I believe that, in its zeal to be responsive to many different demands, the Legislature has been too ambitious in increasing GPR spending by 6.3% and 7.4% in fiscal year 1999-2000 and fiscal year 2000-2001, respectively. While the budget that passed is balanced in both fiscal years, the ending balance of $117.8 million in fiscal year 2000-2001 is just $5 million above the required 1% reserve. It will be extremely difficult to continue current programs in the next budget given the structural imbalance and the very limited balance overall.
My second major concern is the large increase in bonding authorized in the budget, particularly for new programs. Since we must meet our debt service payments once bonds are issued, we
need to be vigilant that debt service does not become an increasing proportion of our total spending. My proposed budget authorized $572 million in new GPR-supported general obligation bonding in the 1999-2001 biennium, a level calculated specifically to ensure that debt service payments would remain at 3.3% of total GPR revenue over the next decade. The budget passed by the Legislature contains $698 million in new GPR-supported bonding authorizations. This level of bonding means that debt service will increase as a percentage of total revenue. We should not incur new long-term debt of this magnitude. Debt service payments will increase by 8.5% in fiscal year 2000-2001, while our GPR revenue will increase just 4.0%. Therefore, I vetoed several new bond authorizations to lower the total new bonding authorization amount by $39 million to reduce the new debt we will incur to a more affordable level.
In order to address these issues, I vetoed a total of $43 million in additional GPR spending items approved by the Legislature as a means to improve the ending balance. This is the largest amount of GPR budget savings achieved through vetoes during my tenure as Governor. I also exercised a veto to increase the size of the balance we are required to maintain from 1% to 1.2% of GPR spending. Finally, I will support legislation creating a fund to retain any additional revenue we collect during 1999-2001 compared to what the budget assumes, in order to help meet our needs in the following biennium. These are the most responsible ways to begin preparing for what can be expected to be a difficult budget in 2001-2003. It should also be noted that while the net ending balance is now projected to be $86 million under the budget as vetoed, $60 million of this must be set aside to pay the December 2000 school levy increase which is not paid under current law until July 2001 (fiscal year 2001-2002).
Total spending under the 1999-2001 budget as passed is $20.8 billion in fiscal year 1999-2000 and $21.3 billion in fiscal year 2000-2001, for a biennial total of $42.1 billion. These figures represent annual spending increases of 7.9% and 2.8%. From general purpose revenue, net spending will be $10.6 billion in fiscal year 1999-2000 and $11.4 billion in fiscal year 2000-2001, for a biennial total of $22.0 billion. These figures represent annual spending increases of 6.3% and 7.4%, primarily due to increases in spending to meet our commitment to fund two-thirds of school costs, to house our prison population, to pay for increased medical assistance costs for our low-income citizens and to make investments in our higher education system.
I am signing this budget with a total of 255 vetoes. Many of these vetoes were needed to reduce spending by a total of $43 million GPR. Some of these vetoes rolled back tax increases, saving $43 million. I do not believe we should be increasing taxes when the state has a booming economy. A number of these vetoes are technical in nature and were required to make provisions workable. I also tried to limit the Legislature’s involvement in the day-to-day management of state agencies by eliminating the most burdensome new reporting requirements. The Legislature has a legitimate interest in knowing how state programs are working, but it should not micromanage agencies or dictate agency workload.
The budget I introduced and the Legislature passed moves Wisconsin forward, blazing a trail for other states to follow. Among the highlights are the following items:
Tax and Local Government Finance
· Enacts a comprehensive individual income tax reform and reduction package which makes Wisconsin's tax code simpler and more progressive.
· Reduces income taxes on a permanent basis in the second year of the biennium by $331 million, a 5.8% decrease. This will result in a tax cut of $200 for the average Wisconsin taxpayer in tax years 2000 and 2001. These income tax cuts are in addition to the 2.5% income tax cut enacted in the last biennium.
· Reduces all income tax rates in tax years 2000 and 2001, creating new rates for married joint filers in tax year 2001 and thereafter of 4.60% for taxable income below $10,000, 6.15% for income from $10,000 to $20,000, 6.50% for income from $20,000 to $150,000, and 6.75% for income over $150,000.
· Dramatically increases the base standard deduction from $9,040 to $12,970 for joint filers and from $5,280 to $7,200 for single filers and raises the ceiling for using the sliding scale standard deduction to $70,380 for individuals and $80,150 for married, joint filers.
· Creates a new personal exemption for each tax filer, spouse and dependent of $600 for tax year 2000 and $700 for tax year 2001 and provides elderly filers with an added $200 exemption in 2000, which would increase to $250 in 2001.
