CHICAGO — Freshman Wisconsin Gov. Scott Walker on Tuesday unveiled a two-year $59 billion budget that exacts a toll on most areas of state spending, including public education, local government aid, and Medicaid to eliminate a $3.6 billion deficit without tax hikes and limited one-time maneuvers.
The spending plan also relies on savings tied to increased employee pension and health care costs. Walker put those increases in a separate budget-repair bill to address a current year shortfall but it remains stalled following a walkout nearly three weeks ago by Senate Democrats over a measure in the bill that sharply curtails public employees’ collective bargaining rights. Walker has warned 1,500 employees could lose their jobs if the bill is not soon passed.
“The facts are clear: Wisconsin is broke and it’s time to start paying our bills today so our kids are not stuck with even bigger bills tomorrow,” Walker said in his budget address to the Legislature. “This deficit did not appear overnight. Wisconsin got here through a reliance on one-time fixes, accounting gimmicks and tax increases.”
Walker, a Republican, blamed previous lawmakers of both parties for contributing to the state’s structural budget problems through one-time fixes that included securitizing the state’s tobacco settlement to help pay for operations and raids on various non-general fund accounts.
“In short, they governed for the short term, with an eye only on the next election — not the next generation,” Walker said of past leaders. The budget does, however, rely on $334 million in savings from debt restructuring, a move considered a one-time revenue source. Past governors have relied more heavily on one-shots to avoid tax increases.
The budget trims education spending in fiscal 2012-13 by $834 million and lowers local districts’ revenue caps so they can’t pass the cut on to property taxpayers. Funding for the University of Wisconsin system will fall by $250 million. The state will reduce local government aid by $1.25 billion and another $500 million will be cut from Medicaid funding levels. The state expects to save about $300 million from increased employee contributions towards their pensions and health care premiums.
Overall, all-funds spending in the next biennium that begins July 1 will drop by $4.2 billion, or 6.7%. The operating budget for fiscal 2012 totals $29.3 billion and $30 billion for fiscal 2013.
Tax revenues are expected to increase by $560 million, or 4.6%, in the current fiscal year, and then grow by another $473 million, or 3.7%, in fiscal 2012, and by another $526 million, or 4%, in fiscal 2013, according to figures provided by the Legislative Fiscal Bureau. Despite the projected growth, revenue will only reach levels similar to those in fiscal 2007-08.
Long-term bonding recommendations to support a separate capital budget will be submitted at a later date to the Legislature as a budget amendment. But the operating budget does call for $151 million of transportation revenue bonding to support an interchange project and savings of $334 million through debt restructuring in the next fiscal year.
The state has unused general obligation bonding authority of $2.1 billion. The budget also assumes the issuance of up to $800 million of notes for cash-flow purposes in each fiscal year of the next budget. Fitch Ratings, Standard & Poor’s, and Moody’s Investors Service all rate the state’s $7.2 billion of GOs in the mid-double-A category with stable outlooks.
Walker sought to boost the pressure on Senate Democrats to return to the capitol to vote on the budget repair bill by asserting that the $1.25 billion of local government aid cuts could be offset by measures in the bill that have passed the Assembly. If enacted, local governments could shave nearly $1.5 billion off their employee expenditures for pensions and health care, according to the governor.
“If the 14 Senate Democrats do not come home, their local communities will be forced to manage these reductions in aid without the benefit of the tools provided in the repair bill,” Walker said.
Walker, a Republican, enjoys a GOP majority in the Senate and Assembly. The Senate has been unable to vote on the budget repair bill because the presence of at least one Democrat is needed to reach the quorum necessary to vote on spending matters.
The budget repair bill includes authority to restructure $165 million of debt service coming due May 1. In order to complete the transaction by March 15 when the state must fund the payment, legislative approval was needed by Tuesday, state officials have said.
The state is facing an estimated $137 million shortfall in the current fiscal 2011 budget that runs through June 30. It also owes more than $200 million to a medical malpractice fund as the result of a Wisconsin Supreme Court ruling overturning a previous transfer of funds.
The budget repair bill requires state, local, and school district employees to pay more towards their pensions and health care premiums for an estimated savings of $30 million in the current budget and $300 million in the next budget cycle. The bill’s most controversial component, which sparked the Democratic walkout that has become a major national news story, would severely limit the collective bargaining rights of most public employees.
In a letter to Walker on Tuesday, Milwaukee Mayor Tom Barrett forwarded the opinion of the city attorney that the bill’s pension changes may be illegal. The city attorney believes the state cannot statutorily change the structure of the city’s employee retirement system.
Barrett, who lost to Walker in the governor’s race last November, asked Walker to request a review by the state attorney general.
