Archive for February, 2010

A Reluctant New MPS Superintendent?

A recent news article out of Pennsylvania raises several troubling questions regarding the newly-hired Superintendent of Milwaukee Public Schools.

In a controversial move last month, the MPS School Board announced that they had selected Chester Upland School District Superintendent Gregory Thornton to be the next MPS Superintendent, replacing William Andrekopoulos who announced he will retire in June.

But does Thorton really want to be in Milwaukee?

Moreover, given the uncertainty surrounding the governance of the state’s largest school district, has the School Board negotiated a lucrative contract for Thorton that would see him leave with a substantial lump-sum buyout if the State of Wisconsin’s Department of Public Instruction, the State Legislature, the Governor or the Mayor of Milwaukee gain greater control of the troubled district?

In an article in Wednesday’s Daily Times of Delaware County, PA, but written before he signed his contract with MPS, Thorton laments the uncertainty surrounding governance issues at his Pennsylvania district. 

They describe the current governance set up at Chester Upland: 

Since 2007, Chester Upland has been run by a three-member empowerment board appointed by Gov. Ed Rendell, a Democrat. With Rendell on his way out, Republicans in the state Senate are considering legislation that could radically altar the makeup of the board.

If passed, the governor would appoint one member of the board and Chester’s mayor and the elected school board — out of power since the state first took control of the district in 1994 — would pick the others. Such an arrangement would virtually assure the current board, responsible for hiring Thornton, would be replaced by a Republican-backed board.

Thorton offers some insight that should have everyone who is concerned about MPS wary of Thorton’s commitment to his new gig in Milwaukee.

He admits the controversy surrounding the Chester empowerment board as being the impetus for his move to Wisconsin.

“This [Chester] board has been very good to me, but, unfortunately, they are not in a position to (guarantee) stable leadership and stable governance going forward.”

He admits to the Daily Times: 

“If none of this was happening, we wouldn’t be having this conversation,” 

So, MPS will be getting a new Superintendent who isn’t savoring coming to the city, as much as he is troubled about his current job and the uncertainty surrounding the structure of power there. (Note, Thorton is here as the result of  MPS paying an Iowa research firm $80,000 to conduct this search for a new Superintendent.)

But wait, Thorton thinks the Chester Upland School District’s governance structure is uncertain?  Did he do any research into MPS before accepting the new job here?  Not even a Google search? (Unlike the Iowa Search firm’s work, Google searches are free!)

Or  did the MPS School Board calm Thorton’s fears by secretly negotiating a sweetheart deal that gives Thorton an option to take a lucrative buyout in the event efforts to reform MPS are successful?

The Daily Times provided insight into Thorton’s negotiations with MPS:

Thornton said he was holding out for language that would give him “the authority necessary to bring about change that will help kids improve.” He added there was nothing the Chester Upland Empowerment Board could do to make him stay if the Milwaukee Board of School Directors signed off on that language.

Yep, it appears MPS accepted Thorton’s terms. In a show of tough negotiating, the MPS School Board approved a contract Tuesday night that reportedly would pay Thorton $265,000 annually (up $5,000 from the salary they approved last month and $90,000 more than the current Superintendent’s salary) plus fringe benefits. The deal includes a termination provision (golden parachute) if the governance of the district changes and Thornton is dismissed. Plainly, if Thorton is dismissed as the result of the passage of an MPS reform plan, Thorton would be paid, in full, whether he remains as Superintendent or not.

So does Thorton want to be in Milwaukee, or is he just glad to be out of Chester? Either way, looks like he got one hell of a deal, and that’s without knowing just how lucrative his fringe benefits are.

The MPS Board is playing a game of chicken with the State Legislature. If MPS governance changes ever do pass, the gambit will cost taxpayers handsomely. 

Well, it wouldn’t be the first time taxpayers didn’t get their money’s worth out of the state’s largest school district.

By Brian Fraley
 A MacIver Perspective


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Posted in mi perspectives | February 18, 2010 | | 1 Comment

Debating the School Choice Study

This week’s installment of “That’s Debatable,” is a debate over the recent study by the University of Minnesota’s John Robert Warren, PhD., which found that had MPS graduation rates equaled those for MPCP students in the classes of 2003 through 2008, the number of MPS graduates would have been about 18 percent higher.  That higher rate would have resulted in 3,352 more MPS graduates during the 2003-2008 years. 

