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Surprising UW Cash Reserve Needs Audit

Posted by Kathleen Vinehout, State Senator 31st District
Kathleen Vinehout, State Senator 31st District
Kathleen Vinehout of Alma is an educator, business woman, and farmer who is now
User is currently offline
on Monday, 29 April 2013
in Wisconsin

buckyMADISON - “What’s happening to the UW reserve money?” the woman asked. She was concerned about criticism of the University of Wisconsin. “It seems like they want to attack the UW,” she told attendees at the Mondovi Town Hall Meeting.

A recent memo from the Legislative Audit Bureau (LAB) and the Legislative Fiscal Bureau (LFB) revealed nearly a billion dollars in what appeared to be reserve funds carried over from the last budget year.

Legislative leaders reacted by calling for a freeze on UW tuition. Other lawmakers want to cancel the promised $181 million increase to the UW. University officials cautioned most of the money was obligated to student financial aid or support of high demand programs like business and engineering. They say unrestricted does not mean uncommitted.

Nothing was clear except the UW’s so-called “unrestricted net assets” took a big increase in the past few years.

LAB reported in January the sizable growth of UW unrestricted net assets – or dollars not restricted by the funding source. Auditors reported UW unrestricted assets at $860.2 million. These assets increased by $624.9 million over five years.

The discovery of a large sum of unrestricted net assets comes on the heels of sustained tuition increases. It also comes at a time when the Legislature gave the UW new freedoms in how to spend money.

In recent years, as state funding to the UW dropped, university officials asked for and were granted new authorities. Changes in the last budget made funds formerly directed for a specific purpose into a flexible block grant; to allow the UW to spend as it saw fit while honoring the needs of all campuses.

New authorities granted in the last budget allowed the UW to set its own travel policies. Beginning this summer the state gave the university system contracting authority for supplies and materials unique to the UW, and the UW Madison was to develop a new system-wide personnel system.

This decision was made after many problems and much expense with the last personnel system. Even with recognition of the system’s problems, officials failed to stop recent overpayment of the health insurance and retirement of some employees. This discovery led the Joint Committee on Audit to approve an investigation of the UW personnel system as its first audit of 2013.

The discovery of large sums in reserve fractured the trust building between the UW and the Legislature. Sharp words and threats came from leaders when details about the exact purpose for which the money was set aside were hard to find.

My legislative colleagues on both sides of the aisle called for a freeze in tuition. Some said planned UW budget increases should be scrapped.

The surprise in the Legislature over the discovery of these dollars may reflect the general obscurity of the financial matters of the state and not any attempt by the UW to conceal cash.

Across the country, as in Wisconsin, legislators turn to the Comprehensive Annual Financial Report (CAFR) to learn of the state’s fiscal health. Hoping to find cash to balance the budget, legislators identify what appear to be cash balances.

But few state reports are as opaque as the CAFR. Auditors examine finances according to governmental accounting standards. While this method may assist bonding agencies in comparing risk, it does not provide legislators with necessary detailed financial and management information. So in Michigan, California and Wisconsin lawmakers seek funds the universities say are already committed.

Exactly what money is in reserve and what money is already committed is unclear.

This is why my Audit Committee colleagues and I recently directed the Legislative Audit Bureau to review the dollars and their oversight.

It is right for us to ask questions and we know the questions to audit: are the unrestricted net assets commitments or reserves? They can’t be both. What is the appropriate level of reserves necessary for a $5.5 billion operation like UW? What oversight do system officials provide and is this oversight adequate?

My legislative colleagues should slow their rush to judgment until auditors complete their investigation. It’s always better to make decisions based on facts.

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Rural Folks: Ag Budget Cuts Ill Advised

Posted by Kathleen Vinehout, State Senator 31st District
Kathleen Vinehout, State Senator 31st District
Kathleen Vinehout of Alma is an educator, business woman, and farmer who is now
User is currently offline
on Monday, 22 April 2013
in Wisconsin

BLACK RIVER FALLS - “Black River Falls is grappling with high phosphorus in the water,” the woman told me at the Town Hall Meeting. “The phosphorus is coming from farms up river. Why cut funding to conservation staff that help farmers keep manure out of the river?”

