The Associated Press January 31, 2011, 8:20PM ET

Wisconsin could face $340 million budget shortfall

A new analysis released Monday showed that Wisconsin's budget could be between $79 million and $340 million short by June 30 due largely to anticipated Medicaid expenses and a court-ordered repayment to a fund that was raided four years ago.

Gov. Scott Walker has said he will begin outlining how he intends to deal with the problem in his first State of the State speech Tuesday. Walker has said he wants to take immediate action not only to deal with the problem this year but also start making savings to lessen the ongoing projected two-year shortfall of roughly $3.2 billion.

His plan for solving that much larger shortfall over the next two years will be released on Feb. 22.

The highly anticipated Legislative Fiscal Bureau memo released Monday put new numbers on a well-known problem. It showed that the state will end the current fiscal year on June 30 with $121 million in cash, which was $54 million more than the last estimate done in December. That was due primarily to a reduction in debt service payments.

That was about all the good news to be had.

Despite the positive balance on paper, state agencies are expected to have about $200 million in bills that need to be paid over the next five months, including $169 million in Medicaid.

Paying those would leave the state $79 million short.

On top of that, the state owes Minnesota $58 million in tax reciprocity payments and it must repay $200 million plus interest into a fund used to help pay doctors' medical malpractice claims that was raided to balance the budget in 2007.

Depending on when those payments start, the immediate budget problem could balloon to roughly $340 million or more.

"These new numbers confirm that tough choices need to be made in the very near future," said Walker spokesman Cullen Werwie.

The Republican co-chairs of the Legislature's budget committee released a joint statement pledging to work with Walker to fix the problem.

"Today's numbers reinforce that our state is in a fiscal crisis," said the statement from Sen. Alberta Darling, R-River Hills, and Rep. Robin Vos, R-Rochester.

In Walker's first month in office he's pushed a number of tax cuts that actually make the state's ongoing budget problem worse. The Fiscal Bureau predicted the state will collect about $190 million less in taxes over the next two years than previously thought, with $117 million of that coming from Walker's tax cuts.

Walker argues the tax cuts will actually spur economic growth by making Wisconsin a more desirable place for businesses to locate. Democratic critics say the potential benefit to the tax breaks isn't significant enough given the cost.


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