Wisconsin to Skip Debt Payments to Make Up for Walker’s Tax Cuts - Bloomberg Politics

 

Bloomberg) -- Wisconsin Governor Scott Walker, facing a $283 million deficit that needs to be closed by the end of June, will skip more than $100 million in debt payments to balance the books thrown into disarray by his tax cuts.

The move comes as Walker, 47, mounts a 2016 bid for the Republican presidential nomination, and while his state is under stress from a projected shortfall that could exceed $2 billion in the two-year budget beginning in July.

Delaying the $108 million principal payment due in May on short-term debt would free funds. The move doesn’t require legislative approval, the nonpartisan Legislative Fiscal Bureau said in a Feb. 13 memorandum. The terms of the debt sale allow Wisconsin to defer the payment in any given year, a procedure known as a restructuring, without defaulting.

“They need some cash.”

Todd Berry

“They need some cash,” said Todd Berry, president of the Wisconsin Taxpayers Alliance, a nonpartisan research group that examines taxes and government spending. “This is kicking the can down the road.”

A spokesman for the Wisconsin Department of Administration said the state is taking advantage of “favorable short-term interest rates” for the restructuring.

“With these types of notes, the maturity schedule and amortization is determined solely by the state, unlike a traditional bond,” said Cullen Werwie.

Werwie also noted in an email that Walker’s predecessor, Democratic Governor Jim Doyle, “utilized similar financial tools.”

Increasing Bills

Walker’s plan would increase debt-service bills by $545,000 in the next budget year, which starts July 1, and by $18.7 million in the one after that.

Berry said Walker has little room to maneuver.

“That’s a lot of money to try to find in four-to-five months, if you do it through cuts,” Berry said.

Since taking office in 2011, Walker has steered more than $2 billion in tax cuts through the Republican-controlled legislature. The state reported a $759 million surplus on June 30, 2013

Wisconsin to Skip Debt Payments to Make Up for Walker’s Tax Cuts - Bloomberg Politics