The Pew Charitable Trusts

Wisconsin Gov. Tommy Thompson signed the 1999-2001 state budget today, but a power struggle over the Badger State budget is not yet over. Thompson has some firm ideas about how he wants the budget's tax cut features to work, and he's used his line-item power to get what he wants. The four-term governor has cast thousands of vetoes, and has yet to suffer an override. So he's likely to prevail in the fiscal test of wills.

"This budget blazes the trail for a dynamic new era of prosperity and growth by investing in our families through deep tax cuts, stronger schools and better health care," said Gov. Thompson. Thompson is giving the Legislature a choice: agree to deliver $700 million in one-time rebate checks to 2.5 million tax-filers, or do nothing and see a property tax relief plan that opposition Democrats favor dismantled. Funds for the property tax relief plan would be redistributed into other tax-relief mechanisms if the lawmakers fail to act.

Leaders of the GOP-run Assembly have promised quick action on the tax rebate; the leader of majority Democrats in the state Senate is angry about what he says will be property tax increases in December 2000 and is promising consideration but not action on the rebate idea.

Thompson says the Legislature must act by Nov. 11, or his redistribution plan goes into effect.

It's the latest twist in a budget battle that should have been over July 1. A projected $1 billion surplus and personality clashes between rival legislative leaders from opposing parties have made today's ceremony the latest budget signing since 1971.

Thompson must by law sign a balanced budget, but he's worried that too many future commitments will make the next two-year budget difficult to balance. Thompson, in office since 1987, has issued nearly 1,700 budget vetoes in advance of this budget -- and none has been overridden because of GOP legislative unity.

He has already telegraphed what some predict will be about 200 line-item vetoes in the budget that will trim at least $30 million from a $433 million "structural deficit." He also has announced vetoes that will make non-fiscal policy more to his liking.

Thompson has one of the most powerful line-item veto priviledges in the country, and he used it again as he signed the budget to essentially rewrite its tax provisions.

After tough negotiations that included the governor's office, lawmakers proposed in their final budget rewrite $900 million in tax cuts over two years, including $410 million in property tax relief through an expansion of the "lottery credit" and $335 million in permanent income tax cuts.

Thompson vetoed the lottery credit expansion because of constitutional worries. Lawyers said a scheme to reimburse with general tax money past pay-outs from the lottery fund -- something never done before -- likely would be ruled unconstitutional. Up until now, lottery funds for property tax relief, administrative costs and prizes have been kept separate from the general fund.

At the same time, Thompson called a special legislative session to push for passage of a bill to implement the rebate checks. The average check would be $286.

But summoning a special session doesn't force the Legislature to act, andlawmakers could change the rebate bill. Thompson again would have the final say through his veto power, however.

No matter what happens, Thompson pledged that the budget will deliver $335 million in income tax rate cuts plus a 3.6 percent property tax cut to homeowners this December.

"People are going to get their money back," he says.