycott was about racism, however, not the FCC. The NBC station in Salt Lake City refused to carry NBC’s “The Playboy Club” when it was briefly on this past fall.)
The distinguishing factor is supposed to be that ABC, along with CBS, Fox, NBC, PBS, CW, My Network TV and other networks are available over the air, whereas HBO, Showtime, TBS, TNT, A&E and others are available only for cable or satellite viewers. That is a distinction with a decreasing difference given that only 15 percent of U.S. households get only broadcast TV.
Had I written this column a decade ago, I would have written that it’s really not the FCC’s business to decide whether my sensibilities have been offended. The fact that we now have three TV-watching children, one of whom is now up through what the networks call “prime time,” actually doesn’t change that opinion, although it makes TV-watching more of a chore.
The old “family hour,” which was supposed to feature family-appropriate TV before 8 p.m. Central time, went away a long time ago. It’s up to the producers of Fox’s “Glee,” which is on Tuesdays at 7 p.m., whether they want to have gay characters, but I’m sure parents who don’t approve of homosexuality don’t appreciate having to explain it to their kids during a TV show. (So far, I have not had to explain the purpose of Cialis, Levitra or Viagra or other “male enhancement” aids when a commercial comes up.)
Well, there’s an answer for all that: Don’t watch. In fact, you are free to not watch the following 7 p.m. shows, all of which are rated TV-14: ABC’s “The Bachelor,” CBS’ “How I Met Your Mother,” the CW’s “Gossip Girl,” Fox’s “House” and My Network TV’s “Law & Order: Special Victims Unit” on Mondays; CBS’ “NCIS” and Fox’s “Glee” on Tuesdays; CBS’ “Criminal Minds” on Wednesdays; Fox’s “Bones” and the CW’s “The Vampire Diaries” on Thursdays; and Fox’s “Kitchen Nightmares” on Fridays; plus Telemundo’s “Una Maid en Manhattan,” on every weeknight.
(It is perhaps a little more disturbing that such TV-14-rated shows as “The Simpsons,” “Two and a Half Men” and “Family Guy” are shown between 6 and 7 p.m. by stations that don’t carry 6 p.m. news, but the answer to that is in the previous paragraph too. Then again, I watched such family-friendly shows as “The Mod Squad” and “Hawaii Five-O” when I was our children’s age; I remember being bummed because the “family hour” shifted Steve McGarrett to 8 p.m.)
More disturbing than what’s on between 6 and 8 p.m. is the cultural and parental laziness inherent in the idea that TV needs to cater to the lowest-common-sensibility denominator at some times of the day because parents don’t want to have to act as parents. Parents who want to censor what their children see and hear need to be independently wealthy because they’ll have to follow them around to such opportunities for exposure to disagreeable ideas as the school lunchroom and recess.
This is a good place to bring up the difference between government and society, a distinction not enough people seem to understand. In a diverse, pluralistic society, government is not the best arbiter between contrasting standards of personal morality. (For example, see the positions on abortion rights of 1996 presidential candidate Steve Forbes vs. 2000 presidential candidate Steve Forbes.) Should the moral standards of those opposed to alcohol force beer, wine and liquor commercials off TV? No. It should not be up to the government to tell the networks that they cannot broadcast ads for legal products, whether or not you like the presence of Cialis, Levitra and Viagra ads. (Does that apply to cigarette advertising, not seen on the airwaves since 1970? Yes.) Those with problems with such advertising of legal products need to contact the offending TV station, or the companies advertising said products, and get like-minded people to do the same.
I’m not sure where one begins trying to de-coarsen the culture, but TV reflects culture at least as much as the other way around. Actually, now I do know where one begins trying to de-coarsen the culture: with yourself and those around you. The networks respond to ratings, and if people don’t watch, TV series don’t survive.
Roberts’ request that “All we are asking for is for a few channels” without foul language or bare skin should fall on deaf ears because it’s not the government’s place to tell any broadcaster — over the air, cable, satellite or online — what content the broadcaster can or cannot show. There is that troublesome First Amendment, for starters. And as brought up here last May, the idea that the airwaves are public was correctly described by former FCC commissioner Erwin Krasnow as “a mischievous notion that has been misused as a rationalization for government regulation,” which contradicts the First Amendment.
