CHICAGO — Wisconsin will take competitive bids Tuesday on $138.3 million of general obligation bonds, the first half of a new-money sale to fund capital and infrastructure projects, with the remaining $130 million piece planned for early next year.
The Wisconsin Building Commission also last month approved new-money transportation revenue borrowing that state capital finance director Frank Hoadley’s office expects to tap in a $100 million to $200 million sale, also early next year.
The GOs selling Tuesday mature from 2023 through 2032. The remaining piece will mature in the earlier years and be structured as extendible municipal commercial paper to take advantage of lower floating-rates.
“The proceeds are for routine bricks-and mortar-projects,” Hoadley said.
It has not yet been decided whether the transportation bonds would be sold through negotiation or competitively.
Ahead of the sale, at least two rating agencies affirmed the state’s GO credit and stable outlook. Fitch Ratings and Standard & Poor’s rate the state’s $6.2 billion of GOs AA, both affirmed. Moody’s Investors Service rates them Aa2 but a report had not yet been released.
The state’s credit position strengthened over the last year after adoption of a $66 billion, two-year budget that made “notable progress toward achieving a structural balance,” Fitch wrote.
The state’s strengths include a broad and diverse economy, and strong pension funding levels. Its minimal reserves are a negative.
“The ratings reflect our view of the state’s strong government framework, demonstrated ability to make midyear budget corrections, diverse economy, and moderately high debt burden offset by a fully funded pension system,” said Standard & Poor’s analyst Gabriel Petek.
Gov. Scott Walker and the Legislature, controlled by his fellow Republicans, relied almost exclusively on spending cuts to eliminate a $3 billion deficit in the biennium that began July 1. Former leaders often relied on one-time revenues to balance the state’s books, leaving the state with an imbalance between its ongoing costs and recurring revenues.
Though it benefited the state, that shift towards a more solid financial footing came at the expense of local governments, school districts, and public employees, who face higher pension contributions and health care premiums. Walker also pushed through measures that sharply curtailed the employees’ collective bargaining rights.
The plan does not include any general tax hikes. It strictly limits local property tax increases to keep governments from raising taxes to compensate for the state cuts. Democrats voted against the plan over concerns that it hurts local governments and school districts while aiding businesses that received various breaks.
The budget does include one substantial non-recurring revenue source, a $337 million debt restructuring in fiscal 2012, to help eliminate the deficit. Rating agencies consider the maneuver a negative.
The budget puts Wisconsin on course to reduce its $2.5 billion structural imbalance to $250 million. The state is expected to end the fiscal biennium with a cash balance of nearly $300 million, according to an estimate from the nonpartisan Legislative Fiscal Bureau.
The state reported an ending balance of $85.6 million at the close of fiscal 2011. Revenues totaled $12.9 billion, or 6.4% above fiscal 2010 collections. The bureau anticipates solid growth of 3% in the current fiscal year and 3.6% in the next, due mostly to personal income and sales tax growth.
Political divisiveness over Walker’s union bargaining limits has driven efforts by unions and other opponents to oust the governor from office through a recall election. Organizers of the efforts are working to gather, by Jan. 17, more than 540,000 signatures required to force a recall election.