Buried in the 2013-15 state budget is removal of almost $5 million or over a quarter of cost-share funding to create structures to reduce run-off and preserve topsoil. The budget proposal also cuts nearly $2 million for local county conservation staff who assist farmers in creating and monitoring these structures.

It’s been a difficult spring for farmers. Many turned to spreading on frozen and snow covered ground. Now with the melting season underway, phosphorus from the manure finds its way into waterways.

State and federal rules clamped down on phosphorus discharged by city wastewater treatment plants and cities are crying foul. They claim the state is shortchanging them by taking away money used to help farmers control run-off. The increased cost of phosphorus cleanup will fall unfairly on city ratepayers.

Local people also raised concerns about several other changes in the budget of the Department of Agriculture, Trade and Consumer Protection (DATCP). The Governor proposes getting rid of popular programs like the Buy Local, Buy Wisconsin, the Agriculture Development and Diversification, and the Grazing Lands Conservation Initiative programs.

Buy Local, Buy Wisconsin is a competitive grant program launched in 2008 to strengthen the ‘value added’ aspects of Wisconsin agriculture. If we can keep more of the food dollar in Wisconsin, the entire state benefits. Local folks used these programs to develop markets for local produce, meat, fish, and cheese. With a small investment, the program created $4 million in new food sales over three years.

The Agriculture Development and Diversification grant program was created in 1989. Since then it has funded 342 projects with an investment of $6.9 million according to its website. This program leveraged $49 million in new capital investments and over $140 million in economic returns.

For example, James Altwoes of Mazomanie wanted to reestablish hops growing and processing in Wisconsin. With grant support he developed new technology, reached out to new buyers and involved 1,000 people through workshops focused on growing hops.

I often hear from farmers who benefited from the Grazing Lands Conservation Initiative Program. Intensive rotational grazing is a technique many used to keep cattle rotating from one pasture to another to increase the consumption of high quality feed and preserve plants and topsoil. The practice is not as easy as you might think.

Technical assistance from the Grazing Program helped farmers hone their skills at recognizing noxious weeds and early signs of needed pasture maintenance. The popular local ‘pasture walks’ were part of the outreach provided by this program.

Cutting popular and effective programs was not the only part of the state budget that drew complaints from rural people. Many were concerned about the changes facing rural schools and BadgerCare. I will cover these topics in upcoming columns.

Removing the ban on foreign corporations and foreign individuals from owning large tracts of Wisconsin land has many farmers upset. Older folks express concern about the control of food by foreign companies. They remember the rationing of World War II. They see land ownership as a way to protect the security of our country.

Younger farmers, trying hard to get started in farming, are worried foreign companies will increase the competition for land and drive up prices. I have yet to find a person attending a town hall meeting who thinks changing the law on foreign companies owning large tracts of land is a good idea.

Like foreign land ownership, the change in conservation funding is an issue that cuts across city dwellers and rural residents alike. People see the connection between high costs for city ratepayers and dirty water from farm run-off. They do not see cutting conservation money as a wise decision when cities are facing higher phosphorus standards.

Especially this year the late spring snow keeps cattle on concrete pads and winter manure storage over capacity. As one rural woman said, “we all live somewhere down stream.”

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Thoughts and Prayers with Boston

Posted by Chris Larson, State Senator, District 7
Chris Larson, State Senator, District 7
Chris Larson (D) is the Wisconsin State Senator from the 7th District in Milwauk
User is currently offline
on Saturday, 20 April 2013
in Wisconsin

MADISON - Like many others across the country, I was devastated by the news coverage of the tragic bombings at the Boston Marathon. My thoughts and prayers go out to the lives that were torn apart by this act of terror.

Finishing a marathon is not just an achievement, it is the culmination of months, if not years, of hard work a runner puts in just to get there. It is about overcoming hardship and adversity. The cowards that did this not only struck out against that American spirit of endurance and achievement, but they also struck out against a world community of runners from all 50 states and 90-plus countries across the globe.

