CHICAGO — The Wisconsin Legislature was expected to take up a two-year, $70 billion budget Tuesday after majority Republicans resolved key sticking points by reducing borrowing levels and withdrew a financing package for a new Milwaukee Bucks sports arena.
The state entered the new fiscal biennium July 1 without a budget amid GOP internal divisions over borrowing levels, the arena, and proposed changes to prevailing wage requirements.
"Everything runs as normal" with bills paid, payroll and debt service being met based on a continuing appropriation, budget director Michael Heifetz said last week. "We don't expect a protracted delay" in approving the plan.
The logjam was broken by removing the arena from the budget and cutting transportation bond levels. Amendments continued to be made on Monday and Tuesday as the GOP leadership worked to build rank-and-file support.
The budget package advanced by the Joint Finance Committee trims $250 million in funding from the University of Wisconsin system while freezing in-state tuition; K-12 school funding is held steady in fiscal 2016 with a small increase in the second year.
Joint Finance cut Gov. Scott Walker's proposed general fund supported, revenue, and appropriation backed borrowing down to $652 million from $1.6 billion.
The drop included the removal of $220 million in appropriation-backed bonding Walker originally proposed for a new Milwaukee Bucks arena.
Legislative leaders decided late last week to pull the plan from the budget and let it stand on its own. It's unclear whether the bill can pass because the plan has spurred both bipartisan support and opposition.
The revised package authorizes $850 million of transportation related borrowing with $160 million backed by the state's transportation revenue program, $380 million of transportation funded GO bonds, $132 million of general fund supported GOs, and $175 million of debt with backing still to be determined.
Walker originally sought approval for $1 billion of transportation revenue-backed debt and $330 million of transportation fund-supported GO bonding.
In another borrowing-related measure, the package being sent to the Assembly and Senate removes Walker's proposal to pledge 50% of revenues from motor fuel taxes to transportation borrowing, said David Erdman, assistant capital finance director.
During a legislative hearing Monday, Milwaukee Bucks President Peter Feigin pressed the need for legislative support if the state is to keep the team. Feigin stressed the new jobs and other economic benefits of hosting a National Basketball Association team. "You'll never be able to replace the revenue if the Bucks leave," he said.
State revenue officials said the team contributes roughly $130 million to the state's economy with Bucks-related income taxes producing $6.5 million annually.
Under the financing plan, the public would contribute $250 million toward the new $500 million arena and the team would cover the rest. The total public cost when interest on borrowing is factored in totals about $377 million, according to the Legislative Fiscal Bureau.
The deal relies on a mix of borrowing and other funding from the state, the city, Milwaukee County, and the Wisconsin Center District, which manages the city's convention center. The team would have to cover overruns and the public funding must be repaid if the team is sold.
The Republican governor has sought to make the case with hesitant lawmakers that the deal preserves state collections of income taxes on visiting NBA teams, economic activity spurred by the team, and eliminates the public expense of maintaining the team's current home.
Under the plan, the Wisconsin Center District's powers would be expanded from managing the city's convention center to include the new arena. The state would provide an annual subsidy of $4 million annually over 20 years for a total of $80 million.
The county would also provide $4 million annually for a total of $80 million, the city would provide $47 million in tax-increment financing support, and the Wisconsin Center District would issue $93 million of new debt.
The district collects taxes on hotel rooms, food and beverage sales at restaurants, and car rentals to repay a $185 million bond issue for the convention center. The $93 million would be repaid with those taxes. If the county and state contributions are leveraged, total borrowing would be about $200 million.
Walker has been pressing to get the budget done ahead of an expected July 13 announcement that he will make a 2016 bid for the Republican presidential nomination.
Fitch Ratings and Standard & Poor's and Kroll Bond Rating Agency all rate Wisconsin AA and Moody's Investors Service assigns its equivalent Aa2. Moody's has a positive outlook; the others have stable outlook.
