CHICAGO - Wisconsin must close a $283 million budget gap this year and erase another $648 million more of red ink in the following two years to keep its books balanced, according to its latest
The deficit looming in the fiscal biennium that begins July 1 rises to more than $2 billion if Gov. Scott Walker and lawmakers grant all agency spending requests, the nonpartisan Legislative Fiscal Bureau report warns in the forecast, which will guide the state's next two-year spending plan.
The latest figures will fuel further bickering among Republicans and Democrats.
Republicans, who control the legislature and the governor's office, paint a picture of future growth that will emerge from tax cuts and other reforms such as curbs on collective bargaining.
Democrats will counter that GOP priorities on tax and spending cuts have hurt local governments as Gov. Scott Walker pursues an agenda aimed at supporting a possible 2016 presidential campaign.
"The nonpartisan Legislative Fiscal Bureau projects healthy economic growth in the 2015-2017 biennium," Sen. Alberta Darling, R-River Falls, and state Rep. John Nygren, R-Marinette, the co-chairs of the state's budget-writing Joint Committee on Finance, said in a statement.
"We are confident Governor Walker will resolve the short-term revenue shortfall. There is no doubt Wisconsin's economic outlook is bright," they said.
"Republicans have created a staggering budget deficit and an equally staggering deficit of economic opportunity in Wisconsin," Assembly Democratic Minority Leader Peter Barca, D-Kenosha, said in a statement. "While Republicans concentrate on amassing a surplus of political control, the real people of Wisconsin are facing a painful budget and jobs deficit."
The latest figures added slightly to the deficit in the current budget but higher estimates for collections in the next biennium helped trim the predicted two-year shortfall.
The bureau's new projections don't include any measures Walker may present in his next budget such as further tax cuts or new transportation spending.
Walker's top transportation deputy has proposed raising the gas tax and other taxes and various fees to generate more than $750 million in new funding over the next two years.
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.
Walker and lawmakers must tread cautiously is they are to maintain the state's positive fiscal momentum on the structural imbalance.
Moody's Investors Service recently revised Wisconsin's outlook to positive on its Aa2 rating, 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 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.
Walker cited his concern over the potential negative impact on the budget as a reason he rejected Friday of the Menominee Tribe's request to build a new $800 million casino in Kenosha, south of Milwaukee just over the Illinois border.
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"After a comprehensive review of the potential economic impact of the proposed Kenosha casino project, the risk to the state's taxpayers is too great," Walker said, pinning the blame in large part to provisions included in existing gambling compacts negotiated by his predecessor, Democrat Jim Doyle.
"Due to the compacts the current cost to taxpayers of approving the proposed casino project is up to $100 million and the long-term economic hit to the state budget would be a potential loss of hundreds of millions of dollars," Walker warned.
Terms of the compacts would leave the state at risk of litigation from other competing tribes that could force the state to return portions of past compact payments, he said.
The state report was prepared with help from Dykema Gossett PLLC Nathan & Associates Inc.