As an avid runner who had family and friends attending and participating in the Boston Marathon, this affected me on a personal level. While my family and friends were uninjured, none of us were left untouched by this unthinkable event. My hope is that the people responsible for this horrible act of terrorism are found and brought to justice so that the those affected by this tragedy and their families are able to find peace.

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State Finances: Stuck in the Mud

Posted by Kathleen Vinehout, State Senator 31st District
Kathleen Vinehout, State Senator 31st District
Kathleen Vinehout of Alma is an educator, business woman, and farmer who is now
User is currently offline
on Monday, 15 April 2013
in Wisconsin

State Senate leader, Kathleen Vinehout, gives the inside story of how Walker and the Republicans in Madison have spent our State into a structural debt that will hold Wisconsin’s economy back for decades.


MADISON - “Pardon my tardiness,” I told the crowd gathered at a Town Hall Meeting. “I spent 20 minutes stuck in the mud.” Rural folks nodded in understanding. Spring has turned many unpaved roads into mud.

Stuck in the mud is an apt metaphor for Wisconsin state finances.

Debts and deficits; GAAP and gaps; bonding and borrowing; all these terms make it hard to follow what’s happening with the state’s fiscal health.

Wisconsin cannot run a deficit. Unlike the federal government, every budget must be balanced. But what exactly does that mean?

When state leaders make funding commitments to coming years they can create a ‘structural deficit’ which means the future years’ expected revenue won’t cover the expected spending.

This happened regularly over the past 20 years. A 2013 memo from the nonpartisan Legislative Fiscal Bureau (LFB) shows more in store in the future.

My colleague summed up the concern. “I cannot support a budget that has that kind of a structural deficit and I know several other Senate Republicans who feel the same way,” Senator Rob Cowles (R-Allouez) told the Milwaukee Journal Sentinel.

Commitments made in the proposed 2013-15 state budget leaves the following two-year budget with a significant shortfall.

Much has been made of the work done to create a budget surplus at the end of this fiscal year. LFB staff report the state ending up with a nearly $500 million surplus. The main reason is improvement in revenue from tax collections.

But the LFB memo has many folks talking about projections for a shortfall of $644 million in the 2015-17 state budget.

Deficits, structural or otherwise, should not be confused with debt. The state sells bonds to raise capital with a commitment to later pay back the bondholders. This is state debt.

The Wisconsin Taxpayers Alliance calculated debt per person rose 131.9% over the past decade. My research with the LFB shows state debt more than tripled from $4.4 billion in 1996 to $14.2 billion in 2012.

Money spent on debt payments can’t be spent on roads or classrooms so financial staff remind legislators to hold spending in check. Historically the state's debt management threshold is no more than 4% with a target of annual GPR debt service between 3% and 3.5% of all general fund spending. Debt payments go well into the danger zone at 5.28% in the first year of the 2013-15 budget.

One very troubling part of the current budget was the sale of more debt to avoid making payments coming due.

Even though the current budget had $1.8 billion projected in new revenue, the Governor did not pay $560 million in debt payments coming due. More debt was incurred as some bonds were sold at a premium to gain cash up front. This gave the appearance of the state having more cash. But the long-term effect was an increase in principle and interest.

The 5.28% of tax money spent on debt in the 2013-15 budget is the direct result of payments owed but not made in the past.

Deficits and debt are two measures of fiscal health. A third, rather unique to state government, is the GAAP Gap. This measures the gap between how the state budgets - on a cash basis - and generally accepted accounting principles (GAAP).

Since 1982 when the Attorney General interpreted the constitutional requirement for a balanced budget as “cash” accounting not “accrual” accounting, the state often committed more to spending than available resources. According to the Taxpayers Alliance, in 2011 only California and Illinois had a larger GAAP deficit than Wisconsin.

When revenues came in higher than expected, Governor Walker put half of these revenues into the rainy day fund as required by law. This, and his work paying other commitments, helped lower the GAAP deficit from $2.9B to $2.2B. But spending in his new budget increases the GAAP gap to $2.8B by 2015.

