April 7, 2009
The Honorable James P. Doyle
Governor
State of Wisconsin
PO Box 7863
Madison, Wisconsin 53707
Dear Governor Doyle:
On behalf of Forward Janesville, an organization representing nearly 550 large and small businesses in Janesville, Rock County, and south central Wisconsin, we are writing to share the organization's thoughts on the 2009-2011 biennial budget proposal and other related legislation currently in the legislative "pipeline".
The mission of Forward Janesville ("FJI") is to lead private sector economic and community development efforts to ensure the continued health and prosperity of business and industry in the Janesville area. Unfortunately, that charge has grown more challenging over the past several years. Since January 2006, the Janesville area has experienced the loss of over 5,000 direct jobs due to plant closures, downsizings and long-term lay-offs, with over 2,600 occurring within the last twelve months. Unemployment in the Janesville metropolitan area is 13 percent, the highest in the State of Wisconsin. Unemployment in the City of Janesville itself is 14.6 percent, and numerous observers believe our situation will undoubtedly worsen in the coming months.
Now more than ever, the citizens of Wisconsin are looking to you and the State Legislature to provide sound and reasoned leadership during these challenging times. We understand that our state faces an unprecedented budget deficit, and we appreciate your good faith efforts to repair the imbalance. In times like these, it is true that all of us - business, labor, government and the citizenry of Wisconsin - must collectively pull together for the greater good. We believe that both the Wisconsin and Janesville business communities are prepared to actively participate in this challenging process.
That said, we are concerned that a number of proposals contained in the 2009-2011 budget adversely affect Wisconsin and Janesville area businesses at a time when they can least afford it.
With respect to the tax and employment aspects of your budget proposal and other legislative proposals currently being considered, we offer the following thoughts:
- While we believe that the increase in the minimum wage beyond federal levels represents an unfortunate increase in the cost of doing business for many FJI members, we find the automatic annual indexing provisions of the proposal to be particularly troublesome. From our perspective, automatic cost increases in the cost of labor represent a threat to the overall competitiveness of our member base. As such, we believe that automatic indexing should be eliminated from the provisions of any final bill.
- While the significant expansion of employee lien rights beyond the current $3,000 limit may be an altruistic exercise, it will significantly restrict access to debt financing for FJI member companies most in need of financing of that nature. In order to avoid triggering "the law of unintended consequences" for our business community, we would suggest that employee lien rights be expanded to no more than $5,000.
- With many Wisconsin and Janesville-based businesses formed under Internal Revenue Code Subchapter S and partnership provisions, the income of such businesses is taxed at the shareholder level. As such, the creation of a new income tax bracket of 7.75% will result in an increase in the cost of doing business for members of FJI, thereby reducing the amount of income that can be retained in their businesses. Similarly, the reduction in the capital gains exclusion from 60% to 40% will adversely affect the ability of our members to grow and expand operations.
Needless to say, during these recessionary times we are also concerned about a pending proposal to increase taxes on area businesses by increasing the rate of "throwback sales" from 50% to 100%. Those concerns are equally applicable to the already enacted provisions of "combined reporting" on Wisconsin businesses.
While we understand that shared sacrifice is necessary to right Wisconsin's fiscal ship, there is no question that these tax increases will weigh heavily on Wisconsin businesses. The bottom line is that taxes matter in the arena of economic development and tax rates continue to be a key factor in site location and business expansion decisions. We simply do not believe that significant increases in business taxes are the manner in which to facilitate Wisconsin's economic recovery. We urge you to explore alternative ways to balance our biennial budget.
With respect to other legislative proposals currently under consideration, we believe that the cost of doing business will also expand significantly as state government becomes increasingly intrusive into the operation of member businesses. We would ask that you specifically and carefully re-examine a variety of expanded business liability and employment cost increases embodied in a number of Senate and Assembly bills under consideration.
From the perspective of cost containment, despite the fact that our state faces a monumental budget deficit, the non-partisan Legislative Fiscal Bureau estimates that state spending will actually rise from $58.6 billion during this biennium to $62.7 billion in the next biennium. This increase of 7% would appear to be at odds with your observation that the budget "makes many of the largest cuts we've ever seen." Understanding the urgency and severity of Wisconsin's fiscal situation, we believe this budget should reduce state spending or, at a minimum, freeze it at its current level, just as many of our member businesses are doing during these challenging financial times.
One final thought before we close. While we understand the necessity to act expeditiously in the enactment of a Wisconsin "stimulus" package, we encourage you and the Legislature to operate as transparently as possible. From our perspective, that means careful and open consideration of all issues of significance, ensuring that appropriate input is received from all parties involved. We understand that the "stimulus" package was introduced on February 16, 2009 and signed into law on February 19, 2009, without public hearing. We do not believe this meets the "transparency" standard that we are advocating.
We would appreciate your consideration of our preceding thoughts. In the event you require any additional information or would like to meet with us to discuss our recommendations in greater detail, do not hesitate to contact us.
Sincerely,
Bruce Corner
Chairman, FJI Board of Directors
SSI Technologies, Inc.
Mary Willmer Sheedy
Vice Chair, FJI Board of Directors
M&I Bank
David Bagley
Secretary/Treasurer, FJI Board FJI Board of Directors
RSM McGladrey, Inc.
Rich Gruber
Past Chair, FJI Board of Directors
Mercy Health System
John Beckord
President, Forward Janesville, Inc.