Each week, the website WisOpinion.com asks two veterans of Wisconsin policy and politics, Scot Ross of One Wisconsin Now and our own Brian Fraley (a Director at the John K. MacIver Institute for Public Policy) to engage in exchanges on a topic of their choosing.

From Fraley’s entry, this week:

Scot, repeating your baseless accusations over and over again does not make them true. The study is sound and was done by a respected academic who has experience doing this kind of research. Look, Governor Doyle, Senator Taylor, Representative Colon, DPI Superintendent Evers and Mayor Barrett all agree that the Milwaukee Public Schools are failing the children of Milwaukee. School choice is one program that offers several thousand Milwaukee families a chance to escape that system. PARENTS are empowered to choose a better option for their children and over the years, tens of thousands of families have benefited…Scot, why don’t you venture off the Madison Isthmus and join me down here at St. Anthony’s or Messmer and tell the some of the kids who have thrived in good schools because of school choice that the program is a “failed experiment” and you believe they should have to go back to their awful MPS school down the block from where they live. I’ll pick you up, we can carpool. 

You can read the entire exchange here.

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Posted in mi perspectives | February 16, 2010 | | Comments Off

Introducing the MacIver Minute…

Welcome to the inaugural ‘MacIver Minute’ feature. Periodically, we will step away from the day to day public policy debates going on in Wisconsin and Washington, DC and offer a brief look at an interesting person or issue of relevance to our readers. Despite the title, we won’t hold ourselves to 60 seconds, but these will be quick hit videos that are meant to spur discussion. Today, we offer a brief interview with with Ambassador Mark Green, former Republican Congressman from Green Bay and 2006 Republican candidate for Governor of Wisconsin. Ambassador Green, currently the Managing Director of the Malaria No More Policy Center in Washington, DC, explains why conservatives should support the notion of the US providing foreign assistance to countries in need.

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Posted in News, mi minute | February 16, 2010 | | 1 Comment

SWIB Embraces High Risk

We have all sat through the 401k lecture about not trying to time the market. The investment professionals would have you 100% invested 100% of the time. That is not good enough for the State of Wisconsin Investment Board (SWIB). The board wants to be 120% invested 100% of the time.

SWIB trustees approved a plan at the January 26th meeting to leverage 20% of the state pension fund’s core fund to invest in Treasury Inflation Protected Securities (TIPS). TIPS pay a fixed rate of interest lower than regular Treasury bonds, but the face value of TIPS are adjusted to keep pace with changes in the consumer price index. As inflation rises, so do the interest payments and the face value of the TIPS.

Five school districts, Kenosha, Kimberly, Waukesha, West Allis-West Milwaukee and Whitefish Bay, are involved in lawsuits stemming from borrowing to invest in the derivatives. They, too, believed borrowing to invest was a good plan, until the investments went bad.

They learned the hard way there is no such thing as a free lunch. Will the state employees and the taxpayers, who trust the SWIB to make prudent investments for the growth of the pension fund, also discover their free lunch have a hidden cost?

According to the SWIB, the idea behind borrowing money to invest in the TIPS is to reduce the core fund’s exposure to equities. Equities are currently 90% of the core fund’s volatility. But the SWIB isn’t selling off equity to balance the portfolio. They did not want to reduce the possible return from stocks. They are borrowing to invest in the TIPS.

Only in Wisconsin government is investing on the margin reducing the risk for your portfolio. Pensions and Investments magazine is even calling the SWIB “pioneers.”

We may be only looking at the beginning of the SWIB’s buying on margin. The SWIB had considered borrowing up to 200% for investing, but chose for now this smaller amount.

Steven J. Foresti, managing director and head of the investment research group of Wilshire Associates Inc., said to Pensions and Investments that this is the future of investing for pension funds, and is advising clients to adopt the strategy. “…if the idea is to use leverage to manage risk and maintain diversification and current expected return levels, that is a free lunch.”

He also said that if a pension fund was leveraging to pursue return, “that would be different.” But that’s clearly what the SWIB is trying to do. The stated purpose of leveraging to invest in the TIPS is to maintain the returns from the investment in equity. SWIB is clearly borrowing to gamble, even if the loan is for the house payment they’re skipping to play Bingo at the casino.

