On February 20, 2013, Gov. Walker officially introduced his 2013-15 state budget. The state budget contains more than $630 million in tax relief for Wisconsin families and businesses, and general purpose revenue (GPR) spending increases at a moderate rate, rising 1.4 percent in 2013-14, and 3.5 percent in 2014-15.

Fortunately, our state’s budget situation is better than it was two years ago, when we faced a $3.6 billion budget deficit, property taxes had gone up 27 percent over the last decade, and the unemployment rate was at 7.8 percent. Today, Wisconsin has a $419 million budget surplus, property taxes have gone down each of the last two years, saving the average homeowner a few hundred dollars each year, and the unemployment rate is down to 6.6 percent.

Over the next several months, the state budget will be reviewed, debated and likely amended by the legislature and its budget reviewing committee, the Joint Finance Committee. Prior to the state-mandated, July 1 budget deadline, the state budget must be approved by the Joint Finance Committee and both houses of the legislature. When one political party controls both houses, like Republicans do today, the process is usually less contentious because the two houses generally share the same philosophy on taxing and spending issues. However, in Wisconsin politics, nothing can be taken for granted.
Some of the specific provisions in the proposed state budget that impact REALTORS^® include the following:

Property taxes

Retains current law, which places a zero percent property tax cap on local levies, but would allow increases based on net new construction and gives local governments the power to carry forward up to 0.5 percent of unused levy authority to the next year. In addition, local governments may exceed the levy limits if approved through local referendum. 

County property tax rate limits

Repeals the county operating tax mill rate limit, which has been in effect since 1992. This will mean that counties, municipalities and technical colleges will be subject to the same property tax controls. 

Individual income tax reductions

Decreases individual income tax rates for the first three income tax brackets. For couples who are married, filing jointly, the income tax rates will be reduced in the following manner:

1. For couples making less than $14.3K, the income tax rate will be reduced from 4.6 to 4.5 percent. 
2. For couples making between $14.3K and $28.6K, the income tax rate will be reduced from 6.15 to 5.94 percent. 
3. For couples making between $28.6K and $214.9K, the income tax rate will be reduced from 6.5 to 6.36 percent.

Foreign land ownership

Repeals statutory language that prevents foreign entities and corporations from owning more than 640 acres of land. The statute conflicts with federal treaties, which prevent states from enacting or enforcing laws that restrict ownership of land by foreign individuals and corporations. 

Broadband

Allocates $4.7 million for a broadband grant program to increase broadband access and capacity, and expand high-speed Internet service access to underserved areas identified by the Administration Department and Public Service Commission. 

Economic development

Some of the economic development initiatives aimed at helping existing businesses grow and encouraging the creation of new businesses include:

1. Seed accelerator and capital catalyst programs: Investing nearly $6 million in fiscal year (FY) 2014 and $11 million in FY 2015 in Seed Accelerator and Capital Catalyst Programs at the Wisconsin Economic Development Corporation (WEDC). These programs support high-potential entrepreneurs and businesses as they start and grow. 
2. Wisconsin Economic Development Corporation marketing program: Providing $10.9 million over the biennium to support WEDC’s marketing program promoting Wisconsin as a great place to do business. WEDC marketing focuses on attracting businesses, promoting investment opportunities in Wisconsin, and changing the negative perceptions that may still exist about doing business in Wisconsin. 
3. Economic Development Tax Credit: Providing an additional $75 million in available credits for the Economic Development Tax Credit program. This tax credit is aimed at encouraging businesses to make capital investments, expand and retain jobs, invest in job training, and locate or retain their corporate headquarters in Wisconsin.
4. Angel Investment Tax Credit: Lifting the cap on this tax credit program focused on encouraging private investment in start-up companies. The budget removes the maximum cap, which is currently set at $47.5 million, but retains the annual limit, effectively allowing this program to continue into the future.

Transportation

Increases funding for transportation-related projects by $824 million. Several of the specific transportation projects funded in the governor’s budget are:

1. Zoo Interchange: Allocate $550 million toward the Zoo Interchange Project, which is the busiest interchange in the state. Primary construction will begin in 2015-2018 and will improve safety and reduce congestion.
2. Hoan Bridge: Utilize $236 million toward the Hoan Bridge and I-794 Freeway. This project will ensure convenient access to the Port of Milwaukee. 
3. Routine maintenance: Increase funding for routine maintenance agreements with counties by $55 million. Maintenance is vital to keeping our transportation system running smoothly and keeping long-term expenses down.

Education

Invests $475.6 million in new state funds into public education and quality of education opportunities for students throughout the state.

1. K-12 education: $276.5 million in new funds will go to K-12 education, including $129.2 million in total increased equalization aid with $42.9 million in fiscal year 2013-14 and $86.3 million in fiscal year 2014-15, while keeping school district revenue limits flat.
2. Pay for performance: Creates a new $54 million performance-based funding program that rewards schools for excellence and improvement as evidenced by school report cards.
3. Underperforming schools: Provides an additional $10 million in grants for plans to transform underperforming schools and significantly improve student outcomes.
4. School choice expansion: Opens the school choice program to school districts with at least two underperforming schools (report card grades), at least 4,000 students, and at least 20 students intending to participate in the program. The expansion will be capped at 500 students statewide for FY 2014 and 1,000 students statewide for FY 2015.

Land cover map and geographic information system

Creates a statewide geographic information system through several initiatives, including reallocating the current $5 document recording fee assessed by registers of deeds for social security number redaction projects to the department, as these projects are completed, to support the creation of a statewide digital parcel map. 

Sale of state-owned real property

Modifies provisions related to the sale of state-owned real property to:

1. Require agencies to submit an inventory of all real properties to the DOA. 
2. Allow the Building Commission or the DOA, with approval of the Building Commission, to offer for sale or lease any state-owned real property unless prohibited by the Wisconsin Constitution, federal law or other specific statutes. (The DOA would obtain appraisals for any properties that may be offered for sale and report this information to the Building Commission.) 
3. Direct net proceeds from a sale to refund general obligation or revenue bonds.
4. Allow the DOA to attach conditions to a sale or contract that are in the best interest of the state. 
5. Allow a co-owning non-state entity the right of first refusal to purchase the property. 
6. Allow the DOA secretary to adjust positions and operating budgets of affected agencies. 

Transfer of programs to different agencies

To achieve greater efficiencies within state agencies, the transfer and consolidation of the following programs are recommended:

1. Commercial construction site erosion: Transfer soil erosion control regulation for commercial sites from the DSPS to the DNR. 
2. Tank and petroleum testing: Transfer the Tank and Petroleum Testing Program from the DSPS to the DATCP, which would combine the program with the Weights and Measures program. 
3. Consolidation of the PECFA program: Transfer positions, expenditure authority and program responsibility for low- and medium-risk petroleum site cleanups from the DSPS to the DNR. The transfer will combine responsibility for all petroleum site cleanups in the DNR. 

Residency requirement

Prohibits local governments from instituting or enforcing residency requirements and prohibits employers from bargaining collectively with respect to a decision to impose a residency requirement.
The WRA lobbying team will continue to monitor the state budget process and the various provisions impacting the real estate industry. 

If you have questions, please feel free to contact Tom Larson at tlarson@wra.org or at 608-240-8254.

Tom Larson is Vice President of Legal and Public Affairs for the WRA.