The commission was created by the Legislature as part of the 2011–13 state budget to …
… examine issues related to the future of transportation finance in Wisconsin, including the following:
Highway maintenance, rehabilitation and expansion projects
Local aid and assistance programs, including general transportation aids (GTA)
Transportation fund revenue projections
Transportation fund debt service
Options to achieve balance between revenues, expenditures and debt service
Impact of highway project planning on abutting property
The commission is meeting in Madison Thursday, Milwaukee March 22, Appleton April 26 and Eau Claire May 31 to get public input as part of the process of creating a report the Legislature is requiring the commission to complete by March 1, 2013. The commission will also take public input at dottfpcommission@dot.wi.gov.
(Want some public input? Here goes: Wisconsin 23 between Ripon and Fond du Lac needs to be four lanes ASAP. I am tired of being stuck on 23 behind someone who cannot differentiate between a 4 and a 5 either on the lower left of speed limit signs or that person’s car speedometer.)
As it happens, I know, or know of, a few of the members. I’m pleased to see Barb Fleisner, executive director of Centergy, the Central Wisconsin regional economic development effort, and a former Marketplace Magazine cover subject. A representative of Schneider National, one of the nation’s largest trucking firms, is in the group, as are a couple of companies related to road construction. The head of the Transportation Development Association of Wisconsin, a group that advocates for road construction even if it requires higher taxes, is in the group too. I am not pleased to see former Madison mayor Dave Cieslewicz in the group, although I suppose he’s there to represent the cars-suck constituency.
One of the most visible pieces of evidence that suggests that former Gov. and current U.S. Senate candidate Tommy Thompson was a big-government conservative is the vast expansion of freeways over Wisconsin since I’ve gotten my driver’s license. I grew up a mile south of where Interstate 90 goes to Chicago, Interstate 94 goes to Milwaukee and then Chicago, and I–90/94 head north until they split near Tomah to go to, respectively, La Crosse and the Twin Cities. Interstate 43 between Milwaukee and Green Bay, the snippet of Interstate 535 that connects Superior and Duluth, the snippet called Interstate 794 down Milwaukee’s lakefront, and Interstate 894 through Milwaukee’s southern suburbs were the only other Interstate highways in Wisconsin. I only knew of I–90 and I–94 through Madison because if you live in Madison, you’re unlikely to go to Milwaukee to go somewhere north and south.
Looking at Wisconsin’s Interstate mileage vs. other states may have been the first time I wondered what the hell our elected officials were doing in Washington. Some of U.S. 41 and U.S. 51 was four-lane, though with intersections instead of interchanges in many spots. There was also the Beltline Highway, much of which was freeway, but the most dangerous parts, East Broadway in Monona, were not. Most Wisconsin roads had just two lanes, including the high-traffic roads such as U.S. 151, along with, once I moved northeastward, U.S. 10 and Wisconsin 29.
Now, three decades after I got that piece of freedom called a driver’s license, freeways and four-lanes cover much more of Wisconsin’s landscape. U.S. 51 north of I–90/94 is now Interstate 39 to Wausau. I’m not sure why Wisconsin 15 between Beloit and Milwaukee’s west side was built as a freeway, but it is now part of I–43. U.S. 41 from Milwaukee to Green Bay via Fond du Lac, Oshkosh and the Fox Cities will be Interstate 41, 55 or 243 (or so speculation goes) in 2014. U.S. 10 is no longer known as “Highway Hell” (or so WGBA-TV called it) now that 10 is four lanes from the Fox Cities to Stevens Point and will be four lanes west of Stevens Point. Wisconsin 29 lost its “Bloody 29” nickname now that it is four lanes from Green Bay through Wausau to I–94. U.S. 53 is four lanes from Eau Claire north to Superior. My one-year commute to New London was made more tolerable because of U.S. 45, which is four lanes from Oshkosh to U.S. 10. And U.S. 151, the four-lane I’ve spent the most time on over the years, is four lanes from Fond du Lac through Madison to Dubuque.
That’s a lot of road construction, some of which started in the 1980s, more of which started in the 1990s. Some argue that is the result of the excessive political influence of the road-builders. Former state Sen. Brian Burke (D–Milwaukee) used to complain about “building four-lane roads to nowhere,” a place presumably not called Milwaukee. (Burke’s political career ended badly, let’s just say.) The Sierra Club, the leaders of Wisconsin’s Plants Before People movement, bemoaned the death of the $822-million pseudo-high-speed-rail project, calling projects that, unlike Madison-to-Milwaukee train projects, benefit a majority of travelers a “boondoggle.”
(I knew two people who died and one person who was permanently injured on roads that weren’t upgraded soon enough. You can conclude that environmental groups don’t bother to contact me for donations.)
