Wisconsin is facing the largest budget shortfall in state history. This week, debate started in the General Assembly on ways to fill the expected $6.6 billion gap . Only $1.6 billion of the state's shortfall was predicted just last month, demonstrating how quickly the fiscal situation has deteriorated.
The budget proposal being debated uses a combination of spending cuts and tax increases to balance the books and is based on the plan passed by the Joint Finance Committee in late May. The Joint Finance Committee's budget bill included cigarette tax increases, reductions in the state's capital gains exclusion from 60 percent of net capital gains income to 40 percent, and a new top income bracket for "very high" income earners. For a complete summary of the Joint Finance Committee's proposals, see the helpful report from the Wisconsin Council on Children and Families.
Legislative leaders seem confident a budget will be passed before the start of the new fiscal year on July 1. The first hurdle is for Democrats who control the Assembly by a slim margin (52-46) to rally the 50 votes they need to pass their proposed budget.
But even if Wisconsin lawmakers resolve this shortfall, their fiscal challenges are not over. They learned Tuesday from the Legislative Fiscal Bureau that the state will likely face a $2.2 billion shortfall by the middle of 2013.