Is this a reduction in risk? As much as diversification is good for your portfolio. However, the risk of stocks is independent of the risk of TIPS. Whether stocks go up or down is independent of whether the value of TIPS will go down. They could both go down, exposing the state pension to even more losses.

To make matters worse, the TIPS not only have to perform positively, but to make them a worthwhile investment they have to do well enough to cover the interest paid on the loan. If the TIPS lose value, the loss is even more exaggerated by the maintenance cost of the loan.

The SWIB says TIPS are one of the safer investments. But as Mike Shedlock of SitkaPacific Capital Management said, TIPS can be volatile, too. The time to invest in them was last March, according to Shedlock, before they rallied. The investor also runs the risk of flat growth in interest rates such as Japan has experienced for years.

Shedlock also said there’s even risk in running with the pack into leveraging for investment in TIPS. “If everyone says this is what we’re going to do, it drives the yield curve down.”

As I mentioned, the SWIB is not the only pension-governing body in Wisconsin to recently try leveraging to invest for long-term returns.

Unfortunately, as “pioneers,” there is a real risk that Wisconsin may be the cautionary tale.

By James Wigderson
Special Guest Perspective for the MacIver Institute

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Posted in mi perspectives | February 15, 2010 | | 1 Comment

Tensions Run High at Senate Hearing

Maciver News Service - 

[Madison, Wisc...] It’s more important to get BadgerCare Plus Basic done fast, than it is to get it done perfectly,  Senator Jon Erpenbach (D-Waunakee) repeatedly said at a Senate hearing Thursday.   

BadgerCare Plus Core, the state’s program for poor, childless adults, was only expected to serve about 40 thousand people during a two-year period, but that number was reached in only a few months.  The state had to cut off enrollment in October, leaving more than five thousand people on an initial waiting list.  Erbenbach says those five thousand people need something to help them right away. 

“We are totally up against the wall on this,”he said.  The legislative session ends April 22. 

Erbenbach is the author a bill to authorize Badger Care Plus Basic, intending for it to be a stopgap coverage solution for those eligible for, but shut out of the BadgerCare Plus Core Plan.

However, critics argue Erbenbach’s plan is impractical.  First of all, at $130 a month, it is cost prohibitive to low-income individuals, they say.  Also, since it may only serve five thousand people, the insurance pool is too small, bringing in only $7.8 million a year to cover medical costs. 

“If you get a couple of hits, boom, that sucker’s gone!  And that’s the life of being a government insurance company, and that’s the problem,” argued Sen. Ted Kanavas (R-Brookfield). 

Senator Kathleen Vinehout (D-Alma) also disagrees with Erpenbach’s plan.  “Badger Basic, continues everything that’s wrong with our current health care system,” she said bluntly. 

“Because the state doesn’t have any extra revenue, the plan is supposed to be paid for with premiums. But with 50% of the potential population without income, so it’s hard to set a premium low enough that covers costs,” Vinehout continued.  “Badger Basic puts the risk on the state and taxpayers.”

Vinehout then suggested a series of reforms to address these issues. After finishing her testimony, Erpenbach erupted. 

“So what do you suggest we do within the next five legislative minutes to fix this?” he demanded.  “We cannot leave this session and not do anything for these people on this waiting list.”

Erpenbach admits BadgerCare Plus Basic is far from ideal. 

“It’s not like we’re going out and saying ‘Hey, come on.  We’ve got this great plan.  People are showing up uninsured and they’re showing up in huge numbers,” he said. “We’re not doing anything new here.  We’re responding to a crisis.”

Although the discussion Thursday revolved around the intitial five thousand people on the waiting list, since October, the number has increased to over 23 thousand people.

**Update, despite the heated discussions, including those between the majority Democrats on the comittee, SB484 passed on a straight party line 4-3 vote today and  bill is on the Joint Finance Committee’s Tuesday calendar.

By Bill Osmulski

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Posted in News | February 12, 2010 | | 2 Comments

Liberals Fishing for Dirt on Vukmir

The Wisconsin Open Records Law and the Federal Freedom of Information Act are powerful tools for reporters and the general public who believe the government that serves them should be more transparent.

