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Walker Seeks Wisconsin Spending Cuts, Savings to Close Gap

March 1 (Bloomberg) -- Wisconsin Governor Scott Walker, whose plan to curb government workers’ bargaining power spurred protests across the U.S., proposed $3.4 billion of cuts and savings in a two-year budget to help close a $3.6 billion gap.

The almost $60 billion plan reduces funds for education and local aid by more than $1.25 billion. It requires government workers to contribute more to their health and retirement plans and shifts more than 17,000 from state payrolls by creating a separate authority for the University of Wisconsin-Madison.

The former Milwaukee County executive was elected in November as fellow Republicans took control of the state Legislature. He and governors in 43 more states are looking for savings to close budget deficits totaling as much as $125 billion next fiscal year, according to the Washington-based Center on Budget and Policy Priorities. The nonprofit focuses on issues that affect lower-income Americans.

“Governments around the nation and world are facing the hard reality that spending has outstripped our ability to pay,” Walker, 43, said today in an overview of the fiscal 2011-2013 budget he submitted to the Legislature in Madison, the capital.

“This ‘steal from the middle class, give to the rich’ proposal builds on Walker’s attacks on workers of the last few weeks,” state Representative Mark Pocan, a Madison Democrat, said in a statement. “ While Walker makes historic cuts to basic middle-class services, he also finds tax breaks for the wealthy,” Pocan said.

Job Reductions

The governor’s budget proposal removes about 17,400 positions from state payrolls by making the University of Wisconsin-Madison a separate entity. Additional shifts will reduce state employment by about 21,300 in all, affecting workers in health and housing agencies. Walker would close the commerce department, shut some juvenile-correction facilities and eliminate vacant posts, the budget proposal shows.

“It’s not that all these people are getting fired -- the positions are being eliminated from the state’s books,” Cullen Werwie, a spokesman for Walker, said by telephone after the governor’s presentation. “That doesn’t mean there won’t be firings. A couple of people will get fired.”

The budget requires government employees except police and firefighters to pay 5.8 percent of their salaries for pension costs, up from nothing now, and to cover about 12 percent of their health-care premiums, up from 6 percent.

The proposal reduces school aid by about $800 million. Local districts also would be required to cut per-pupil spending by 5.5 percent from the current budget. The University of Wisconsin System’s funding would be pared by $250 million.

Aid Reduction

The spending cuts would help offset a $1.26 billion reduction in federal aid that the state used in the previous two-year budget to help pay for Medicaid, the health-care program for low-income residents.

Walker’s budget doesn’t raise taxes or fees. It caps municipal property levies according to a formula and requires localities to pass savings in debt service to residents through tax reductions.

Businesses would receive tax breaks on the gain in value of capital assets in the state. A tax credit for new jobs would be expanded to include higher-salaried workers.

“This is a reform budget; it is about getting Wisconsin working again,” Walker told a joint session of the Legislature. “We need a balanced budget that works and an environment where the private sector can create 250,000 jobs over the next four years.”

Third Week of Protests

Walker’s presentation came as demonstrations at the Capitol against his so-called budget repair bill entered a third week.

The bill aims to close a projected $137 million gap for the current fiscal year and balance spending and revenue in the next biennium. Walker has said the repair bill would generate $30 million in savings this fiscal year and $300 million in the next two years by raising what government workers pay for benefits.

It also calls for voter approval of wage increases that exceed inflation, requires union recertification votes every year and ends automatic dues withdrawals from paychecks, according to the governor’s office. The measure made Madison a focal point for protests against Republican-led efforts in states including Ohio and Indiana to cut benefits and the bargaining power of government unions.

The repair bill passed Wisconsin’s Assembly on Feb. 25 after more than 60 hours of debate. The bill remains stalled in the Senate because Democrats there are boycotting a vote, denying the chamber a quorum.

Call for an End

The governor yesterday called on Senate Democrats to end their walkout, saying a failure to return today would jeopardize a $165 million debt refinancing designed to lower costs. The savings are incorporated into the budget Walker released today, said Werwie, his spokesman.

Forty-two percent of those polled in a Pew Research Center survey released yesterday support government employee unions, while 31 percent side more with Walker. The national telephone poll of 1,009 adults was conducted Feb. 24-27 and has a margin of error of plus or minus 4 percentage points.

To contact the reporter on this story: Esmé E. Deprez in Madison, Wisconsin, at edeprez@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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