MADISON, Wis. (AP) -- Wisconsin Gov. Scott Walker proposed an income tax cut targeted to the middle class as part of a state budget introduced Wednesday that would keep property taxes nearly flat, expand the private school voucher program, continue a public school spending freeze and tighten Medicaid income eligibility.
The $68 billion two-year budget Walker delivered to the Republican-controlled Legislature would increase state spending 3 percent the first year and 2.1 percent more the second. Democrats blasted Walker's priorities, saying he should have done more to help public schools, taken a federally funded expansion of Medicaid that's being rejected, and done more to help the middle class.
"Our focus is simple — more prosperity, better performance and true independence," Walker said in his 40-minute speech. "Our middle class tax cut is a down payment on my goal of reducing the tax burden in our state every year I'm in office. I want to cut taxes over and over and over again until we are leading the country in economic recovery."
Walker's proposal will be debated by the Legislature's budget committee over the next four months, then be voted on by both the Senate and Assembly sometime before it takes effect in July.
Much of Walker's plan will find broad support among Republicans, but other key portions will run into trouble with members of his own party and nearly all Democrats.
"The governor's proposals are bad for the short term and bad for the long term in Wisconsin," said Rep. Peter Barca, Democratic minority leader in the Assembly.
One of the most problematic of Walker's proposals is his planned expansion of the private school voucher program to any district that has at least 4,000 students and two schools receiving a D or F grade on new state report cards.
Enough Republican state senators have already voiced opposition to the plan to block it in the Senate. Walker has pledged to work with them to address their concerns.
Walker said that his goal is to "ensure that every child — regardless of where they are from or what their family income is — has access to a great education."
Walker's proposed $181 million increase in funding for the University of Wisconsin System drew praise from UW leaders. In the last budget, Walker cut UW funding by $315 million.
"This is the best budget we have seen in many cycles," said UW-Madison Chancellor David Ward.
Walker's proposal to eliminate requirements that public employees live in the city they serve, an issue that's been debated for years in Milwaukee but is the law in dozens of communities statewide, will trigger a fierce debate.
Walker had released most of the major portions of the budget in the weeks leading up to his address before the Legislature, except for how the income tax — which equates to a 2.2 percent reduction — would be structured.
Under this plan, a family of four with an income of $80,607 would save $212 over two years.
Walker calls for cutting the taxable rates on individuals up to $161,180 and couples earning up to $214,910. The lowest rate, for individual income up to $10,750, would drop from 4.6 percent to 4.5 percent. The rate on income in the next bracket, for individuals earning up to $21,490, would decrease from 6.15 percent to 5.94 percent. And the third bracket, for individuals making up to $161,180, would decrease from 6.5 percent to 6.36 percent.
The rate cut would be permanent and not phased in over time as Walker had previously said he was considering.
The budget cuts income taxes, includes no general sales tax increases, and continues local government and school district spending limits that Walker said would hold increases on property tax bills for the median-valued home to no more than 1 percent a year.
Walker's budget keeps spending limits for schools in place, while state aid to schools will go up about 1 percent. That money will go toward keeping local property taxes down, not more spending on schools. This has angered Democrats and public school advocates, especially since it comes on the heels of an $800 million aid cut and a 5.5 percent reduction in spending authority in the last budget.
Steve McNeal, superintendent of the Beloit School District, blasted Walker's proposal as not doing enough to help districts like his that have already made millions in cuts.
"The low-hanging fruit is gone for us," he said. "We've pulled every rabbit out of the hat."
His proposal also calls for cutting income eligibility for poor adults in the state's BadgerCare program from 200 percent of the federal poverty level to 100 percent. While he's also lifting an enrollment cap for childless adults, the net effect of the changes will be a drop of about 5,400 people in the Medicaid program.
Walker estimates that about 224,600 currently uninsured people will access federally subsidized private insurance coverage through the marketplace known as an exchange, which is scheduled to begin operating in 2014. He called for those changes instead of accepting money from the federal government under President Obama's health care overhaul law to pay for expanding Medicaid eligibility to cover 175,000 additional people.
Walker's Medicaid proposal and other parts of his budget are shaped by his desire to run for president in 2016, said Scot Ross, director of the liberal advocacy group One Wisconsin Now.
"Wisconsin's middle class needs a balanced approach that targets tax relief to them and invests in long-term growth strategies and services they need like public education and health care," Ross said.
Walker also is rejecting the recommendations of a task force created in his last budget that studied ways to plug a projected $2 billion funding gap over the next decade for road maintenance, repair and other transportation projects.
That group, headed by Walker's own secretary of the state Transportation Department, recommended a gas tax increase, fee hikes and other changes to provide long-term growth and stability to pay for roads projects. None of their recommendations are in Walker's budget.
Instead, Walker said he would look into selling the state's power plants and other assets to pay off bonds for transportation projects such as the Zoo Interchange near Milwaukee. Prisons, state parks and other land that has protections in the law from being sold would not be considered for sale.
Walker's budget would end with a $43 million positive balance, but unfunded commitments would total $188 million. Using more comprehensive private-sector accounting measures, the so-called structural deficit after two years would be $2.6 billion.
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