CHICAGO — Wisconsin faces a $2.2 billion gap headed into the next two-year budget cycle, up $400 million from previous estimates.
The latest figures were released late Thursday by Department of Administration Secretary Mike Huebsch in a document outlining state agency budget requests. The document is used to help craft a new two-year budget for the biennium beginning July 1.
State agencies requested $37.2 billion in spending for fiscal 2016 and $38.4 billion for the second year of the budget. Those requests represent 6% and 3% growth, respectively, over the current budget cycle and are each about $1.1 billion more than expected revenues.
The deficit projection is up from a previous $1.8 billion estimate earlier this fall from the nonpartisan Legislature Fiscal Bureau.
Republican Legislative leaders and Walker cautioned that the agency spending requests are just that — requests — and don't reflect what will eventually end up in the budget to be unveiled early next year. Democrats said the figures show Walker painted too rosy a picture of the state's fiscal condition during the campaign. Walker was re-elected earlier this month.
"Governor Walker will introduce a balanced budget early next year focused on growing the economy and moving people from government dependence to true independence," Walker spokeswoman Laurel Patrick said in a statement.
Wisconsin closed out the last fiscal year with a $517 million balance and $279 million in its reserve account. The state earlier this year anticipated a $1 billion budget surplus, prompting Walker and his fellow Republicans who control the Legislature to adopt $600 million of tax cuts. The state now expects to close out the fiscal year and biennium on June 30 with a negative balance of $132 million.
"Through continued prudent management of agency resources, the shortfall noted above will be addressed and the current biennium will end in balance," Huebsch wrote in the report.
The latest figures came on the same day that Moody's Investors Service revised Wisconsin's outlook to positive. Moody's said the state could win an upgrade from Aa2 if recent budgetary and liquidity strides remain on course and result in a stronger balance sheet and reserves.
The review came in conjunction with the upcoming advance-refunding of $300 million of general obligation bonds. The sale is on the day-to-day calendar with the finance team looking for the best opportunity to enter the market. Morgan Stanley is the senior manager. The bonds mature from 2015 to 2029.
The outlook change recognizes the state's improved liquidity position, conservative management of retiree benefits that limits future budgetary pressures, and reductions in the state's long standing negative fund balance based on generally accepted accounting principles, Moody's said.
Ongoing improvements would allow Wisconsin to bolster its lean reserves, move closer to structural balance, and overall strengthen its balance sheet, Moody's said. The state's rating also benefits from a fully funded pension system.
The state's GOs are rated AA by Fitch Ratings, AA by Standard & Poor's and AA by Kroll Bond Rating Agency. They all assign stable outlooks.