Just this month, journalists’ open records requests have provided valuable insight into the means, methods and motivations of some prominent Wisconsin lawmakers.

1) When veteran Democratic Lawmaker Marlin Schneider (D-Wisconsin Rapids) was pushing his bill to restrict public access to public court information, he sent a memo to his Capitol colleagues Dec. 23 seeking co-sponsors wherein he claimed (as he later would at a public hearing) that he had received “hundreds” of letters from innocent people who said their lives had been hurt by information appearing on the state’s Web site for court records. The Associated Press filed an open records request seeking copies of all the contacts Schneider had received and records showed that only 59 people had sent e-mails or letters to Schneider on the issue in the last three years. Worse yet for Representative Schneider, only 22 of those people complained that records on CCAP had hurt them even though their charges had been dismissed. Not hundreds.

2) After Assembly Speaker Mike Sheridan (D-Janesville) was caught up in a publicly embarassing intra-party squabble over his personal relationship with a female lobbyist, an open records request revealed information that showed how his consitutents and others communicated their opinion on the matter.

On the opoosite end of the spectrum are taxpayer-financed, time-wasting requests that serve as nothing more than free political opposition research fishing expeditions conducted at taxpayers’ expense. With these requests, one can draw more insight about the means, methods and motivations of the person making the request. Consider this recent request filed with the office of State Representative Leah Vukmir (R-Wauwatosa) by former One Wisconsin Now minion and current blogger Cory Liebmann:

Please be advised that I am requesting the following public records of Rep. Leah Vukmir’s office under the state’s open records law:

1.  All email from 7/1/08 through 1/20/10 for Rep. Vukmir, Dean Cady and Matthew Adamczyk (only in his capacity working for Rep. Vukmir) that fit the following search words and names:

“Jim Sullivan”, “Sullivan”, “WPRI”, “Wisconsin Policy Research Institute”, “MacIver”, “Americans for Prosperity”, “AFP”, “Sykes”, “Belling”, “Wisconsin Manufacturers and Commerce”, “WMC”, “Grebe”, “Kohler”, “Bradley Foundation”, “Obama”, “Palin”, “McCain”, “ALEC”, “American Legislative Exchange Council”, “Republican”, “Democrat”, “GOP”, “Barrett”, “Scott Walker”, “Lawton”, “Healy”, “Jensen”, “Zignego”, “Walton”, “Wal-Mart”, “Sprenger”, “Wisconsin Right to Life”, “WRTL” , “Pro-Life Wisconsin”, “Tenth Amendment”, “Tea Party”, “Wisconsin Family Council”, “WFC”, “Wisconsin Family Action”, “WFA”, “Appling”, “Julaine”, “Milwaukee Police”, “Grothman”, “Ed Thompson”, “WVCY”, “global warming”, “marijuana”, “PRESS”, “Parents Raising Educational Standards in Schools”, “Rose Fernandez”, “Fraley”, “Mark Block”, “Dooley”, “Real Debate”, “Owen”, “Wigderson”, “McBride”, “Bucher”, “Boots and Sabers”, “Lightbourn”, “Sheehy”, “Koschnick”, “Memphis”, “Luber”, “Stitt”, “One Wisconsin Now”, “Citizen Action”.

2. All official calendar entries (including notes) for Rep. Vukmir and Dean Cady from 7/1/08 through 1/20/10 with known representatives or employees from any of the following entities and organizations:

Wisconsin Manufacturers and Commerce, Americans for Prosperity, MacIver Institute, Wisconsin Policy Research Institute, American Legislative Exchange Council, Wisconsin Right to Life, Pro-Life Wisconsin, Wisconsin Family Council, Wisconsin Family Action, Wisconsin Business Council, Milwaukee Journal Sentinel, Wisconsin State Journal, Metropolitan Milwaukee Association of Commerce, FreedomWorks,  Bradley Foundation,  Wisconsin Coalition of Virtual School Families, Parents Raising Educational Standards in Schools, School Choice Wisconsin, Milwaukee Police Association.

3. A listing of Rep. Vukmir’s use of sick, vacation and other paid leave while she has been in her current office.

4. A copy of any electronic files that have been compiled tracking media clips involving Rep. Vukmir during her time in her current office. 

Vukmir’s office staff  say they will comply with this request, even though a nonpartisan legislative attorney said the request could be denied for being too broad in scope.  

