Walker to use bank settlement to help fill budget hole

Wisconsin Gov. Scott Walker plans to use $25.6 million of the $140 million the state is receiving from a settlement with large banks to help offset a projected state budget deficit.
Wisconsin will receive the estimated $140 million from a $25 billion multi-state and federal settlement of a foreclosure lawsuit against the nation’s five largest mortgage providers.
The Wisconsin Legislative Fiscal Bureau (LFB) said Thursday the state is now facing a gross deficit of $143.2 million for the 2011-13 biennium, a difference of almost $216 million from past projections. The LFB said several factors combined to worsen the state’s fiscal outlook, including a $272.8 million drop in projected tax revenues through June 30, 2013.
Walker said he will put $25.6 million of the bank settlement into the state’s general fund, rather than using it to provide relief to distressed homeowners.
That decision was criticized by Milwaukee Mayor Tom Barrett, who said all of the $140 million the state will receive should be directed to families and communities hit hardest by the “unacceptable” practices that led to the foreclosure crisis.
“Families and local communities have had to carry the extraordinary burdens created by the foreclosure scandals,” Barrett said. “All of the settlement funds, including the $31.6 discretionary payment, should be used to help mitigate local concerns. Not one dime should be used to fund the unbalanced State Budget. Families and local communities did not cause the foreclosure crisis, nor did they have a hand in the mismanaged state budget.”
Walker told a news conference that the state has been harmed by the practices of the large banks and part of the payment will go toward offsetting that harm. Walker previously was critical of the state using so-called "one-time" money from legal settlements, such as the settlements from the tobacco industry, to balance the state budget.
The largest portion of the bank settlement  – about $60 million – would go toward loan modifications and other relief for struggling homeowners. More than $31 million would go toward homeowners underwater on their mortgages, and $17 million would be allocated for $2,000 payments to eligible foreclosure victims between 2008 and 2011.
For ongoing coverage of the state budget crisis, visit WisPolitics.com, a media partner of BizTimes.