CHICAGO - Wisconsin Gov. Jim Doyle and legislative leaders yesterday announced measures to trim about $700 million from the state's $5.7 billion, three-year budget deficit through spending cuts, a hospital assessment program that leverages more federal funds, and other maneuvers.

Under the plan, the state will cut $125 million in spending. Additional general funds of about $300 million will be saved by implementing a hospital assessment tax aimed at leveraging more Medicaid matching dollars. The governor did not propose any increase in Wisconsin's income or sales taxes, but he would raise new revenue by extending the sales tax to cover some Internet sales that are now exempt.

The plan also pre-authorizes the use of about $300 million in expected federal stimulus funds for transportation projects, freeing up other state funds. To help spur the economy and job creation, Doyle and lawmakers also proposed an expansion of existing tax credit programs and several new ones.

The governor also proposed allowing the Wisconsin Health and Educational Facilities Authority to issue tax-exempt debt for research facilities. He also wants to give the Wisconsin Housing and Economic Development Authority the ability to make loans for refinancing qualified subprime loans for single-family residential mortgage loans made after Dec. 31, 2001, and before Jan. 1, 2008.

"This bill lays critical groundwork for getting our state's economy back on track and creates a platform for putting federal stimulus dollars to work quickly and efficiently ," Doyle said. "It identifies expenditures that can be cut right now, and targets revenue we can begin raising today."

The Democratic governor was joined by Democratic leaders who control the Assembly and Senate in announcing the proposals. Republicans were less enthusiastic.

"After negotiating behind closed doors and without a hint of bipartisanship in developing important fiscal policy for our state during tough economic times, it appears Gov. Doyle plans to stimulate our economy by raising taxes and punishing business," the state's Republican Party said in a statement.

On Tuesday, Doyle will unveil his budget for the next biennium that begins July 1, outlining his plan for dealing with the state's worst deficit ever. He delayed releasing the budget by one week to await congressional action on a final stimulus plan.

The deficit includes a $600 million shortfall in the current budget, which the proposals announced yesterday are expected to address, as the state is required to close out the fiscal year with a balanced budget.

Doyle has previously announced that the state will leave as many as 3,500 vacant positions open during the current fiscal year, suspend some pay increases and bonuses, and sell 500 state vehicles. Legislative authority also will be sought to trim 2.5% from agency spending.

Last spring, faced with a downward revision of revenues in the $57 billion budget, the state adopted a plan that delayed repayment of about $125 million of commercial paper, cut $270 million in spending, drained $57 million from the state's small budget reserve, took $150 million in up-front savings from a proposed tobacco bond restructuring that is still pending, and closed corporate tax loopholes.

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