Archive for May, 2010

Doyle Administration Moves to Accelerate Pace of ObamaCare Implementation Here

MacIver News Service – [Madison, Wisc…] Wisconsin is quickly moving ahead with implementation of a key component of the new national health care reform plan, even though there is no requirement it do so for another three years.

Last year, Governor Jim Doyle (D) announced he would not run for re-election, but he is not letting his lame duck status stop him from moving ahead with the creation of a state-run health insurance exchange.

The recently-passed federal “Patient Protection and Affordable Care Act” requires states to set up insurance exchanges for those who do not have employer-sponsored insurance. The exchanges are not required to be operational until the year 2014, but Wisconsin officials are expending resources and moving ahead with procurement right now and by September will have a vendor in place to design the project.

The exchange implementation is being pursued despite the pending gubernatorial transition, the lack of detailed direction from the federal government, and recent polls indicating a majority of American voters actually favor repealing the controversial new law. In fact, Wisconsin’s Attorney General J.B. Van Hollen wants to join a suit to stop implementation of the Act, permission for which Governor Doyle did not grant.

State officials and policy experts discussed Wisconsin’s efforts at a symposium in the State Capitol Thursday.

MacIver’s Bill Osmulski reports from Madison:

 

WHEDA Partners with Fannie Mae, Promotes No-Money-Down Lending Scheme

Have they not learned anything?

The taxpayer-supported Wisconsin Housing and Economic Development Authority is promoting “no-money-down” home mortgages.

Still.

Really.

As they proclaim in this new radio ad:

“WHEDA…We do…So you can buy your first home with no money down! Coming up with a down payment prevents a lot of renters from becoming homeowners. That’s why WHEDA created the Advantage Home Loan. With the Advantage Loan, you don’t need a down payment.”

Are they serious?

Apparently.

From their website: Learn more about how you can get into a home with a mortgage you can afford long-term with no money down and very little cash to close.

WHEDA is promoting the Advantage program in spite of the fact that from October 2008 to February of this year the agency actually stopped issuing mortgages for single family housing in the wake of the credit crunch which was created when the housing bubble burst.

From a 2008 press account

Wisconsin’s affordable-housing agency has temporarily stopped issuing mortgages for single-family homes because it’s having trouble raising the money needed to make the loans —a situation it said is a direct result of the national financial system crisis.

It’s the clearest evidence yet that the crisis on Wall Street is hitting Wisconsin’s Main Street.

“We primarily operate with tax-exempt mortgage revenue bonds. That’s what funds our mortgages. And right now, we can’t raise capital. There’s nobody investing in those bonds,”said Kate Venne, spokeswoman for the Wisconsin Housing and Economic Development Authority.

It is the first time in the 30-year history of WHEDA, which works through local lenders to offer below-market interest rates to first-time home buyers who have low and moderate incomes, that it has suspended its mortgage lending program because of liquidity problems.

But now WHEDA is back with a vengeance.

Who is making this new WHEDA Advantage program possible?

None other than Fannie Mae

Yes, that Fannie Mae. Really.

For those who need a refresher course: Here is how the Heritage Foundation explains Fannie Mae’s role in the housing crisis:

Fannie Mae and Freddie Mac do not actually lend money to borrowers. Instead, they make their money by purchasing loans, bundling them together and then selling them as mortgaged back securities. Due to their quasi-government status, Freddie and Fannie are exempt from state and local taxes and can borrow money at lower rates than their competitors. With these advantages, Freddie and Fannie have cornered the market on mortgage securitization. Most years, Freddie and Fannie help finance 40% of all U.S. mortgages. In the first quarter of 2008, they handled 80% of the market. If Fannie and Freddie were private entities, they would be a considered a monopoly by Department of Justice anti-trust guidelines.

Fannie and Freddie are neck deep in the subprime industry as well. In 1995 Fannie and Freddie convinced the Department of Housing and Urban Development (HUD) to let them get affordable-housing credit for buying subprime securities that included risky loans to low-income borrowers. In 2003 Fannie and Freddie bought $81 billion in subprime securities. In 2004 they bought $175 billion —

44% of the subprime market. Now Fannie and Freddie are in the same financial hole as Countrywide. They suffered $9 billion in mortgage-related losses last year and are sitting on another $19 billion in additional losses they have not yet fully acknowledged.

