CHICAGO - Wisconsin Gov. Jim Doyle unveiled a $62.7 billion budget for the next two fiscal years that eliminates a nearly $6 billion deficit through spending cuts, federal stimulus dollars, and a series of tax and fee increases.
The Democratic governor proposes chipping away at the deficit by cutting about $2.2 billion through a 1% across-the-board reduction in program costs, including aid to local governments, and the elimination of some services.
"These cuts are huge and unprecedented. They mean we will spend less state tax money this year and next year than we did last year," Doyle said in his budget address Tuesday night. "Many will be called on to share the sacrifices, and I appreciate all those who are tightening their belts to get us through this time."
On the revenue side, the budget relies on $2.1 billion in new revenue from the federal stimulus package for state aid to local schools and Medicaid. The budget also relies on an additional $1.35 billion from a series of tax increases. They include $312 million from a tax increase on Wisconsin's top 1% of earners, $344 million from a 75-cent increase in the tax on a pack of cigarettes and other tobacco products, and $180 million from changing the capital gains exclusion to 40% from 60%. The state would raise $544 million by imposing a new tax on excess oil company profits.
The state saves another $245 million through various measures, including $214 million through a restructuring of a short-term debt payment and through other payment shifts and fee increases.
Spending will increase by $426 million for public school education largely funded with federal funds and transportation projects will receive $600 million funded by federal stimulus dollars and proceeds of the new proposed tax on oil company profits.
The budget includes nearly $1.5 billion of bonding authority including $778 million of general obligation borrowing and $720 million of revenue-backed borrowing. Additional borrowing will be outlined in a separate capital budget to be released at a later date.
Total spending in the next fiscal year is up by 7.4% to reflect federal funds and other spending commitments and then it drops by 1.4% in the second year. The state would close out the next fiscal biennium on June 30, 2011 with $270 million of cash reserves, including a $130 million ending balance.
Absent the proposed tax increases, the state expects near across-the-board declines in tax collections this year and next, including personal income and corporate income taxes and sales taxes. Revenues would fall in the current fiscal year by 4.2% and another 2.3% in the next fiscal year before officials project growth of 4.5% or $449 million in fiscal 2011.
The budget also would allow for a new transportation authority to be created in the Madison area with the ability to levy an up to 0.5% sales tax to fund new transit services. Another $120 million in bonding is included in the budget to finance high-speed rail between Milwaukee and Madison.
Doyle's fellow Democrats, who control the Senate and Assembly, praised the governor for protecting health care and education spending while Republicans slammed the tax increases.
"The governor did a good job outlining just how tough this budget is going to be," said Senate Majority Leader Russ Decker. "We are going to tighten the state's belt even further and everyone is going to have to make sacrifices."
Assembly Republican Minority Leader Jeff Fitzgerald said: "With Democrats in control of all of state government, this budget will go largely unchanged and will increase the tax burden on the families of Wisconsin by billions of dollars."
The state's GO ratings are AA from Standard & Poor's, AA-minus from Fitch Ratings, and Aa3 with a negative outlook from Moody's Investors Service.