It’s important to remember the GAAP deficit only looks at the gap between money coming in and money going out in the next year. The real long-term health is better measured by the long-term commitments – i.e. debt.

Looking ahead, Wisconsin finances do seem stuck in the mud.

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Why I Voted Against the Open-Pit Mining Bill

Posted by Kathleen Vinehout, State Senator 31st District
Kathleen Vinehout, State Senator 31st District
Kathleen Vinehout of Alma is an educator, business woman, and farmer who is now
User is currently offline
on Wednesday, 13 March 2013
in Wisconsin

I am writing to provide you with an update about the open-pit mining bill. I voted against the bill when it was before the Senate. Prior to this, my colleagues and I tried to improve the bill with 20 bipartisan amendments, which were voted down. Since this is such a significant issue, I wanted you to know the latest.

The open-pit mining bill passed the state Senate by one vote. Recently the Assembly passed the bill 58 – 39. The Governor signed the bill into law last Monday, March 11th.

I want to explain a little about the bill and why I opposed it.

Wisconsin has a long history of mining. We also have a carefully crafted law that allows mining. In fact, as recently as 1993, the Flambeau Mine in Rusk County operated under the current law. I have read this law in detail. It is very thorough and has evolved over the years to accommodate changes in the industry and in public health and environmental needs. It is well balanced, involves local citizen input and provides resources to local communities affected by mining.

A few years ago, a West Virginia coal mining company, Gogebic Taconite (GTAC), asked Wisconsin to change the law. The concern conveyed to the Legislature by the company was the lack of certainty and predictability in the mining permit process. Both Democrats and Republicans agreed there could be positive changes to the law to bring certainty for mining companies and to streamline the permitting process.

I agreed there needed to be a clear deadline by which the state must agree to permit or not permit a mine.

Changes in creating the right process and timing had to be carefully balanced because Wisconsin is not the only player in permitting a mine. The U.S. Army Corps of Engineers must approve a federal permit that shows the mine will comply with the federal Clean Air Act and the Clean Water Act. The Corps acknowledged that one of the most significant opportunities to speed up the process was to make sure the law allowed for the collaboration between the state and the federal government by respecting federal law and the time needed by the federal agency.

The timelines had to be carefully established to allow for the concurrent review of the permitting application by the state and federal government. Also, it would be in the best interest of all those involved if the law allowed one single environmental impact statement be submitted. These statements are very expensive, highly technical and often disagree.

This particular location for the mine will affect the streams leading into the Bad River. This river flows through the reservation of the Bad River Band of the Lake Superior Chippewa. Native American tribes and bands are sovereign nations. As such they have their own clean water standards and laws that the mine must agree to follow if the mine engages in activities that would affect these waterways.

This past summer and fall the Senate Select Committee on Mining, led by Senator Cullen, collected over 20 hours of public testimony. Input was gathered from the mining association, industry experts, environmentalists, Native Americans, the Department of Natural Resources, the US Corps of Engineers and many others.

From this work Senator Cullen, Senator Schultz and Senator Jauch drafted a bipartisan bill to change the process. This bill, known as Senate Bill 3, added a 520-day deadline to the permitting process. The bill allowed for a collaborative process between the mine owners, the state and the Army Corps of Engineers. The bill that was only 25 pages did not change Wisconsin environmental law, nor did it release the mine from any existing environmental law. The bill allowed for a master public hearing once the DNR approved the permit and made immediate payments to the local communities affected by the mine. The bill did not release the mine from following local laws.

I found this bill to be a carefully balanced approach. I cosponsored and voted for a version of SB 3 on the Senate floor.

Unfortunately there was a parallel process to draft a different mining bill. The bill was drafted behind closed doors during the last legislative session. Modifications were made in secret during December of 2012. Newly elected Senator Tiffany introduced the bill in January of 2013. The bill, known as Senate Bill 1, received one public hearing in January and was modified by the committee on Finance and brought to the Senate floor in late February.

Senate Bill 1 had a number of problems that my colleagues and I tried to correct on the Senate floor. Chief among the problems were the potential environmental damage caused by the mine to local water sources, ground water and harm to navigable waterways.

