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Walker's Wisconsin budget forecast looks rosy

Associated Press Modified: November 20, 2012 at 4:01 pm •  Published: November 20, 2012

Huebsch said the state was seeing signs of a steady, but not spectacular, economic recovery.

"Wisconsin's economy continues to mirror the national economy in climbing out of the steep economic hole and, looking forward, seems to be gathering strength before a more full-throttled recovery is evident," Huebsch said in the letter.

While Tuesday's letter was chock full of positive news, it did come with a couple of major caveats. Huebsch warned that the state's economic recovery could be extinguished or delayed if Congress does not avoid the so-called "fiscal cliff" in January. He also cautioned that it was unknown how implementation of President Barack Obama's health care overhaul would affect the state budget.

Walker last week ceded authority to the federal government to set up the virtual marketplace, known as an exchange, to connect Wisconsin consumers with private health insurance plans under the Affordable Care Act. Walker said then he didn't want the state to take on the exchange not knowing how much it could cost to operate it.

Walker has also been mum on whether Wisconsin will expand Medicaid coverage as allowed, but not mandated, under the federal law.

Even with those caveats, the memo paints a far rosier picture of the state's economy than Wisconsin has seen in years.

Two years ago at this time, as Walker prepared to come into office, the state faced a roughly $3 billion budget shortfall. This year the state has a net $277 million surplus, the largest since 2001, Huebsch said.

State agency spending requests for the next two-year budget exceed expected revenues by about $171 million, a negligible difference in the scheme of a $67 billion budget. The additional spending requested amounted to a 2.8 percent increase in the first year of the budget and 1.4 percent in the second.

The memo relays Department of Revenue estimates that show tax collections are projected to increase 1.8 percent this year, 3.8 percent next year and 3.5 percent for the budget year that begins in July 2014.

"Heading into the next budget we are in the unique position of having anticipated surpluses, increased revenue, and projected economic growth," Walker spokesman Cullen Werwie said in a statement.