Representative Vukmir is running for State Senate this fall, challenging Democrat Senator Jim Sullivan (D-Wauwatosa). It is clear from this request that the liberal special interest machine is ready to portray Vukmir as part of some grand conservative cabal.  If only Mr. Liebmann had asked for the minutes of the latest Vast Right Wing Conspiracy Annual Meeting, he could have received all his research in one handy document.

As a constituent, and through my professional work, I would not be surprised if there are a few communications between me and the Representative. As I am sure there are reams of communications that mention “Democrat’ and “Republican.” I find it particularly amusing that Mr. Liebmann is so concerned about “Tenth Amendment.” Who knew that state’s rights would be so controversial?

As a rule, when I’ve filed such requests, they are much more narrow in scope and much easier with which to compy. As the liberal special interest groups begin to use the information obtained by requests like this, I hope Mr. Liebmann makes a tidy sum for the work done by state employees who complied with his fishing expedition/request.

Kudos to Representative Vukmir for fulfilling the request and for having nothing to fear from such transparency.

And finally, here’s hoping Mr. Liebmann doesn’t dent his tin foil hat when lugging all those documents out of the Capitol.

By Brian Fraley
A MacIver Perspective

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Posted in mi perspectives | February 12, 2010 | | 13 Comments

Plale Admits Doubts on Global Warming, Still Pushes Bill

MacIver News Service - 

[Madison, Wisconsin] Senator Jeff Plale (D-South Milwaukee) co-Chairman of the Senate Select Committee on Clean Energy made a stunning comment about the threat of Global Warming, just as his meeting concluded, Thursday.

Plale informed his fellow Senators that the final bill, SB 450-dubbed by supporters as “The Clean Energy Jobs Act,” will undergo revisions as the legislative process continues. Plale told his colleagues and others in attendance “Now is the time to take the information we’ve gathered, start to put something together that is work that’s workable.”

Plale then stunned the audience with this admission about his position on the global warming debate: “I don’t know if the science is real or not.”

Yet, he argued, something needed to be done.

How sweeping that ‘something’ will be, is yet to be determined. 

Right now, according to the nonpartisan Legislative Reference Bureau, SB 450 relates to:

“goals for reductions in greenhouse gas emissions, for construction of zero net energy buildings and for energy conservation; information, analyses, reports, education, and training concerning greenhouse gas emissions and climate change; energy efficiency and renewable resource programs; renewable energy requirements of electric utilities and retail cooperatives; requiring electric utilities to purchase renewable energy from certain renewable facilities in their service territories; authority of the Public Service Commission over nuclear power plants; motor vehicle emission limitations; a low carbon standard for transportation fuels; the brownfield site assessment grant program, the main street program, the brownfields grant program, the forward innovation fund, grants to local governments for planning activities, the transportation facilities economic assistance and development program, a model parking ordinance; surface transportation planning by the Department of Transportation and metropolitan planning organizations to reduce greenhouse gas emissions; environmental evaluations for transportation projects; idling limits for certain vehicles; energy conservation codes for public buildings, places of employment, one- and two-family dwellings, and agricultural facilities; design standards for state buildings; energy efficiency standards for certain consumer audio and video devices, boiler inspection requirements; greenhouse gas emissions and energy use by certain state agencies and state assistance to school districts in achieving energy efficiencies; creating an exception to local levy limits for amounts spent on energy efficiency measures; creating an energy crop reserve program; identification of private forest land, promoting sequestration of carbon in forests, qualifying practices and cost-share requirements under the forest grant program established by the Department of Natural Resources; air pollution permits for certain stationary sources reducing greenhouse gas emissions; allocating a portion of existing tax-exempt industrial development revenue bonding to clean energy manufacturing facilities and renewable power generating facilities; requiring a report on certain programs to limit greenhouse gas emissions; granting rule-making authority; requiring the exercise of rule-making authority; and providing a penalty.”

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Posted in News | February 11, 2010 | | 4 Comments

Spending Surge Continues, Unabated

A disturbing bit of news and analysis from Veronique de Rugy, posted at the Mercatus Center at George Mason University and over at Reason…

The summary at Mercatus: Last Monday the Obama Administration released its budget for the upcoming fiscal year, FY 2011.  When compared to projections from last year’s budget, this budget calls for increased government spending not only this year, but also into the future.  In fact, in the period between 2011 and 2019, the FY 2011 budget proposes an additional $1.5 trillion in spending over the spending projected for this time period in the 2010 projections.

