CHICAGO — Representatives of the Wisconsin Assembly and Senate are expected over the next two weeks to resolve differences in their adopted budgets that address a $6.6 billion deficit as state finance officials ready a $800 million cash-flow note issue that could sell as soon as next week.
The state’s budget process advanced with the Senate’s passage of a $62.5 billion, two-year budget late Wednesday. Lawmakers yesterday said they might meet informally to resolve differences instead of setting up a conference committee of members from both chambers to address differences between the Senate version and one previously approved by the House. No action is expected until next week.
The Senate version excluded Gov. Jim Doyle’s tax on oil company profits, which was expected to raise $260 million annually, over concerns that the companies would successfully challenge a proposed provision in the tax to keep them from passing the increase on to consumers at the pump.
The Senate version instead raises additional revenue of $300 million by repealing a tax break on capital gains. Doyle had proposed scaling back the 60% exemption now allowed on the capital gains tax. The House version included both Doyle proposals.
Senate Republicans voted against their chamber’s version of the budget over opposition to several measures, including the repeal of the capital gains exemption. Doyle is a Democrat and both chambers are controlled by his party.
Senate Majority Leader Russ Decker said of the Senate plan: “This budget has no general sales or payroll tax increase, protects the vast majority of Wisconsin residents from an income tax increase, and we held the line on property taxes by making investments in local transportation aid, police and fire services, and recycling grants.”
Republican Minority Leader Scott Fitzgerald countered: “At a time when our state is in recession, the Legislature’s number-one priority should be creating jobs and decreasing the tax burden on Wisconsin working families. Instead, the budget bill passed by Senate Democrats today does exactly the opposite. It increases spending by over 6% and raises millions of dollars in taxes and fees.”
The two chambers’ budgets are similar in that they both include a 6% across-the-board cut in agency spending, proposed state employee furloughs, the elimination of 1,400 positions, tax and fee increases that raise $2 billion from an income tax increase for high-income residents, and a hike in the cigarette tax and other increases. Both versions also cut aid to local government and school districts. The plan also relies on $285 million in debt service savings through debt restructuring. The state faces a $6.6 billion hole due to declining revenues.
The competitive note sale, which will smooth out the state’s cash-flow in the next fiscal year, could sell as soon as Wednesday or Thursday, according to capital finance director Frank Hoadley. The notes mature June 15, 2010. The notes are not a general obligation of the state, but the state is obligated to deposit the necessary general funds not needed for general obligations of the state into the fund that secures them.
Wisconsin’s GOs are rated Aa3 with a negative outlook by Moody’s Investors Service, AA-minus by Fitch Ratings, and AA by Standard & Poor’s.