Wisconsin Budget Heads to Governor's Desk

CHICAGO — The Wisconsin Legislature Friday sent Gov. Scott Walker a two-year, $68 billion budget that cuts income taxes by $650 million, limits property tax increases, and authorizes $1.8 billion in new general obligation and revenue-backed borrowing.

The budget also replenishes the state’s exhausted GO refunding capacity with a $2 billion authorization. 

The Assembly passed the budget 55-42 Wednesday and the Senate took it up Thursday and passed it in the early hours of Friday morning by a narrow one-vote margin with all Democrats and one Republican voting against it.

The Republican governor can now use his line-item veto powers on legislative changes but he generally praised the spending plan, which closely resembled the budget proposal he sent to the GOP-controlled Legislature earlier this year. Two significant changes included a bigger income tax cut and a reduction in his proposed borrowing levels.

“Because of our sound fiscal management and tough, but prudent, decisions over the last two years, we are now able to provide nearly $1 billion in tax relief for Wisconsin families and businesses, more money for our public school system, and additional education options for parents across our state,” Walker said. Business tax breaks bring the level of tax cuts to $1 billion.

The budget includes a freeze on tuition at the University of Wisconsin system, raises kindergarten through 12th grade funding by about $290 million over the two-year period, and caps property tax increases to about 1%. Aid to local governments would increase less than 1% after several years of deep cuts.

It also authorizes the sale of some state assets such as parking garages, roads, and college dormitories with the approval of the State Building Commission. Proceeds would go to pay down the state’s debt load. The Legislature’s Joint Finance Committee would also have a say on any asset sales.

Walker and the Legislature rejected additional federal support to expand Medicaid under federal healthcare reform. Walker has defended his position saying he is concerned about the commitment of the federal government to meet its funding pledge in future years. 

Republicans touted the state’s improved fiscal health compared to two years ago when the state faced a $3.6 billion deficit. Walker in his first budget increased pension and health care premium payments for employees and cut local aid to governments to help eliminate the red ink a $66 billion budget, relying on collective bargaining changes imposed by the state at the local level to offset the cuts in aid.

Democrats attacked the budget from many fronts. They argued that the state could not afford the tax relief that they believe will favor the wealthy and said the state should instead further increase school funds.

They decried a statewide expansion of the use of taxpayer funded vouchers to attend private schools. They also had pushed hard for the Medicaid expansion and noted that the state would be left with a $500 million structural deficit at the close of the next budget cycle.

“The passage of this extreme, anti-middle class, anti-Wisconsin budget will dig our state deeper into a values deficit. Private schools over public schools, wealthy taxpayers over middle-class taxpayers, and Tea Party extremism over saving tax dollars for more healthcare coverage,” Chris Larson, leader of the Democratic Senate minority, said in a statement. “This budget is fiscally unsound and morally wrong.”

Republican lawmakers who control the state’s powerful Joint Finance Committee pared down Walker’s initial borrowing levels of $2.17 billion, citing worries over the state’s cost for rising debt service. Walker had argued that the higher bonding was warranted given the state’ improving finances, infrastructure needs, and low interest rates.

In the end, lawmakers approved $1.8 billion in new borrowing, including $409 million of revenue-backed bonds for major highway projects and $1.4 billion of general obligation bonding for transportation projects, public university buildings, natural resources, State Building Commission projects, and health services and corrections projects. 

The Joint Finance Committee slashed GO support for several projects totaling $105 million, sliced GO bonding authority by another $250 million although it left it up to Walker’s administration to identify what projects to eliminate, and shaved $7 million off revenue borrowing.  

The state expects to close out the current fiscal year with a rainy day fund of $243 million. All three rating agencies recently affirmed the state’s mid-double-A level ratings and stable outlooks. The rating is driven by moderate debt levels, fully funded pensions, and a broad and diverse economy while challenges remain an ongoing structural imbalance and minimally funded reserves.

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