Read the rest at Reason.

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Posted in mi perspectives | February 9, 2010 | | 1 Comment

Waukesha Water Wars
Regional Cooperation a 2-way Street

It’s the $116,000,000 question.  Where will the city of Waukesha get water from, and what does it mean for regional cooperation?

Waukesha was once known for the healing properties of its spring water, earning the city the nickname, “Spring City.” Now the city is under a compliance order from the Environmental Protection Agency to reduce the amount of radium in the drinking water. Apparently the healthy glow of Waukesha residents owes more to Madame Curie than to the extra minerals.

The radium is the result of using well water from a deep aquifer that is rapidly becoming depleted. A layer of shale prevents surface water from replenishing the aquifer. As the aquifer diminishes, the radium count increases.

Waukesha has two choices, and neither one of them are fun.

The first choice is to acquire land to the west and dig more shallow wells. This is costly, $145-$176 million, and will again directly affect water surface features in the surrounding area.  Communities to the west will surely protest the loss of water pressure in residential wells and the damage to lakes and rivers. Already environmentalists and residents of the Town of Waukesha are unhappy over plans to annex land near the Vernon Marsh area for development and shallow wells.

The other choice is to get water from Lake Michigan. Under the Great Lakes Compact, communities in counties that straddle the Great Lakes Basin can petition to be granted permission to tap Lake Michigan water. This is not an easy process.

Under the Great Lakes Compact, each state in the Great Lakes region has the power to veto any applications for water. The community getting the water has to arrange for the water’s complete return, with allowance for use. Finally, the community has to find a seller.

In Waukesha’s case, they are considering water from three communities: Milwaukee, Oak Creek, and Racine. Milwaukee is the “cheapest” option so far. To build as pipeline to get the water from Milwaukee and to accomplish the return flow is estimated at $116 million, much less expensive than developing wells to the west.

Nothing in life is ever that easy. During Milwaukee’s debate over whether to sell water to western New Berlin, Milwaukee aldermen demanded more than the price of water. They wanted New Berlin’s cooperation with light rail and other regional transportation projects. They wanted New Berlin to agree to allow more affordable housing. In the end those demands were dropped, and New Berlin agreed to pay $650,000 a year and a one-time fee of $1.5 million.

Now it’s Waukesha’s turn, and the issue has already injected itself into the race for mayor. Waukesha’s current mayor Larry Nelson likes regional cooperation of the Milwaukee kind. He supports regional cooperation on transportation and is open to joining a Regional Transit Authority.

His opponents are of varying degrees of opposition. Former Milwaukee Journal Sentinel reporter Darryl Enriquez supports the idea of getting water from Lake Michigan, but only if there are no policy strings attached. He wants to be open to negotiating with Oak Creek and Racine to keep Milwaukee from dictating terms. Former police officer Bill Beglinger and real estate developer Jeff Scrima go even further, suggesting Waukesha should store water in quarries and develop wells to the west rather than take the risk of Milwaukee dictating the city’s housing and transportation policies, even though such water plans were dismissed as unworkable and too expensive.

On the other side, there’s pressure in Milwaukee to not sell any water to Waukesha. Local environmental writer Jim Rowen is typical of the opposition to selling Waukesha water. Rowen’s objection is to any expansion of Waukesha, believing growth in Southeastern Wisconsin is a zero-sum game. If Waukesha grows, it must be to the detriment of Milwaukee. Regional cooperation gives way to regional competition, and Rowen wants to play cut-throat with Waukesha’s water needs.

However, the growth to which Rowen objects is the natural, modest growth Waukesha has already been seeing projected over the time of the negotiations to get Waukesha approval for water, build the pipeline and arrange for the return flow of the water to Lake Michigan.

Growth of part of the region should be to the benefit of all. If Waukesha grows, that’s more people working in Milwaukee and buying goods and services there. Milwaukee would benefit and, if they adopt the right policies, grow, too.