Conservatives have been pushing for fundamental reform of Freddie and Fannie for years. Long before the subprime crisis became apparent, conservatives warned that “their commanding presence exposes U.S. financial markets to excessive risk and instability.”

Since September 2008, Fannie Mae and its sister organization Freddie Mac have received a combined $145 billion in emergency funding to cover their investments. Together, propped up by our tax dollars, the two behemoths control upwards of $5 trillion in mortgage debt.

So when Fannie ‘partners’ with WHEDA, just consider it your right pocket partnering with your left; pouring more tax dollars into a dubious program and failing to learn from the mistakes of the past

Here’s a newsflash: Home ownership is not a right–it is an investment strategy, complete with benefits and risk.

You cannot eliminate risk from investment. You can mitigate risk. You can reduce your exposure to risk. You can transfer risk to someone else. But you cannot eliminate risk. In the case of the housing bubble, taxpayers absorbed the risk…and paid dearly.

False promises of risk-free investments in home ownership played a crucial role in this country’s Great Recession. Politicians like Barney Frank (D-Massachusetts) and Chris Dodd (D-Connecticut) used the coercive force of government to ‘encourage’ lenders to ignore would-be home buyers’ ability to make good on their obligations when making loans for first time home purchases. (In the early 2000’s these ‘defenders of the poor’ demanded these programs. Now they call such efforts predatory lending.)

As the result of getting lines of credit they did not earn by merit (via an analysis of credit rating, available assets, income stream, ability to repay loan), people defaulted on these mortgages. Banks ate the losses. Investments based on the securitization of those mortgages crumbled. While people can argue over the appropriate underwriting standards and the strength of government oversight of these securities, you can’t deny the fact that they were undermined by the fact that people defaulted on loans they could never afford.

The economic instability that came about in the wake of the burst of the housing bubble severely hurt WHEDA to the point they could no longer help first-time home buyers for more than a year. That is until, like so many other entities over the last two years, they were bailed out by taxpayers.

Last year, WHEDA got back on its fee with the infusion of massive amounts of tax dollars. They received $139 million in American Recovery and Reinvestment Act (Stimulus) funds to for the Low Income Housing Tax Credit developments around the state. WHEDA further received $325 million from the US Treasury to “revitalize its home ownership programs.”

So, thanks to an infusion of hundreds of thousands of dollars of tax dollars and the support of the ‘too big to fail’ Fannie Mae, WHEDA has decided to double down on the ‘Hey you don’t have to work for it, why worry?” mentality.

WHEDA. They do (make mistakes), so you can too!

In fact, WHEDA boasts, renters who can not afford any down payment on a home loan can take advantage of the misfortune of their peers who had earlier ventured into home ownership while ill equipped to do so.

“The loan can be used to purchase a foreclosed and vacant single family home and finance limited home repairs,” proclaims the WHEDA website.

The cycle continues.

WHEDA notes that the new no-money-down required program is only available for a limited time.

The program is available for a limited time, but apparently when it comes to pouring gasoline on the housing fiasco fire, stupidity is perpetual.

By Brian Fraley
A MacIver Institute Perspective

First Year Tab for State Employees’ Domestic Partner Benefits Tops $7 Million

MacIver News Service – [Madison, Wisc...] Providing health insurance benefits to the domestic partners of state employees will cost more than $7 million dollars this year.

State Senator Glenn Grothman

On Tuesday, the Department of Employee Trust Funds reported 700 employees have switched from single to family coverage to take advantage of the extended benefits. That will cost the state $7.4 million dollars this year. $3.1 million of that will come from general purpose tax revenues and $4.3 million will come from program revenues and segregated funds.

Even though the benefits are currently coming in under projections, some state lawmakers are disappointed the state chose to offer additional benefits while facing a $6.6 billion deficit at the time the budget bill was drafted. For Senator Glenn Grothman (R-West Bend) a $7.4 million price tag is no cause for celebration.

“Both numbers struck me as high,” said Grothman. “Both the 700 people and the $7.4 million.”

Grothman pointed out that with 70,000 state employees, 700 people taking advantage of the new benefits amounts to a full one percent of the workforce.

