When I recently wrote a Milwaukee Biz Blog to suggest the Darwin E. Smith Awards for people, organizations and government entities who made it difficult for companies to business Wisconsin, I had no idea Steve Roell, chairman and chief executive officer of Johnson Controls Inc., would step forward as a nominee.
Johnson Controls reports annual revenues of $35 million this year with a pre-tax profit of $2.6 billion. It is the largest corporation in the state of Wisconsin. The company employs 140,000 people. A model corporate citizen.
It is a company of which Darwin Smith, the CEO of Kimberly-Clark who moved his company’s corporate headquarters out of Wisconsin because of high taxes and excessive regulation, might have suggested considering removing itself from the Wisconsin corporate gene pool – by relocating to another state or perhaps, another country.
So why is Steve Roell supporting the state hospital tax?
Let’s connect the dots.
Wisconsin Gov. Jim Doyle and the Senate Democrats included the $400 million hospital tax in their budget repair bill. The idea was to add an "assessment" to all hospital bills. This assessment would be a tax – a 0.7-percent sales tax – on every patient who paid his or her hospital bill, either through private insurance or out of his or her own pocket. Hospitals throughout the state would collect the tax from their paying patients and send it to the governor.
The governor agreed to pay an extra $275 million to the state Medicaid health program to repay hospitals a portion of the bill for people who are unable to pay their medical bills. The federal government matches the state’s additional contribution. Under this socialized reimbursement plan, hospitals with the highest percentage of Medicaid patients would see their reimbursement rates increase the most.
Doing the math, the governor gets to keep $125 million, under a provision in the bill called "the skim." The skim is analogous to the "grease" a bettor pays a bookmaker for placing and winning a bet. The bookie earns the grease for facilitating the transaction. In this case, because the grease goes to the general fund, Doyle gets to spend the skimmed tax money any way that pleases him and his constituents.
At this point, the proponents of the "sales tax on people who pay their own hospital bills either through private insurance or out their own pockets" claim that the matching funds coming back from Washington, D.C., is free money. Wisconsin does not receive its fair share of the federal largess, they say. Twenty other states have cooked up similar schemes.
The free money from Washington isn’t free. It is, more appropriately, money that has been extracted from ordinary, everyday people. Not corporations. Not hospitals. Real people, like the folks who send some of their earned income withheld from every paycheck to Washington every week.
So why would really smart guys like Steve Roell, Jim Haney (president of Wisconsin Manufacturers & Commerce) and Tim Sheehy (president of Metropolitan Milwaukee Association of Commerce) support such a scam?
The deception is even more interesting considering the primary beneficiaries of the arrangement. Besides Doyle, the hospital systems that stand to gain the most under the proposed socialized hospital tax solution appear to be Children’s Hospital of Wisconsin and Aurora Health Care – two of, arguably, the most profitable, "nonprofit" hospital systems of the planet. San Aurora serves poor patients in Milwaukee, while Children’s substantial niche in health care for kids, attracts everyone, rich and poor.
We all love and admire Children’s Hospital for the incredible work they do. But Aurora? Why are the big businesses and outstanding companies like Johnson Controls, with the support of WMC and MMAC, supporting, the 800-pound gorilla?
Connect the dots.
Doyle is creating on a $1 billion project on the campus of the University of Wisconsin-Madison, called the Wisconsin Research Institute. Stem cell research. Cancer research. Cures for all manor of diseases. A worthy cause, no doubt.
Consider the Wisconsin corporations that would benefit from the construction and operation of the Wisconsin Research Institute? On a billion dollar laboratory project, how much would Johnson Controls "climate control group" and "facilities management divisions" stand to gain? $50 million? $100 million? Run the numbers over the lifetime of the facility, if you like. I trust Johnson Controls has a pretty good idea.
Next, consider how many companies represented on the WMC and MMAC boards of directors stand to benefit directly and indirectly from the construction and management of this $1 billion expenditure? Google the lists of their directors. Make your own evaluation.
For me, it took a fair amount of time and research to connect the dots. Assembly Speaker Mike Huebsch (R-Onalaska) has his heels so dug in on this one that the sales tax on people who pay their hospital bills is unlikely to pass the Assembly.
The question is why would smart, big business leaders go along with something that they know is wrong?
One of the reasons local business leaders join business associations, such as MMAC and WMC, to help sort through the almost incomprehensible machinations of government, particularly at the state and local government levels. They let us down on this one. They ought to know better. They thought we would not connect the dots.
Dennis Ellmaurer is a principal of Globe National Corp., a Milwaukee firm working exclusively with sellers of small businesses in southeastern Wisconsin. Ellmaurer also is a chairman of The Executive Committee, facilitating three CEO groups in southeastern Wisconsin.