The open-pit mine proposed by GTAC would be the largest of its type. The iron ore deposit is roughly 22 miles long. The first phase of the mine would be 4 ½ miles long and a mile and 1,000 feet deep. The waste from this mine (434 million cubic yards) would fill 3 times over the volume of Lake Monona. The waste materials would be used to fill lakes and streams – contaminating water with toxins like arsenic, lead and mercury.

The bill allowed the mine to not follow a number of environmental regulations related to water. For example, the bill allowed the mine to fill streams less than two miles long and ponds less than two acres wide. Proponents claimed this filling of streams and ponds was necessary. Senator Schultz argued on the Senate floor so many streams would be filled they would stretch from Lambeau Field to Camp Randall – 108 miles.

The taking of Wisconsin’s navigable waterways may violate Article IX of the Wisconsin Constitution that contains a clause known as the Public Trust Doctrine. The constitution protects the rights of the people of Wisconsin to use the water ways as common highways and forever free.” During the Senate debate I heard testimony that the filling of streams and lakes would likely result in an immediate court challenge.

Taken in its entirety, SB 1 added longer delays and higher costs to the mining permitting process particularly because of the unworkable time frame from the federal agencies position. The bill creates a fractured and uncertain process that will likely lead to a many year delay by the US Corps of Engineers. The bill will almost certainly result in lawsuits from the tribe and others concerned with the violation of the Wisconsin Constitution. The fiscal estimate – or cost to the state- prepared by the Department of Justice recognized these likely court costs to the people of the state of Wisconsin. The DOJ said they were unable to determine how high the court costs would be.

Mines pay fees to the state for the right to extract minerals. Unfortunately SB 1 uses the net proceeds tax” and allows the mine to write off” expenses and avoid making payments to the local communities impacted by the mine. This is especially troublesome during the early years of the mine when the communities would most incur costs like new road construction or the hiring of additional law enforcement officers.

Because of the lack of local resources to cope with the effects of the mine, the environmental damage and the permission to avoid following local ordinances, many local elected leaders in the Northern Wisconsin opposed the bill. For example, the Mayor of Mellon, the city nearest the mine, strongly opposes the mine. I also received a resolution from the Washburn City Council opposing the mine.

The strongest argument the proponents of the mine made was the possibility of job creation in an economically depressed area of the state. But even this argument is questionable. I carefully reviewed the only economic impact statement used to demonstrate the jobs created by the mine. The analysis by NorthStar Economics is made up almost entirely with assertions about dollars and jobs but without any supporting evidence. There are only two sentences in the 26 page document that describe the author’s assertions. There was no basis by which to evaluate the author’s assumptions, methodology or accuracy.

Taken in its entirety, SB 1 did exactly the opposite of what it claimed to do: It created a more uncertain, less predictable and longer process than we now have in Wisconsin’s mining law. The bill undermines the authority of the Department of Natural Resources by taking away the discretion the department has to work with a mining company. The bill releases the mine from many environmental protections. The bill releases the mine from complying with local ordinances. The bill does not provide resources to local communities –especially in the early years of the mine. The bill creates a mining process that will almost certainly end up in court.

There is a clear alternative to SB 1. We can choose a mining bill that gives greater certainty to the process, does not change environmental law, will not end up in court and provides resources to communities affected by the mine.

I’ve been hired by the people of the 31st Senate District to represent their interests in Madison. I received over 200 contacts related to the open-pit mining bill. Overwhelmingly the people of my district opposed this bill. Over 95% of those who contacted me opposed the bill. These numbers are similar across Wisconsin. It is clear to me that people want a bipartisan bill that does not destroy the pristine North Woods.

We should not presume the only way to have mining in Wisconsin is to degrade our wetlands, rivers, lakes and streams and ignore the rules and needs of local people.

For these reasons I voted against the open-pit mining bill SB1.

Thank you so much for your email. Please feel free to share this message with your friends. Please contact me regarding any issue of concern or interest to you.

 

Sincerely,

Kathleen Vinehout
State Senator - 31st District

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