The fact remains, however, that more Wisconsinites use roads than any other mode of transportation by a large margin. Road projects, after all, only benefit those who want to get themselves or get something from one place to another in this state on their own schedule. That includes travelers from point A to B and businesses that sell products. The former benefit from trains, buses and commercial aircraft only if they’re following the train’s or bus’ or airline’s schedule. Freight trains are fine for the latter if their products are large enough to make the cost economical, except that something has to get the product from the train to where it’s sold, and that will not be a train.
One subject the commission will deal with is how to fund transportation projects. Gov. James Doyle raided segregated funds, including the transportation fund, to “balance” his unbalanced budgets. That has been stopped by state Constitutional amendment. The problem, though, is that gas and diesel tax receipts drop when people buy less fuel from a combination of driving less (a byproduct of a weak economy) and driving more economical vehicles. That being the case, fuel taxes tax those who use more fuel, which results when you drive more.
One partial solution is to use sales tax proceeds from transportation purchases — for instance, car purchases — to augment the transportation fund. That is a partial solution, but it has the benefit of forcing state government to prioritize its spending of the total state tax dollar.
Another is to be more selective about which projects get done. The DOT’s Connections 2030 plan involves projects in every mode of transportation you can think of, including transportation modes in places that don’t presently have them (for instance, passenger rail). I am not an opponent of roundabouts (in fact, I prefer them to stoplights, and I vastly prefer them to four-way stops), but one sometimes gets the impression that road projects are chosen based on the opportunity to install roundabouts instead of installing roundabouts as part of regularly scheduled road projects.
A third is to spend money generated by road users only on roads, and not on little-used projects that don’t benefit most people’s first transportation method. I occasionally bike (when I can pry my bike out of our oldest son’s hands), but I would not argue that spending money on, for instance, converting abandoned railbeds to bike trails is a particularly efficient use of scarce tax dollars. You want mass transit? Pay for it yourself, Madison and Milwaukee. You want trains? Most people disagree with you.
The four-letter word “toll” inevitably will come up. Tollways would be immensely unpopular in Wisconsin. Most people who have had the misfortune of traveling the old Illinois tollways think of stopping every 20 miles or so to throw coins in baskets. (Not to mention the patronage machine known as the Illinois Tollway Authority.) The wireless toll transmitter is more convenient, but also easier to abuse, given that a few keystrokes create a rate increase.
For my money, road improvements are one of the few provably valuable uses of our tax dollars. I think about that every time I drive on Madison‘s South Beltline, which goes south of the old, bad East Broadway, which was simultaneously crowded, slow and dangerous, and took too much time to be replaced. (East Broadway is still there, but with about one-tenth of the traffic.) With road projects, you get to see what you’ve paid for.
I think I have found my favorite candidate for president.
Unfortunately, he’s not eligible, because he’s not an American. He is Canadian Prime Minister Stephen Harper, and not just because of his parents’ fine choice of first name.
On New Year’s Day, while Americans were sleeping off their hangovers, Canada achieved its goal of having the most business-friendly tax system of the Group of Seven (G-7) nations — which include, Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
On January 1st, Canada’s federal corporate tax rate automatically fell to 15 percent from 16.5 percent as the last installment of a series of corporate rate cuts launched in 2006 by the administration of Prime Minister Stephen Harper. When Harper initiated his campaign, Canada’s overall corporate tax rate was 33.9 percent according to the OECD, third-lowest in the G-7. The federal corporate rate was 22 percent and the average provincial rate was 11.8 percent. Today, Canada now has an overall corporate tax rate of 25 percent, the lowest rate of the G-7 nations.
Harper’s opponents said the same thing that American politicians say when the subject of reducing business taxes come up — too much revenue will be lost, government needs the money more than individuals, blah, blah, blah. So imagine the surprise to find, according to The Globe and Mail:
Remarkably, the gradual lowering of the corporate tax rate appears to have resulted in little loss in corporate tax revenue (when compared with long-term, prerecession revenues). …
By 2010–2011, federal corporate tax revenue reached $30-billion, substantially more than the average of $25-billion in the last four years of the prior Liberal [Party] government: 2002 through 2005. Further, federal corporate tax revenue equalled 1.8 per cent of Canadian gross domestic product, a much higher percentage than the revenue produced during the recessionary years in the early 1990s. In tough-times 1992, for example, corporate revenue, with higher tax rates, fell to 1 per cent of GDP.
Economists predictably disagree on the economic importance of corporate tax rates, mostly on an ideological basis, but it makes good sense to keep this particular tax as low as possible. These taxes, after all, are a direct cost of doing business — and Canada’s corporate cuts ensure that this country will have a cross-border edge for the next two or three years at least. With a combined federal-state rate of 39.2 per cent, the United States has the second-highest rate in the world (after Japan, with 39.5 per cent).
