As he gears up to introduce his biennium budget this afternoon, Gov. Scott Walker said debt needs to be refinanced by today in order to curb the current state budget shortfall.
Walker’s budget repair proposal contains a number of cost-saving measures, including refinancing one-time debts owed to the Minnesota reciprocity tax fund and the Patient’s Compensation Fund. However, the bill must pass by today to allow time for refinancing to take place, an action complicated by the absence of 14 Democratic senators, Walker said in a statement Monday.
“Now [the Senate Democrats] have one day to return to work before the state loses out on the chance to refinance debt, saving taxpayers $165 million this fiscal year,” Walker said. “Failure to return to work and cast their votes will lead to more painful and aggressive spending cuts in the very near future.”
Last week, Walker said in a press conference 1,500 workers would be laid off by July if the state does not refinance its debt.
Democrats have provided the governor with alternatives to refinancing the debt – such as utilizing funds in the statutory balance and returning $79 million to the general fund – and criticized the plan to refinance debt as a means of “kicking the can down the road.”
“Pushing off that $165 million payment costs taxpayers an extra $29,570,000 in the next two years,” Sen. Jon Erpenbach, D-Middleton, said in a statement, citing a report by the Legislative Fiscal Bureau.
Released last Tuesday, the Legislative Fiscal Bureau’s report detailed the repayment of debt after refinancing as a 10-year process. The debt would accrue more than $42 million of interest and cost Wisconsin nearly $207 million.
However, Cullen Werwie, Walker’s spokesperson, said the Bureau’s memo failed to compare the interest from refinancing with the interest accruing currently. Interest on the state’s debt to Minnesota, for example, grows by more than $4,000 daily, he said.
Andrew Reschovsky, University of Wisconsin economics professor, said though Walker promised not to use one-time fixes – which refinancing arguably is – pushing the payment into the future could make sense, judging the state’s economy.
“We are in a period where the economy is in very weak shape and the unemployment rate is high,” Reschovsky said. “You could make the argument that doing less cutting now and moving things forward until the economy is stronger may be good economic policy.”
He added whether refinancing makes sense depends on the interest rate on Wisconsin’s debts. If it is a high interest rate, it might benefit the state to refinance instead of cutting spending to repay the debt.
Meanwhile, Walker is set to introduce his budget this afternoon for the next fiscal biennium, which begins July 1.
Walker will introduce his budget in a joint session of the Legislature at 4 p.m. today.
The budget will include cutting state education funding by $900 million. A $500 per pupil reduction in property tax authority is expected, which would decrease aid to districts by roughly $600 million, according to a survey conducted by Reschovsky.
Reductions in aid to schools and other state and local agencies as a result of the governor’s new budget would not exceed savings provided in the budget repair bill, Walker said in a press conference.
