To help close the state’s $283 million budget shortfall this year, Wisconsin Governor Scott Walker (R) plans to skip a $108 million debt payment scheduled for May.
By missing the May payment, Walker will incur about $1.1 million in additional interest fees between 2015 and 2017. The $108 million debt will continue to live on the books; Walker’s budget proposal for 2015-2017 will pay down no more than about $18 million of the principal.
“This latest accounting gimmick kicks the can further down the road and will end up costing taxpayers millions more,” State Sen. Jennifer Shilling (D) said in a press release yesterday.
Democrats have been pressuring Walker to address the estimated $283 million shortfall with an emergency budget bill, but he has resisted so far. Restructuring this kind of debt does not require legislative sign-off. Walker may also be forced to make emergency government spending cuts in the next four months to make ends meet.
In March last year, Walker signed a $541 million tax cut for both families and businesses. At that point, Wisconsin was facing a $1 billion budget surplus through June 2015, the Journal Sentinel reported.
By November last year, the administration was estimating a $132 million shortfall. In January, the non-partisan Legislative Fiscal Bureau pegged it at $283 million. The Bureau, which does research for the Wisconsin Legislature, explained that tax collections were $173 million worse than the administration’s own estimates in November.
The Walker administration argues that pushing off the debt payment is a smart financial move. “The State is taking advantage of unusually strong, favorable short-term interest rates for these notes,” spokesperson Cullen Werwie wrote in an e-mail.
Looking ahead, the administration also faces a $2 billion gap between what Wisconsin agencies have requested in their budgets over the next two years, and Wisconsin’s projected revenues. His budget proposal for 2015-2017, released earlier this month, includes a controversial $300 million cut to the University of Wisconsin System.
Walker has bragged that he has approved $2 billion in tax cuts since he took office in 2011. The Legislative Fiscal Bureau told PolitiFact in March that the claim is accurate.