The new domestic partner benefits were adopted as part of the state’s biennial budget last summer. They went into effect on January 1, 2010. The Department of Employee Trust Funds released their cost estimate at a meeting of the Joint Legislative Committee for the Review of Administrative Rules on Tuesday.

Domestic partner state benefits are different from the state’s domestic partner registry. Domestic partner benefits are available to same sex and heterosexual couples who have one partner who receives employee benefits while working for the State.

“Registration on the domestic partner registry under Chapter 770 does not create a domestic partnership for Chapter 40 benefit purposes. The ONLY way to establish a domestic partnership for Chapter 40 benefit purposes is by filing this completed affidavit with ETF,” reads the affidavit for establishing proof of domestic partnership.

That affidavit is the only proof the state requires to sign up for domestic partnership benefits, which leaves the program at risk for abuse. The affidavit outlines the definition of domestic partnership, which includes: both people are over 18, live together, not related by blood but consider themselves to be members of the same immediate family, and are responsible for each other’s basic living expenses.

The initial cost domestic partner benefits  only cost the state more if employees switched from single to family coverage. That is because the first-year costs only account for initial premiums, not losses. 

“However, over time, as the additional medical costs of more enrollees are built into future premium calculations, additional costs would accrue to the state. It is not possible, therefore, to accurately estimate the extent to which these costs would emerge in the 2009-11 biennium,” according to an analysis of the proposal written by the nonpartisan Legislative Fiscal Bureau before it became law upon the passage of the 2009-11 State Budget.

DPI Chief Balks at Threat over MPS Funds

MacIver News Service - [Madison, Wisc...] State Superintendent Tony Evers will not follow through on his threat to withhold any federal funding from Milwaukee’s public schools.

Evers and Milwaukee Board of School Directors President Michael Bonds issued a joint statement Monday regarding an agreement concerning federal funds. Milwaukee Public Schools (MPS) board leadership agreed that the state superintendent is legally authorized to withhold federal funds but the state superintendent agreed to not withhold federal Title I funds at this time.

“Over the last several months, MPS has made effortsto resolve compliance issues around the state’s corrective action requirements,” said Evers. “It is important right now to support incoming superintendent, Dr. Gregory Thornton, on addressing needed reforms and community building to increase achievement for MPS students.”

As well as backing down on this threat, Evers also agreed to a one-year grace period to not withhold federal Title I funds, which he says will help ensure a successful change in district administration.

Thorton takes over as MPS superintendent on July 1.

Middle Class Tax Hike on the Way

While the Bush tax cuts are often presented as “tax cuts for the rich,” many middle-class families benefit from the increased child tax credit that was part of the tax cuts. Wisconsin middle class families benefited more than their counterparts in other states from the increase in child tax credit.

The increase in the child tax credit is due to expire in 2011 along with the rest of the Bush tax cuts. If the Democrats in Congress and the Obama Administration follow through on their threat to let the Bush tax cuts expire, middle-class taxpayers in Wisconsin and elsewhere could receive a huge tax jolt.

Because of the Bush tax cuts, joint married filers earning less than $110,000 receive a per-child tax credit of $1000. The tax credit phases out after income reaches $110,000. The tax credit is also $1000 per child for single filers earning less than $75,000 and phases out above that point. Married filers filing separately, the phase-out begins at $55,000.

To qualify for the tax credit, the child must be under 17 and living in the household for at least half the year (with a few exceptions). The child must have some relation to the filer: son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes grandchild, niece or nephew. The child must be claimed as a dependent, and cannot have provided at least half of his/her own support. Finally, the child must be a citizen or resident alien.

I think my snow blower qualifies for the credit.

Prior to the Bush tax cuts, the per-child tax credit was only $500. Despite the rhetoric of how the Bush tax cuts only benefited the wealthy, the doubling of the child tax credit had a tremendous impact on the middle class.

Because it is a tax credit and not just a deduction, the credit goes directly to the tax filer’s bottom line. For example, if a family of five files their federal taxes and owes $5,000 before the child tax credit, the child tax credit would reduce their tax burden to $2000, a 60% reduction in their taxes owed. If the Bush tax cuts are allowed to expire, the family would only be allowed to reduce their tax burden by $1,500 ($500 per child), effectively a 75% increase in federal taxes for that family.

