Wisconsin’s Deficit Could Be as High as $3B, Republicans Say

CHICAGO — Wisconsin’s budget deficit going into the next fiscal biennium ranges from $1.5 billion to $3 billion, depending on who is interpreting the figures.

The annual Nov. 20 revenue estimates that were provided by outgoing Democratic Gov. Jim Doyle’s Department of Administration tallies the deficit at between $1.5 billion and $2.2 billion. Governor-elect Scott Walker, a Republican, and incoming GOP legislative leaders warn the figure is closer to $3.3 billion.

The report from DOA Secretary Dan Schooff sent to Doyle, Walker, and lawmakers sets the shortfall — between agency requests for the approaching biennium that begins July 1 and revenue projections — at $1.5 billion. That figure, however, anticipates that additional Medicaid funding support from the federal government of $528 million will continue at the same level.

The $1.5 billion also does not recognize the possible loss of $200 million based on a state Supreme Court ruling earlier this year that overturned Wisconsin’s diversion of funds from a medical malpractice account to leverage additional federal dollars.

The discrepancy between the deficit projections from Doyle’s administration and Walker lie in whether $400 million in annual budget cuts are continued into the next biennium and whether $300 million in savings at the Department of Health Services are achieved. If not, the deficit grows to $3.3 billion.

“The Department of Administration’s revenue projections … underscore what Governor-elect Walker has said for months — the state of Wisconsin is facing very serious budget challenges,” Walker’s transition team director, John Hiller, said in a statement. “Further, we believe that the true budget shortfall is much higher than indicated by the projections released today.”

Walker campaigned on the pledge not to raise taxes to deal with the state’s budget deficit. He is expected to call a special session after he takes office in early January. He will enjoy new Republican majorities in the Legislature.

Though officials may differ on the size of the deficit, the numbers are easier to digest than the projected gap of $5.4 billion released by the DOA two years ago ahead of the fiscal 2010-11 budget. That number eventually grew to $6.6 billion.

Revenues are expected to grow by 4.2% in the next fiscal year and by 3.4% in the second fiscal year of the next biennium. The DOA expects tax collections to rise by $515 million, or 4.2% this year, leaving the state with a narrow ending balance of $10 million on June 30.

The state released an addendum to its $200 million transportation revenue bond sale scheduled for yesterday outlining the DOA estimates.

The DOA report attributes the state’s ability to remain in the black during the current biennium to employee concessions, an income tax increase on top earners, spending cuts that included a 3% cut in school aid and $600 million from Medicaid, and $2.2 billion from the federal stimulus. Republicans want to repeal the tax increase. The $61.8 billion budget also relied on restructuring $285 million of state debt.

Fitch Ratings, Standard & Poor’s, and Moody’s Investors Service all affirmed their double-A ratings on Wisconsin’s $6.5 billion of GOs over the summer. Credit strengths include a diverse economy, moderate debt levels, and strong pension funding levels. Weaknesses include an ongoing structural budget imbalance and weak reserve levels.

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