CHICAGO - The Wisconsin Senate is expected to vote today on a bipartisan plan to eliminate a $527 million deficit in the current two-year budget using a mix of spending cuts, closing corporate tax loopholes, and a series of one-time measures that rely on reserves, the delay of payments, and $209 million from the state's tobacco bond restructuring.
The Assembly is expected to follow the Senate with a vote on the plan Wednesday. Gov. Jim Doyle responded to the announcement, saying it had "significant problems" that he would correct with his veto pen. Doyle is a Democrat and his party has a majority in the Senate while the House is controlled by Republicans. Doyle was especially critical of the proposal's plan to use $209 million from the tobacco restructuring and to delaying a payment to schools.
Under the plan unveiled yesterday, the state would delay a $125 million school aid payment into the next budget cycle, cut spending by about $69 million, and close several corporate tax loopholes. The plan relies on $97 million in cash reserves and $209 million from the restructuring of the $1.7 billion tobacco bond deal that sold in 2002.
The Legislature last year approved a tobacco restructuring, but the deal had been on hold due to interest rates. Under the revised plan proposed yesterday, legislative leaders would have the state extend the final maturities out to 2029 from 2018 and would use an annual appropriation to back the bonds. The current bonds are secured by Wisconsin's share of payments under the national tobacco settlement and the original restructuring envisioned a similar backing.
By using the appropriation as a security, Wisconsin expects to capture lower rates and squeeze out an additional $209 million in savings. The proposal still envisions that the deal would lower annual borrowing costs by $50 million to provide funding for a permanent endowment fund for health programs as proposed under the original restructuring plan.
"Today, after weeks of negotiations and months of hard work, we have reached a bipartisan agreement on a plan to close the state's budget shortfall. We did it the same way families are dealing with their own budgets - we're cutting unnecessary spending, tapping into our savings accounts, and delaying a payment to make ends meet," said House Speaker Mike Huebsch.
"The bill is a balance of tightening the state's belt and maintaining the critical investments in our state economy," said Senate Majority Leader Russ Decker. Lawmakers were under the gun to act, as Doyle had warned them that the state would be forced to cut school payments and delay the awarding of transportation contracts if no agreement was reached soon.