Normally I’m a believer that children should be seen and not heard. The best time for them to be seen is when I’m filling out my taxes. I’m willing to adopt the entire Vienna Boys Choir then.

Wisconsinites benefit from this tax cut more than residents in other states. Of the tax filers claiming the credit, Wisconsin filers ranked eighth in benefiting from the credit. Wisconsin filers’ average credit ranked fourteenth of all filers. Of the Wisconsinites claiming the credit, the average tax benefit was $1,335 off what they owed.

That’s a lot of cheese curds.

Just as Wisconsinites disproportionately benefited from the Bush increase in the child tax credit, so, too, would Wisconsinites be negatively impacted disproportionately if the increased tax credit was allowed to expire.

Democrats unhappy with the Bush tax cuts neglect to mention that only 25% of the benefits went to those making $250,000 per year or more. When they talk about taxing the rich to pay for the deficit, they mean the middle class. Prior to the enactment of the Bush tax cuts, 33 million Americans were non-taxpayers of the federal income tax. After the Bush tax cuts, total non-taxpayers of the federal income tax jumped to a staggering 52 million. How many middle-class families will feel like “the rich” when the Bush tax cuts expire?

When listening to the tax-the-rich rhetoric coming this summer to pay for the huge Obama deficits, skeptical Wisconsinites may want to keep in mind just how much they benefited from the Bush tax cuts.

By James Wigderson
Special Guest Perspective for the MacIver Institute

Repeal Obamacare?
Aftermath of Contoversial Vote Not Going As Left Had Planned

The sweeping health care financing overhaul known as Obamacare is proving to be a pivotal moment in American politics and a seminal turning point within the political culture in America, but not in ways its proponents had imagined.

Galen Institute’s Grace-Marie Turner has written a quick summary of the drip, drip, drip of news and information made available to the public AFTER Congress voted on the plan.

Americans consistently said controlling health costs was their top priority for health reform. But Washington didn’t listen, and independent experts now say the new health law actually will drive up the cost of health care and insurance premiums.

Federal and state governments as well as businesses, consumers and taxpayers are finding they cannot afford this massive and unpopular health overhaul law.

The Congressional Budget Office recently issued a revised estimate showing the law will cost $115 billion more than it projected the week before it was enacted. That puts the CBO’s initial price tag at $1 trillion, still a conservative estimate that is based upon unrealistically high assumptions about cuts in Medicare spending and unrealistically low assumptions about the cost of the new law.

Further, the CBO says that preventive care and pilot projects designed to modernize care delivery, while important, are unlikely to reduce costs and may actually increase health spending.

A report by the Obama administration’s own actuary, issued a month after Congress passed the reform legislation, showed it will increase federal health spending by $311 billion over the next decade and likely much more.

The chief actuary for the administration’s Centers for Medicare and Medicaid Services, Richard Foster, also predicts higher health insurance premiums for individuals and businesses.

One reason is the billions of dollars in new fees and excise taxes the law imposes that Foster says will “generally be passed through to health consumers in the form of higher drug and devices prices and higher premiums.” These include more than $20 billion in taxes on medical devices, $60 billion in taxes on health plans, and $27 billion in taxes on prescription drug companies.

Foster’s report also highlights the shaky financial footing of the new long-term care insurance program – the CLASS Act, which Sen. Kent Conrad, D-N.D., has described as “a Ponzi scheme of the first order.” Foster says the program faces “a significant risk of failure” and finds the program will result “in a net federal cost in the long-term.”

The CBO estimates that individuals and businesses also will face at least $120 billion in fines and penalties for failing to comply with the law’s new health insurance mandates. And it says families purchasing health insurance in the individual market will pay $2,100 a year more for coverage by 2016 than they would had the measure not passed.

States also fear a flood of red ink. Indiana has released a study showing that the health overhaul law could cost the state an additional $3.6 billion over 10 years – money that Hoosiers don’t want to spend for a law that polls show they strongly oppose.

And major companies also face tax hits, fines and huge risks. Large, publicly traded companies have issued reports showing reduced earnings as a result of tax changes.

