State budget hole MUCH worse than thought

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• Legislative Fiscal Bureau budget report to committee co-chairs

In January, preliminary figures from the state's Legislative Fiscal Bureau showed Wisconsin's budget was looking at a $300-$400 million shortfall because of a slowing economy and lower tax collections.

On Wednesday, LFB released their final estimates and the news got worse.

LFB is now predicting that the state budget is facing an estimated $652.3 million shortfall.

"Unfortunately, the January 2008, collections report and the February forecast both point to further weakness in general fund tax collections," wrote Robert Lang, LFB director in his letter to Sen. Mark Miller, D-Monoa Terrace, and Rep. Kitty Rhoades, R-Hudson, who co-chair the Legislature's budget committee.

That $652 million figure might get worse, according to the LFB.

First, there is a lawsuit against the state filed by the Wisconsin Medical Society for a $200 million transfer from the state's Injured Patients' Compensation Fund which was authorized in the 2007-09 biennial state budget.

The fund is supported by the state's doctors and is not taxpayer-supported. The state's doctors are claiming the transfer was illegal since it isn't the government's money.

Another unknown is a lawsuit involving the Ho Chunk tribe against the state regarding tribal gaming compacts and payments.

The General Fund revenue estimates assumes Ho-Chunk will pay in 2007-08, the lump sum payment originally due in 2004-05 as well as percent-of-net-win payments associated with 2005-06 and 2006-07 casino earnings.

However, those payments are in limbo until a court decision is made.

Yet another lawsuit that would impact the budget is against the Mensha Corp. regarding the ability to tax computer software.

That case is being heard by the state Supreme Court and could drop another $295 million from the budget. A ruling in the case is expected this spring.

More bad news comes from the state's transportation fund.

The LFB reported that because of lower revenues from vehicle registration fees the transportation fund may be $25-$45 million short at the end of the biennial budget.

To deal with the shortfall Gov. Jim Doyle ordered state departments and agencies not to spend $111 million which had been allocated to them in the state budget.

The state is also saving $125 million by restructuring the repayment of short-term bonds, according to Dave Schmiedicke, a Wisconsin Department of Administration spokesman.

The government has already instituted a statewide hiring freeze.

"There is a hiring freeze of all non-essential positions and it is up to each department and agency to determine which positions are non-essential," said Schmiedicke.

He added that he doesn't expect any layoffs from any current actions the state government has taken to control costs, but future layoffs are unclear.

"At this time we don't know," Schmiedicke said.

Doyle said he plans on working with the Legislature to come up with other ways to fill the budget hole without raising taxes.

"It's very clear, you stop spending," said Rhoades.

"You don't expand existing programs and you don't initiate any new programs," she added.

Rhoades added that she was encouraged to hear that Doyle wasn't going to increase taxes to get the state out of the budget hole.

She also noted that Wisconsin isn't the only state facing budget deficits and says it is because of a slowing economy.

"When we develop a budget we base it on estimates of economic growth. Nationally the economy is slowing much faster than anyone expected," Rhoades said.

Doyle also noted that Wisconsin wasn't alone.

"States across the country - from Florida to California to Minnesota and Arizona - are all facing budget deficits," he said.

Tags: wisconsinnews, statebudget, deficit