CHICAGO - Wisconsin will sell up to $295 million of general obligation refunding bonds for economic savings as soon as Wednesday.
Morgan Stanley is the senior manager and Ramirez & Co. is co-senior manager. Lamont Financial Services Corp. is advising the state, and Foley & Lardner LLP is bond counsel.
Rating agencies had not released updated reports ahead of the sale by Monday, but in January affirmed the state's double-A level ratings ahead of a new-money GO issue. The state also last year began using Kroll Bond Ratings Agency, which rates Wisconsin GOs AA with a stable outlook.
The deal comes as lawmakers are advancing Gov. Scott Walker's proposal to tap more than $500 million from a projected $1 billion budget surplus for tax relief. Senate Republicans pushed through a $541 million package and it now returns to the Republican-controlled Assembly which approved a slightly different version last month.
The Republican governor unveiled the tax cut package after new state revenue estimates projected a $1 billion surplus in the two-year budget that runs through June 30, 2015. The centerpieces of the package are a property tax cut and a reduction in income taxes through changes in the withholding tax and manufacturing income tax cuts.
Walker's original package would have left the state with an $800 million structural deficit in the next budget. An agreement between his administration and senators calls for $100 million of the surplus that would have gone into the state's reserve under state laws governing surpluses to instead remain in the general fund.
A Democratic proposal would have used half of the surplus for a one-time property tax credit, pumped more money into education funding and set aside $229 million for the state's reserve.
The revised revenue estimates were released earlier this year. State sales and use tax revenues are estimated at $4.6 billion this year and $4.8 billion in fiscal 2015. That's up 5.2% in the first year and 3.8% in the second year. The estimates are $142 million higher than the previous estimates in the first year and $208 million higher in the second year.
State individual income tax revenues are estimated to generate $7.4 billion this year and $7.8 billion next year. Those are up a combined $265 million over prior estimates.
"The state's finances have strengthened, with recent structural budget solutions and solid revenue gains resulting in materially stronger liquidity," Fitch wrote in its January report. "The state has not yet returned to consistent structural balance as of its fiscal 2013-2015 adopted budget although year-to-date revenue performance is strong."
The state's reserves remain modest posing another challenge. Fitch said its rating also reflects the state's diverse economy, a moderate but above-average debt burden, and fully funded pensions.
Moody's in its January report said the state's Aa2 rating on $8 billion of GOs reflects its improving budgetary performance, an improved liquidity position as well as a fully funded pension system, and a negative fund balance based on generally accepted accounting principles.
"The state's ability to make progress toward structural budget balance and improve its liquidity and fund balances will be important to future credit analysis," Moody's wrote.