However, proponents have been quick to argue that there are broad tax cuts and incentives for small businesses that will ease the pain!

Ah, not so much.

As the AP reports:

When the administration unveiled the small business tax credit earlier this week, officials touted its “broad eligibility” for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage. Hoffman’s workers earn an average of $35,000 a year, which makes it all the more difficult to understand why his company didn’t qualify.

Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.

It’s an example of how the early provisions of the health care law can create winners and losers among groups lawmakers intended to help—people with health problems, families with young adult children and small businesses. Because of the law’s complexity, not everyone in a broadly similar situation will benefit.

(Note: Small business owners can go to the NFIB website and use their online calculator to see just how much ‘help’ they could receive from the government.)

In Wisconsin, Republican congressmen Paul Ryan and Jim Sensenbrenner discuss a ‘Repeal and Replace” strategy regarding the health care financing overhaul. US Senate Candidate Ron Johnson said Obamacare’s passage was the ‘straw that broke the camel’s back’ that inspired his involvement in both the Tea Party movement and electoral politics. The Left continues to belittle those who push repeal, mocking their efforts as right-wing folly at best, and economically-devastating at worse. However, it is undeniable that the more the public knows about what was really in the health care bill, the less we like it.

It is clear that Sensenbrenner, Ryan, Johnson and others who favor repeal are not alone.

According to Rasmussen Reports:

Support for repeal of the new national health care plan has jumped to its highest level ever. A new Rasmussen Reports national telephone survey finds that 63% of U.S. voters now favor repeal of the plan passed by congressional Democrats and signed into law by President Obama in March.

Prior to today, weekly polling had shown support for repeal ranging from 54% to 58%.

Currently, just 32% oppose repeal.

The new findings include 46% who Strongly Favor repeal of the health care bill and 25% who Strongly Oppose it.

While opposition to the bill has remained as consistent since its passage as it was beforehand, this marks the first time that support for repeal has climbed into the 60s. It will be interesting to see whether this marks a brief bounce or indicates a trend of growing opposition.

Thirty-three percent (33%) of voters now believe the health care plan will be good for the country, down six points from a week ago and the lowest level of confidence in the plan to date. Fifty-five percent (55%) say it will be bad for the nation. Only three percent (3%) think it will have no impact.

The Political Class continues to be a strong supporter of the plan, however. While 67% of Mainstream voters believe the plan will be bad for America, 77% of the Political Class disagree and think it be good for the country.

The Tea Party movement is a tangible symbol of the chasm between the general public and the political class. Supporters of the behemoth health care plan are siding with the political class. Those who voice support for repeal are siding with the more broad general public.

If I were an elected offiical, or perhaps more significant, a candidate this fall, I know in whose hands I would want to place my fate.

By Brain Fraley
A MacIver Institute Perspective

Declining Enrollment + Declining Performance + Budget Crunch
= Big Raises at MPS

MacIver News Service - [Milwaukee, Wisc...] Although overall enrollment and student performance in Milwaukee Public Schools has been down for years, administrator salary increases have made huge gains.

MPS lags its big-city peer districts in reading and math scores and has been listed as a “District Identified For Improvement” by the US Department of Education since 2006. While the district saw its enrollment decline by more than 8,000 students during those years as well,  some MPS administrative  salaries have jumped by nearly 40 percent since 2006.

Dozens of people make six-figure salaries at MPS. It’s difficult to identify all of them, because oftentimes, multiple people have the same job title and their salaries are combined into one line on the budget. However, when only one person holds a particular title, their salary is easily identified.

Using that limited information, MacIver News Service was able to identify two positions in the central office with anticipated salary increases of 38.6 percent from five years ago. Those positions are Director/Board Clerk (in the office of board governance) and the Communications Officer –Information (in the communications and public affairs office).

In the proposed 2011 budget, the board clerk will be making $138,683 (the same as last year). The Communications Officer will be making $111,283 (up nearly $5,000 from $106,491 last year).

Three positions with salary increases of more than 20 percent from five years ago include : School Nutrition Administrator (22.4 percent), Director of Labor Relations (25.4 percent), and Director of Student Services (28.5 percent). The salaries for those position in the proposed 2011 budget range from $106,553 to $132,162.

