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Growing budget deficit threatens oil fee

Paul Snyder
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Opposition to Gov. Jim Doyle’s proposed oil franchise fee grows louder as the state’s budget deficit grows larger.

“As far as it goes, most of us have already realized we’ll be looking at years’ worth of legal fees if we choose that direction,” said state Rep. Robin Vos, R-Racine, and member of the Joint Committee on Finance. “This budget focuses on an awful lot of spending, and (the fee) is just one more aspect of this ongoing saga.”

The finance committee did not meet Thursday, opting instead to take a breather after learning of the projected increase in the state deficit, which already is at $5.9 billion. Vos said the increase could be between $750 million and $1 billion.

“We’re doing nothing to grow jobs,” he said. “We’re just hemorrhaging them.”

State Rep. Cory Mason, D-Racine, and member of the Finance Committee, said the growing deficit might force the committee to revisit some items on which it already voted. But he said it is too soon to say what those would be or how future discussions would be shaped by the ballooning deficit.

“Obviously, the climate’s changed dramatically,” Mason said. “But as far as it goes with the oil franchise fee, there hasn’t been any specific correlation between that and increased spending.”

Under the proposal, oil companies doing business in Wisconsin would be taxed on gross receipt totals every year. The proposal also contains a provision that prohibits companies from passing the tax on to consumers.

The Legislative Fiscal Bureau estimated the fee could generate nearly $272 million for the state’s transportation system in the next two years.

But opponents — and even some supporters — of the bill say expected legal challenges from Big Oil could place Wisconsin in a prolonged lawsuit, which could freeze money generated by the fee and cost the state even more to defend.

Doyle last month said it is worth discussing substituting a gas tax increase with the oil franchise fee, although the governor’s representatives said he does not prefer the fee.

Mason said it is incorrect to assume the Finance Committee will not at least listen to the proposal.

“We’re going to have a lot of hard decisions to make about the fee,” he said. “The issue of how it will work is still in flux.

“But to those who say it should be a gas tax increase over the franchise fee, I don’t know that they’ve made their case as it being preferable.”

James Buchen, vice president of government relations for Wisconsin Manufacturers & Commerce, said if the oil fee cannot stand up to a legal challenge, the state likely will end up with a higher gasoline tax anyway.

But the clock is ticking, he said, and the state’s transportation system needs money.

“At some point there might have to be some hard bargaining,” Buchen said. “This is as precipitous a fall-off in revenues as anyone’s seen.”

Vos said a gas tax increase also would meet opposition, and the state’s best first step is to prevent raids of transportation money for general spending before seeking new revenue sources.

“You don’t want to keep filling up a bucket with all kinds of holes in it,” he said. “And with an ongoing deficit that’s only growing, we don’t want to keep spending.”

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