Tuesday, January 10, 2006

Cowles, Ellis Rip Doyle’s Credit Card Debt Restructuring Scheme


February 5, 2004
Cowles, Ellis Rip Doyle’s Credit Card Debt Restructuring Scheme

MADISON – State Senators Robert Cowles (R-Green Bay) and Michael Ellis (R-Neenah) today criticized Governor Jim Doyle over his proposal to restructure the state’s debt. Gov. Doyle yesterday said he is in support of a debt restructuring plan based on a proposal contained in his original budget bill. A memo prepared by the nonpartisan Legislative Fiscal Bureau details how this plan would mean tens of millions in additional interest costs to the state. “I sure hope this was only a trial balloon. This credit card scheme should be a non-starter in the Legislature,” said Cowles. Gov. Doyle suggested the Legislature act soon on his debt restructuring plan. The proposal looks to create $175 million in proposed bonding in order to close the yawning gap between revenues and commitments. This structural refunding plan would then increase the life of state debt. Bonds are outstanding over a longer period of time and therefore interest costs will be higher. If state spending is not reduced, the plan only adds to the growing budget structural deficit. “It seems Gov. Doyle never met a bonding proposal that he didn’t like,” said Ellis.

According to a memo produced by the Fiscal Bureau, this will drive up state spending in order to pay down the new debt. It is estimated the state would pay an additional $46.1 million in interest over the life of the bonds that would be issued to refund the $175 million in proposed bonding. State payments would increase by $8.75 million in 2004-2005. To pay off the extra principal and interests costs, the state would pay $52.3 million more in 2005-2006 and $30.2 million more in 2006-2007. “Again, we are looking at a one-time fix and then paying for it long term. It’s kind of like paying for your groceries on your credit card,” said Cowles. At the State of the State address two weeks ago, Gov. Doyle said his budget helped put Wisconsin fiscally “back on track.” But now the Legislature is being asked to consider a debt restructuring plan. “Are we following California down the road to fiscal disaster? This plan is egregious and it puts us in an even bigger hole next time around,” said Ellis.

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