None of these calculations take into account increases in health and retirement benefits.

The position with the largest increase is the superintendent. In 2006, the position paid $160,000. When Gregory Thornton takes over the position this summer, he’ll be pulling in $265,000. That’s an increase of 65 percent from five years ago.

The district is currently working through a $33 million budget deficit from last year, and Superintendent William Andrekopoulos has proposed cutting as many as 680 employees to bridge the gap. Yet, as we reported yesterday, spending within the Superintendent’s office is slated to double from this year to next. We’ve also reported on the 17 full-time in-house painters who average $98,000 in annual salary and benefits.

MacIver News Service has filed an open records request with MPS for the exact number of current district employees who make more than $100,000 a year in salary, and will report that information when the request is fulfilled. According to an online database maintained by JSOnline, however, in the 2008-09 school year, 42 MPS employees in the central office alone had base salaries in excess of $100,000 with fringe benefits raning from $15,653 to $83,856.

Why Did the Streetcars Leave Milwaukee?

As Milwaukee officials continue to debate the merits of a new streetcar system, we looked into the concerns, complaints and results of the city’s previous experience with this form of mass transit. 

Click on the photo, below, to launch our interactive MacIver NewsGraphic.

 

Amidst Budget Crisis, Superintendent Office Spending Doubles at MPS

MacIver News Service – [Milwaukee, Wisc…] The Milwaukee Public School district is facing a $33 million budget shortfall and administrators have said more than 680 employees could face layoffs. Yet, the MPS superintendent’s budget is set to double next year under the proposed 2011 budget. 

This year the superintendent’s office was budgeted $721,111.  Next year it could be getting $1,566,565, unless the MPS School Board makes changes.  Much of that increase can be traced to the district’s incoming superintendent, Gregory Thornton. 

Incoming MPS Superintendent Gregory Thorton chats with current Superintendent William Andrekopoulos.

 

Thornton will be making $265,000 in salary, compared to the current superintendent’s salary of $175,062.  He is also adding new positions within his office.

 
Thornton has picked Naomi P. Gubernick to be his chief of staff at MPS for an annual salary of $138,671.  She currently serves as his chief of staff at Chester Upland School District in Pennsylvania.  

“It is always the prerogative of an incoming Superintendent to make adjustments to staff,” said explained Roseann St. Aubin, the district’s communications officer. “Dr. Thornton is pursuing the establishment of a Chief of Staff position for day-to-day assistance in operations and a community partnerships position to enhance our relationships with the community.”

A new community relations director would make $96,166. A third position, the chief academic officer, will pay $138,000.  While not a new position, it hasn’t been filled in years.  The last time the position was filled was in 2006, when it was part of the curriculum office, and paid $122,101. 

With Thornton bringing in his own people, it’s still not known what will happen to the current superintendent’s staff, although the new budget assumes they will remain on the payroll, too.

“While he [Thorton] is in the process of getting to know people, their responsibilities and skill sets, he is assembling his core team,” St. Aubin said. “What other changes could be coming, we really don’t know.”

With the additional personnel Thornton is bringing to Milwaukee, the superintendent’s office is slated to cost taxpayers almost $1.5 million next year on salary and benefits, compared to $642,000 this year.

Painting with Red Ink?
MPS Has 17 Painters on Staff, at $98k/year

MacIver News Service – [Milwaukee, Wisc...] Between salary and benefits, 17 painters working for Milwaukee Public Schools pull in around $98,000 a year, on average.

That staggering figure came to light as MPS is facing some significant budget decisions. The district is looking to cut $33 million from the annual budget and could layoff more than 680 employees. The district administration had proposed eliminating 15 of the 17 skilled-trade painting positions, but the school board rejected the measure during a budget committee meeting last week.

The MPS Board has said it wants to institute cuts in a way that minimizes the impact on classroom instruction. However when presented with an opportunity to trim non-classroom labor costs, they rejected the plan; instead choosing to impose furloughs on all ‘non critical’ personnel.

The move saved the painters’ nearly $100,000 per-year jobs. The MPS Board deliberations are continuing, with a final vote on the annual budget in two weeks. MacIver’s Bill Osmulski reports…

 

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