· Increases the school property tax rent credit to 16.4% in tax year 1999 and continues the 10% credit into tax year 2000.
· Increases the married couple credit by raising the income ceiling to $16,000 from $14,000. The maximum credit would increase to $480 in tax year 2001.
· Increases the homestead income ceiling from $19,154 to $24,500.
· Reduces the typical homeowner’s property tax bill by 3.6% in December 1999.
· Increases the lottery credit by $77 million in fiscal year 1999-2000.
· Increases the school levy tax credit by $60 million for December 2000.
· Increases funding for the expenditure restraint program by $9.0 million (19%), for the small municipalities shared revenue program by $1.0 million (10%), for the county mandate relief program by $600,000 (3%) and for the payments for municipal services program by $3.5 million (19%).
· Provides $64 million in fiscal year 1999-2000 and $71 million in fiscal year 2000-2001 to fully fund the personal property exemption for computer equipment effective January 1999.
Economic Development and Transportation
· Improves highway safety and enhances economic development by increasing state and federal support for highway construction projects and local transportation aids by over $150 million over the biennium.
· Establishes a new municipal street improvement program funded at $2 million over the biennium and increases local road improvement funding by a total of 9.3% for critical transportation infrastructure projects.
· Establishes mechanisms to ensure that state and federal transportation aid is dedicated to infrastructure improvement.
· Increases local transportation aids by 6.75% to meet rehabilitation and maintenance costs and to limit growth in property taxes.
· Establishes a four-tier transit aid distribution structure, creates performance-measurement and cost-effectiveness mechanisms for transit systems, and increases state assistance to local systems by 7.5%.
· Increases highway safety and law enforcement efforts by authorizing 14 new State Patrol troopers.
· Provides over $6 million in new funding for brownfields assessment, remediation and redevelopment efforts.
· Expands funding to promote Wisconsin tourism destinations by over 25% through use of gaming compact revenues.
· Provides $9 million from gaming compact revenues for support of economic development and diversification through grants to businesses.
Environmental Protection and Resource Management
· Reauthorizes the Warren Knowles-Gaylord Nelson Stewardship 2000 Program at $460 million for the next decade, or $46 million annually, almost doubling the size of the current program.
· Continues state assistance for local recycling programs at the current levels.
· Provides $40 million to leverage up to $200 million of federal funds for farmer water quality and habitat improvement efforts through the Conservation Reserve Enhancement Program.
· Increases funding for water quality protection efforts by 32% for rural nonpoint source pollution abatement projects and by 72% for urban nonpoint source pollution abatement, municipal flood control and riparian restoration projects.
· Enhances environmental cleanup and redevelopment efforts through expanded responsible and voluntary party exemptions from liability, additional site cleanup approval staff and implementation of the Brownfields Study Group recommendations.
· Improves the Petroleum Environmental Cleanup Fund Administration (PECFA) Program by authorizing $270 million in revenue bonds to reduce state interest costs, increasing claimant deductibles, reducing claimant interest rate cost reimbursements, implementing risk-based site assessment and cleanup processes and requiring competitive bidding for site cleanup activities.
· Provides over $3 million for local land use planning activities, establishes statewide local land use goals and links local land use activities to those goals through the new Smart Growth program.
· Provides nonuser fee support of $5 million for fish and wildlife programs from gaming compact revenues, and contains no increase in fish and wildlife fees.
· Increases public access to Lake Michigan and recreational opportunities in the City of Milwaukee by providing $9 million for development of Lakeshore State Park, the first new state park in 25 years.
Education and Training
· Creates a new Work-Based Learning Board, chaired by the Governor, which will consolidate and strengthen efforts to expand work-based learning activities statewide and adds $4 million GPR biennially to increase opportunities for students in the youth apprenticeship program.
· Provides $28 million GPR to the University of Wisconsin System (UWS) in fiscal year 2000-2001 to freeze tuition for Wisconsin resident undergraduate students for the 2000-2001 school year.
· Provides a $19 million GPR biennial increase to the UW-Madison to allow the UW System’s flagship campus to attract the best and brightest Wisconsin high school graduates, hire and retain the best faculty, continue cutting edge research and help maintain Wisconsin’s competitiveness in the global economy.
· Provides $16 million over the biennium in new GPR to support UW systemwide initiatives to expand the use of instructional technology, provide increased opportunities for students and faculty to study abroad, enhance library services and holdings, increase diversity and increase funding for Area Health Education Centers.
