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Madison — Gov. Scott Walker's proposed budget would increase overall spending by 1% over two years rather than reduce it as the administration had said earlier this month.

That would still be the tightest lid on spending of state and federal money in at least two decades, observers said.

A report released Monday by the nonpartisan Legislative Fiscal Bureau showed that under Walker's bill the state would spend a proposed $64.1 billion in state and federal dollars over two years after factoring in existing spending that would be transferred to new quasi-public authorities such as the University of Wisconsin-Madison. That would amount to $609.5 million more in spending over the 2011-'13 budget.

When the Republican governor unveiled his budget proposal on March 1, his administration said it would cut overall spending by more than $4 billion, or more than 6%. But those amounts included spending cuts that would simply amount to transferring certain funding for entities like UW-Madison and a new agency to replace the Department of Commerce off the state's books.

"It's not like UW-Madison is not going to be spending any money. We're just going to have to look somewhere else to get those dollar amounts," said Dale Knapp, research director for the Wisconsin Taxpayers Alliance.

The Taxpayers Alliance did its own separate analysis in which it found that if the Department of Commerce and UW-Madison were excluded from the state budget, Walker's proposal would raise overall state spending by 1.5% over the two years.

Last month, Walker signed into law his bill that would convert the Commerce Department into the Wisconsin Economic Development Corp., which Walker said will be more nimble in helping businesses create jobs because it's partly private.

In his budget proposal, Walker would take a similar step with UW-Madison to give it more flexibility to hold down costs. As a result, federal funding going to the university as well as tuition revenue would move off the state's books, according to the fiscal bureau. State tax dollars that go to the university would remain on the state's financial statements.

Funding going to the University of Wisconsin Hospital and Clinics is also being removed from the state's books.

Walker spokesman Cullen Werwie said the governor was still holding the line on spending. Much of the new spending was to help eliminate a more than $3 billion deficit over two years that came from state bills being pushed off into the future as well as fast-growing spending in areas such as health care programs for the poor, he said.

"We're trying to pay off the bills that were due in the past that were not accounted for," Werwie said.

Knapp said he believed the increase in the state budget proposed by Walker is the smallest in two decades. It would be the smallest increase passed as part of a budget bill in at least a decade, documents from the fiscal bureau show.

By comparison, the current 2009-'11 budget approved by Democratic lawmakers and Gov. Jim Doyle used federal stimulus money to increase spending by $3.63 billion, or 6.2%, according to fiscal bureau figures.

The analysis released Monday shows that the number of positions in state government equivalent to full-time employees will drop by 1,200 after accounting for other positions that will be removed from the state's books but not eliminated. The Walker administration has been careful to emphasize that shifting the 20,111 other positions at authorities like UW-Madison off the state's books does not amount to job cuts.

Spending in just the state's main account would go up by $488.4 million, or 1.7%, under the proposal.

Knapp noted that previous governors, including Doyle, had made moves such as shifting some funding items out of the state's main account or paying for those items with stimulus money. That in turn had the effect of making spending in that account appear less.

Under the proposal, the state would finish the two-year proposed budget on June 30, 2013, with tissue-thin financial reserves of $107.3 million in its main account to handle any unexpected problems. That's enough to run state government for about three days.

Administration officials start briefing the Legislature's Joint Finance Committee on Tuesday. The committee also will hold four public hearings around the state, including one at 10 a.m. April 11 in West Allis at State Fair Park. Democrats, including Assembly Minority Leader Peter Barca of Kenosha, have criticized that, saying it amounts to the smallest number of hearings in 25 years.