But if Milwaukee listens to anti-Waukesha voices like Rowen, Milwaukee will miss an opportunity to generate revenue from the water sale and demonstrate to its neighbors it really believes in regional cooperation.

By James Wigderson
A Special Perspective for the MacIver Institute

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Posted in mi perspectives | February 9, 2010 | | 7 Comments

Controversial Wisc. Climate Bill Assumes Feds Will Tax Carbon

MacIver News Service 

Is Wisconsin’s Global Warming Bill built on a house of cards?

Critics of the so-called “Clean Energy Jobs Act” (CEJA) bill are pointing to a major assumption it makes about future national regulation of carbon emissions that would make or break the bill.

Right now it is cheaper to produce electricity from fossil fuels than from renewable sources.  Supporters of CEJA are counting on that to change.

In calculating the cost-benefits of CEJA, The Wisconsin Public Service Commission “assumed a future cost for emitting carbon dioxide from power plants that starts at $20/ton and rises slowly with inflation,” according to the Office of Energy Independence.  If that happens, the PSC says it will then be cheaper to produce electricity from renewable sources than from fossil fuels.

To capitalize on that possibility, CEJA would enforce Renewable Portfolio Standards (RPS) that set requirements on how much renewable energy utilities would have to sell.  By 2025, a full 25 percent of all electricity sold in Wisconsin would have to come from renewable sources, under the bill.  

If the PSC’s assumption is correct, the Office of Energy Independence predicts “electric utility bills would go down under this legislation.”  However, to date, the federal government has had little luck in passing that  type of carbon regulation, the PSC is counting on.

The federal bill that would establish carbon regulation, often called Cap and Trade, has stalled in the U.S. Senate. Deborah Sliz, President and CEO of  the Washington, D.C. lobbying firm Morgan Meguire, believes with upcoming election cycle, Cap and Trade probably won’t pass anytime within the next couple of years.

Sliz was the keynote speaker at the Customers First! Coalition Power Breakfast in Madison on Wednesday. 

At that same breakfast, Representative Mike Huebsch (R-West Salem) argued it’s dangerous to base state legislation on what might or might not happen in Washington at some unkown date in the future.

“Those are tremendous assumptions and take remarkable leaps of faith, because if Cap and Trade in Washington isn’t dead, it’s certainly on life support,” stated Heubsch during a panel discussion.

Representatives Spencer Black (D-Madison) and Jim Soletski (D-Green Bay), who wrote the Assembly version of the Clean Energy Jobs Act, sat on the panel with Heubsch and defended reying on the assumption.

Representative Soletski argued it is not a great leap of faith to believe Washington will eventually pass some form of carbon regulation, and Wisconsin needs to be ready for it.

“If not now, when?  It’s going to happen,” said Soletski. “We are going to put an emphasis on renewables.  We are going to put an emphasis on efficiency.  Are we going to do this in 2010, or are we going to do this in 2020 or 2030?”

Representative Black argued other states used the same methods as Wisconsin in analyzing potential climate legislation, but Wisconsin has been much more responsible in its assumptions.

“Other states have actually gotten much more robust numbers,” said Black. “Very intentionally, the Public Service Commission put in the most conservative assumptions, so it is completely defensible.”

The panel discussion was not the first instance that the controversy over assuming federal regulation of carbon emissions has been discussed.  Eric Callisto, chairman of the Public Service Committee, addressed it at an assembly public hearing on Tuesday.

“We get about two-thirds of our power from coal,” said Callisto. “That coal is a tremendously reliable source of energy, but its regulatory costs are sure to rise.  And as a state, we’re sitting on a lot of potentially very expensive regulatory liability right now.”

During the panel discussion Wednesday, Representative Huebsch said “I don’t think you can simply state this legislation is going to be economically advantageous unless you can keep with all the assumptions that Chairman Calisto made.”

The Assembly and the Senate are holding public hearings this month on the bill which was developed from the findings of Governor Jim Doyle’s Global Warming Task Force.

During the panel discussion, Representative Black stated “We will pass a clean energy bill.  (But) it will not look like the bill we have now.”

While changes are clearly on the horizon, based on the comments of the past week it appears likely the final bill will still be based on the assumption that Congress will impose expensive regulations on carbon emissions.

The floor period ends on April 22.

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Posted in News | February 5, 2010 | | 2 Comments
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