State may have to slash road work

Legislative leaders are rejecting Gov. Jim Doyle’s plan to go $257 million deeper in debt to protect transportation spending — prompting fears among some that Doyle may scale back summer and fall highway maintenance and rebuilding projects.

The dispute is one of three major unresolved issues blocking a deal between legislative leaders and Doyle over how to rebalance the two-year, $57 billion state budget that became law in October. Since then, the slowing economy has caused a projected $652 million shortfall in tax collections.

Doyle said this week he is worried that the lack of a budget-repair deal could force the Department of Transportation to reduce $261 million in construction contracts it plans to award in May and June.

“I think we’re going to have to make some decisions and get something done,” said Doyle, who returns from a trade mission to Ireland and the United Kingdom next week. “Each week that passes makes it more difficult.”

Some lawmakers, however, want to see the state cut spending instead of going deeper into debt. In their March version of a budget-repair bill, Assembly Republicans called for $220 million more in spending cuts than the governor proposed.

Long-term debt faced by state government increased by 87 percent in the past 10 years — three times the U.S. inflation rate over that period. And this year, payments just on transportation bonds will cost $174 million.

Assembly Speaker Mike Huebsch, R-West Salem, and Senate Majority Leader Russ Decker, D-Weston, don’t like the plan to divert more cash from the transportation fund.

Since 2003, Doyle — sometimes with the approval of lawmakers — has transferred $1.1 billion from transportation to public schools, and covered that transfer with new debt.

“Transportation raids are on everybody’s mind right now, especially as you drive back and forth from Milwaukee — potholes and that type of thing,” Huebsch said. “While we have done that in the past, we may have gone to that well for the last time.”

Decker said protecting transportation is a top priority for Senate Democrats. He said he hoped Doyle would not cut road projects while he and Huebsch try to negotiate a compromise.

Cutting projects “may be something that the administration is looking at that is beyond our control,” Decker said. “It won’t be us doing it.”

DOT warning

The Department of Transportation will post a warning on its Web site by today from Transportation Secretary Frank Busalacchi telling contractors that May and June projects “could be reduced dramatically” if a budget deal isn’t reached soon.

Under the budget passed last year, Doyle has the authority to transfer money from the transportation fund to plug deficits in the general budget. In March, Doyle recommended a $257 million transfer from the transportation fund to the general budget, and replacing the diverted cash with new long-term bonds.

State Budget Director Dave Schmiedicke said Wednesday that, in a worst-case scenario, officials would have to take $144 million from the transportation fund if a budget repair bill is not passed soon. Taking $144 million would greatly reduce the number of summer and fall projects that can be done and cost the state federal aid.

The threat of scaling back scheduled highway projects became more real last week, after Doyle’s top budget advisers objected to a tentative budget package negotiated by two legislative leaders.

Craig Thompson, executive director of the Transportation Development Association, said he is worried about what would happen if the impasse continues much longer.

“Our fear is, if they don’t get something done, there’s going to be job loss,” Thompson said.

Lawmakers have not publicly spelled out exactly how they want to fix the budget, but two other major unresolved issues remain:

• School-aid payment: The Assembly and Senate want to push a $125 million payment for public schools into the next two-year budget cycle — an accounting move that Huebsch said has been done before.

But Doyle said he remains opposed to that, because it would create problems in the next budget.

“It’s going to be just as hard to pay it two years from now — in fact, it’ll be harder,” he said.

• Tobacco bonds: In 2001, then-Gov. Scott McCallum and the Legislature balanced the state budget with $1.6 billion by issuing bonds to cover settlement payments from the tobacco industry. In March, Doyle estimated that refinancing that deal — and extending it to the year 2027 — could free up $30 million to offset the deficit.

Decker and Huebsch say they want any new deal to bring in more than $30 million, but they have not made their plan public.

Doyle said that with a downturn in bond markets nationally, he hears different numbers daily about what refinancing the tobacco bonds might be worth.

“It certainly gets a lot harder, as time moves on” without agreement on a budget-repair bill, he said.

Throughout the negotiations, Doyle, Senate Democrats and many hospitals have pushed for a new tax on hospitals, which would attract more federal aid and free up $125 million to cut the deficit. But Huebsch said that would be a tax increase, which Assembly Republicans will never approve.

If Doyle does not agree upfront to budget deal passed by the Legislature, he could rewrite it with vetoes, something legislative leaders say they want to avoid.

— Copyright © 2008, Milwaukee Journal Sentinel / Distributed by McClatchy-

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Tags: doyle, highway, maintenance, state, budget, debt