Our 39.2-percent rate is only the federal rate. The actual rate is higher because of the added state corporate income taxes — 7.9 percent in Wisconsin’s case. When you add state rates, businesses pay from 39.2 percent (Nevada, South Dakota, Washington and Wyoming have no corporate income tax) to 49.19 percent (Pennsylvania), which gives the U.S. the highest, not second highest, corporate income taxes in the world. (Other states, such as Ohio, tax not corporate income, but gross receipts, which are still taxes businesses must pay — or, more accurately, businesses’ customers must pay.)
Canada is not the only country to get the idea of reducing business taxes:
Canada can only revel in its lowest-tax status for a few months because on April 1st, Great Britain will lower its corporate rate to 25 percent from 26 percent. Britain’s rate is scheduled to fall even further to 23 percent by 2014. Over the past six years, the only G-7 nations that have not cut their corporate tax rate are France, Japan, and the United States. Japan and the U.S. have combined corporate rate over 39 percent. …
The drive by Canada and the U.K. to have the lowest corporate tax rates in the G-7 cannot be ignored. Canada is, after all, our largest trading partner, and the U.K. is our sixth-largest trading partner. Perhaps not so coincidentally, China — America’s second-largest trading partner — also has a corporate tax rate of 25 percent, nearly 15 percentage points lower than the U.S. rate.
Businesses use profits in one or more of three ways — reinvestment back into the business, increased compensation for employees, or dividends to shareholders (which comprise half of U.S. households). Any of those uses is better than giving the money to the government., particularly a government run by Democrats who see business as (1) a source of consequence-free tax revenue and/or (2) a necessary evil.
On Monday night, the Ripon Area Board of Education will hold a special meeting on buying land for a future site for a middle or high school.
There are no public reports as to where the land being discussed is located. The Ripon Area School District owns 35 acres of land near Murray Park Elementary School, which the Ripon Commonwealth Press is only large enough for a middle-school building.
Before the school board votes on a land purchase — which will require voter approval — and certainly before the school board starts considering where to build a new middle and/or high school, the school board needs to consider two major factors.
The first is the accessibility of a site near Murray Park that would be accessible primarily from Eureka Street. It took having children attending Murray Park and Quest Elementary School, as well as playing baseball at Murray Park, to see the regularly scheduled traffic tie-up at the four-way stop at Eureka and Oshkosh streets. That snarl is made worse by employees leaving Bremner Foods at about the same time that students are leaving Murray Park.
Four-way stops are the worst kind of intersection traffic control. How many drivers know the correct order for traffic to go through a four-way stop? (Few, based on observation.) The design produces more pollution from idling vehicles. Because they require all traffic to stop, they also waste the only truly, provably nonrenewable resource — time.
The best alternative from a safety and time perspective, installing a roundabout, is highly unlikely given the size of the intersection, the adjacent properties, and the public unpopularity of roundabouts. As it is, any intersection improvement will require state Department of Transportation approval. Having the Ripon Police Department direct traffic at that intersection between, say, 3:15 and 3:45 p.m. doesn’t seem like a good use of resources given that students are going from school to home all over the city at that time.
All of those facts suggest that any school construction on Ripon’s north side is a bad idea. Another reason should influence any school construction proposal anywhere in Ripon.
The Ripon Area School District has three school districts to the west — Green Lake, Markesan and Princeton — whose long-term viability is in question for a combination of reasons. None of those school districts are growing in enrollment or in population. And yet they all face the costs that could be lumped together into the term “overhead” — paying administrators, maintaining buildings and buying supplies — that is not decreasing, particularly as the federal and state governments pile on more mandates, usually unfunded, onto schools. Smaller school districts also are less able to provide the kind of student programming larger (to a point) school districts can provide.
Wisconsin has 3,120 units of government — counties, cities, villages, towns, school districts and other governmental bodies. Only Illinois has more. That many governmental bodies in a relatively small state population-wise is not a formula for governmental efficiency, and it’s certainly not a formula for wise use of our tax dollars. Some future Legislature will figure that out and will use a carrot and/or stick to make school districts merge, or combine cities or villages with adjoining townships.
The way to prevent getting hit by the state stick is to take the initiative. The school district should approach its smaller neighbors to the west and discuss whether a merger might create better educational opportunities for students of the school districts while costing the taxpayers of those school districts less than now. That discussion needs to take place sooner rather than later because school district geography should influence where future school buildings, particularly a high school, are built.
Steve Prestegard.com: The Presteblog 