Wisconsin Gov. Scott Walker acknowledges guests during his State of the State address. Credit: Associated Press

By of the

Madison — Aiming to launch the state's economy and his own re-election bid, Gov. Scott Walker Wednesday night proposed using a budget surplus to trim taxes by a half-billion dollars.

In the fourth and final "state of the state" speech in his term, the Republican governor said the state's budget and economy are now "dramatically better" than they were amid his 2010 election and his 2012 recall victory.

As Democrats point to job numbers that lag the nation and argue against giving Walker a second term, the governor is seeking a special legislative session to cut taxes by about $150 for the typical homeowner and spend an additional $35 million to train workers for in-demand jobs in fields such as manufacturing and computers.

That would mark the third round of tax cuts for the governor and GOP lawmakers in the past year, with Walker touting the total reductions since he took office at around $2 billion.Part of that total included tax cuts that were approved before the governor took office but which took effect after his inauguration.

"When I travel the state, people don't tell me that they want to keep sending more money to Madison," Walker said. "They don't tell me that taxes are too low or even that taxes are just right. Overwhelmingly, people across the state tell me that one of the best ways to fuel the economic recovery is to reduce their tax burden."

With newly hired workers beside him at the podium in the Assembly, Walker gave a nearly hourlong speech, easily his longest address as governor. He said his "blueprint for prosperity" would trim property and income taxes by $504 million over the next 18 months and put more than $100 million more into the state's rainy-day fund.

It's the governor's answer — in both policy and politics — to critics such as former Trek Bicycle Corp. executive Mary Burke, the governor's Democratic opponent. They point out that the state ranks 37th in the nation in private-sector jobs under Walker's leadership and that the 104,372 private-sector jobs created since 2010 are less than half of the 250,000 he promised in his first campaign.

Burke, a former state commerce secretary, said she agreed with using some of the money on worker training and a property tax cut. But she said that because the surplus is only a projection, she would put more money into the state rainy-day fund and pay down state debt.

"I don't know too many Wisconsin families who would rush out to spend money they may not even have on new things, particularly when they've already racked up a bunch of debt and have other bills coming due," Burke said in a statement.

The proposal would draw on $912 million in unexpected tax collections that are projected to flow into state coffers through June 2015, according to the Legislature's nonpartisan budget office. Walker wants to use most of that money to cut income taxes, cut property taxes and rewrite withholding rules so workers have less in taxes taken out of their paychecks.

Though the state is now projected to have a surplus of $1 billion in its main account, that figure doesn't account for financial challenges facing its separate funds for roads and jobless benefits as well as the state's Medicaid health programs for the needy.

The governor also proposed spending an additional $35 million to:

■Help technical colleges eliminate waiting lists for students seeking to enter high-demand fields such as manufacturing, agriculture and computer technology.

■Aid high school students in getting similar training through dual enrollment programs through their high school and local technical college.

■Assist people with disabilities in finding jobs. Fewer than 19% of people with disabilities have jobs, compared to more than 68% of people without disabilities, according to federal statistics.

"Make no mistake, 'A Better Bottom Line' is not about charity," Walker said of his initiative. "...We are looking for ways to help employers hire people who will add value to their organizations."

Democrats have criticized Walker and Republican legislators for cuts they made to technical colleges two and a half years ago. The current budget gives technical schools $5 million more in state money over two years, but that hasn't yet made up for the 30% cut passed in 2011, which dropped state funding for technical schools from $119.3 million a year to $83.5 million.

Walker already faces skepticism to parts of his tax plan from some of his fellow Republicans in the state Senate who say more of the surplus should go toward improving the state's long-term finances.

Acknowledging that reluctance among some GOP lawmakers, Senate Majority Leader Scott Fitzgerald (R-Juneau) said adjustments to Walker's plan would likely need to be worked out in a compromise by the Legislature's budget committee.

"I don't have the votes right now for what the governor announced," Fitzgerald said.

"I don't have 17 votes for anything right now," he added, referring to the minimum votes needed to pass a bill in his house.

Walker's overall plan would add perhaps $100 million to the $708 million shortfall previously projected for the next two-year budget, under the approach used by the Legislative Fiscal Bureau. If the new tax money were simply put in the bank, the state would go into the 2015-'17 budget with a $1.25 billion surplus, the budget office reported Wednesday.

The fiscal bureau's so-called structural deficit isn't the only way to measure the health of the state budget, but it's a tool that many lawmakers embrace.

Senate President Mike Ellis (R-Neenah) praised the property tax changes and said he wanted to see changes to the income-tax withholding tables. But he questioned the income-tax cut.

"We need to reduce the structural deficit," Ellis said. "I think it would be more prudent to use that last $100 million to pay (down) that structural (deficit)."

GOP Sens. Rob Cowles of Allouez, Luther Olsen of Ripon and Dale Schultz of Richland Center likewise say improving the projected shortfall is a top priority.

But in the Assembly, Republicans say tax cuts are more important than the budget shortfall.

"There's no such thing as a structural deficit if our economy grows," Assembly Speaker Robin Vos (R-Rochester) said.

Walker and Assembly Republicans can also argue that his plan will improve the current state budget's standing under generally accepted accounting principles, another commonly used measure for the state's finances.

Vos said he would like to hold a public hearing on Walker's tax plan late next week and have the Assembly vote on it on Feb. 11.

Minority Democrats said the state should boost education funding as well as address the remaining weak spots in its budgeting.

"To put it simply: You pay off your credit card bills before you go on vacation," said Senate Minority Leader Chris Larson (D-Milwaukee).

Rep. Jon Richards of Milwaukee, one of the Democratic candidates for attorney general, said he was disappointed that Walker didn't focus on public safety in his speech. Richards said that he backed using part of the surplus to cover the substantial cost of making first offense drunken driving a crime.

Wisconsin is the only state in which that is a municipal rather than a criminal violation.

Specifically, Walker wants to trim income taxes by $98.6 million and property taxes by $406 million over the next year and a half. That would translate into an income-tax cut of $44 to $58 per tax filer and a property tax cut of $101 for a median-valued home worth about $151,000.

Additionally, Walker would alter withholding rates so workers had less taken out of each paycheck — about $520 a year for a married couple making a total of $80,000 a year.

That part of the plan allows people to keep more of their money upfront — a potential boon to a struggling family — but over the long run won't mean any more money for taxpayers or less for the state. That's because the change would also reduce the refunds taxpayers receive starting in the spring of 2015.

The withholding changes would mean the state's cash reserves would be $322.6 million lower through the summer of 2015. The change would eliminate almost one-third of the $1.06 billion in over-withholding by the state last year, according to the state's yearly financial statement.

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