CHICAGO — Wisconsin Gov. Scott Walker will spend the next week or so reviewing the $66 billion, two-year budget approved by lawmakers before signing the spending plan, which closely resembles his original proposal by dealing with a $3 billion deficit primarily with cuts.

The budget, approved along party lines with Republican backing late last week, represents a 1.8% increase over current spending levels. It does not include any general tax increases and cuts deeply into education, local government, and health care spending. It also strictly limits local property-tax hikes to keep local governments from passing along the state cuts.

“I am proud of the work done by the Legislature, which passed a budget today that isn’t built on accounting gimmicks, use of one-time money for ongoing expenses, or tax increases,” Walker, a Republican who took office this year, said in a statement late last week. He plans to sign the budget before the end of the fiscal biennium on June 30.

The budget authorizes $1.36 billion of new general obligation borrowing and another $695 million of new revenue-backed bonding, including $342 million for transportation and $353 for clean-water projects, according to Legislative Fiscal Bureau analyst Al Runde.

Though the budget’s steep cuts will dramatically bring down the state’s structural deficit going forward by better aligning recurring revenues with expenses, the plan does rely on one significant one-shot in the restructuring of $337 million of GO and commercial paper debt service due in fiscal 2012. The restructuring is about $100 million lower than what Walker proposed, Runde said.

Local governments will collect $76 million less in the next budget than allocated in the current fiscal biennium that ends June 30. The budget trims $500 million from Medicaid spending and reduces public school funding by about $800 million over the two-year period. Another $250 million was slashed from higher education spending levels and $72 million from aid to technical colleges.

Walker has promoted his previously approved and controversial curbs on collective bargaining rights for public workers as a means for local governments and schools to offset the impact of budget cuts. Democrats charge that the budget unfairly burdens local governments, schools, and the poor to aid businesses.

Transportation funding will rise by 1.2% with $225 million earmarked for the Zoo interchange project in Milwaukee and $195 million for the ongoing reconstruction of a major interstate between Milwaukee and Madison.

The budget offers various tax breaks and credits worth at least $210 million for businesses by deferring capital gains taxes for investments, creating a new credit for manufacturers and agricultural businesses, providing tax relief for multi-state corporations, and passing along a sales tax exemption for certain advertising mail.

The budget eliminates more than 1,000 mostly vacant positions and puts the state on track to close out the next fiscal biennium on June 30, 2013, with a balance of more than $300 million. The structural deficit is expected to fall to about $250 million from $2.5 billion.

The budget anticipates the sale of $800 million of operating notes for cash-flow purposes in each of the next fiscal years. Capital finance director Frank Hoadley will seek State Building Commission approval for the transaction this week and expects to sell the notes competitively early next month. The state is also planning a roughly $300 million new-money GO competitive sale later this summer.

All three rating agencies rate Wisconsin’s $7.2 billion of GOs in the mid-double-A category with stable outlooks.

In nearby top-rated Iowa where lawmakers remain at an impasse over the fiscal 2012 budget, Gov. Terry Branstad was expected to lay out contingency plans for a possible government shutdown plans on Friday but the documents did not offer any new information.

Democrats — who control the state Senate want more spending on education — while Republicans who control the House want to limit the budget to $6 billion. The Republican governor also is pushing for a two-year budget.

State Treasurer Michael Fitzgerald sought to assure state investors they will see no interruption of debt service if a budget is not enacted soon. That’s because all of the state’s debt features an ongoing appropriation of pledged revenues. “There are no state bonds at risk,” Fitzgerald said Friday. “All of our revenue streams that repay bonds are rock solid and the Legislature would have to act to take away the appropriation.”

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