CHICAGO — Wisconsin Gov. Scott Walker unveiled a $68.2 billion two-year
The budget would authorize nearly $1.6 billion in new money borrowing and another $1.5 billion in general obligation refunding.
The state would spend $35.9 billion in fiscal 2016, which begins July 1, a figure that is up 2.6 % from the current year, and then $32.3 billion in second year of the biennium, representing a 10% drop over fiscal 2016.
Walker sought to highlight the state's fiscal strides as he heads into his third two-year budget. The state faced a $3.6 billion deficit in his first spending plan resulting in deep cuts and curbs on collective bargaining that led to mass protests.
A rosier forecast in recent years prompted Walker and his fellow Republicans who control the legislature to enact $2 billion in tax cuts. A $648 million revenue gap in the next biennium and a shortfall of $283 million in the current fiscal year have curtailed any new, major effort to reduce taxes.
"This budget provides renewed financial security as it is balanced and the rainy day fund is the largest in state history-165 times bigger than when I first took office," Walker said in his budget address Tuesday evening. "Our retirement system is the only one fully funded in the country and our bond rating is strong."
Reserves remain lean at $279 million but were near empty when Walker took office and one rating agency recently revised the state's outlook to positive. Four rating agencies rate the state's GOs at the AA level.
The budget would tackle the revenue shortfall through various savings initiatives, the merging of some departments, the elimination of 400 positions with about half currently vacant, and other spending reductions — the most notable being a 13% cut of $300 million in public university funding.
State income and sales taxes would remain at current levels. Levels of shared revenue aid to local governments would remain intact. Public education funding would receive about $300 million over the two years to keep property taxes from rising as revenue caps would remain in place. Education aid levels otherwise would remain on par with current funding.
A freeze on tuition at the University of Wisconsin system would remain in place and the system would be freed from state imposed rules on some operations like human resources, building projects, and procurement. The tuition freeze would be extended to technical colleges for high growth programs.
While praising the proposed freedoms from state rules, the university system in a statement said: "Make no mistake, the proposed cuts are substantial, and they will impact every one of our institutions." The system relies on the state for about 19% of its costs, according to the legislative fiscal bureau.
While balanced on a cash basis, the state's deficit based on generally accounting principles would hover around its current level of $2 billion, about $1 billion less than when Walker took office.
The operating budget includes some new borrowing authority although a fuller picture of the state's borrowing plans for the next biennium won't be known until the governor submits his capital budget. It will first go to the State Building Commission in the coming weeks.
The operating budget permits up to $1.5 billion of refunding transactions for tax-supported and self-amortizing GO debt. The refunding is limited to issues for traditional present value savings and not restructuring for near-term relief. The state shaved $116 million off debt service in refundings completed in the current biennium. A $260 million refunding is planned for later this month.
The budget also paves the way for the creation of a sports and entertainment special purpose district to manage the construction of a new arena for the National Basketball League's Milwaukee Bucks and includes a $25 million line item for debt service in 2017.
Walker recently unveiled a proposal that would provide public financial support for the project with a state appropriation-backed issue of up to $220 million that would be repaid with growth in income taxes expected from Bucks players, team employees, visiting teams, and media contracts.
The funding would be provided only after the team submits proof "of complete financing from other private and public sources," the budget says. "This endeavor will preserve current base income tax resources derived from hosting a NBA franchise in our state and generate additional income tax revenue."
The Bucks' owners and its previous owner, former U.S. Sen. Herb Kohl, are expected to contribute several hundred million to the project.
The budget forgoes a hike in the gasoline tax or other transportation related fees as recently proposed by Department of Transportation Secretary Mark Gottlieb to meet state needs. Instead, the budget raises the limit on transportation revenue bonding by $1 billion for major projects.
Another $119 million of transportation fund repaid, GO-backed borrowing would be authorized in fiscal 2016 and $124 million in fiscal 2017 for the state highway rehabilitation program. Another $36 million is authorized for bridges.
Democrats took aim at the budget, accusing the governor of crafting a plan with his eye on a presidential run over the welfare of citizens.
"Once again, the governor is making short-sighted choices that will put Wisconsin's future at risk," Assembly Minority leader Peter Barca, D-Kenosha, said in a statement. "Among other proposals, making massive cuts to our world-class university system, putting more of our state's transportation needs on the credit card will undermine opportunities for hardworking Wisconsinites and put our state farther behind in a knowledge-based world economy."
Republicans generally praised the plan but some raised concerns over the transportation borrowing levels and said public education deserved more aid.
"While there are some initial concerns from our caucus, especially with the level of bonding, I'm confident that by using input from Wisconsin residents and their legislators we will arrive at the best possible spending plan for the hard-working taxpayers of Wisconsin," said Assembly Speaker Robin Vos, R-Rochester.
Moody's Investors Service recently revised Wisconsin's outlook to positive, recognizing the state's improved liquidity position, a fully funded pension system that eases future budget pressures, and reductions in the state's longstanding negative fund balance based on generally accepted accounting principles.
"The state's ability to make progress toward structural budget balance and continued improvement in its fund balances will be important to future credit analysis," Moody's said.
The three other ratings agencies assign stable outlooks.
