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Gov. Scott Walker’s $537 million tax cut proposal is headed for final approval with minor changes that have won over moderate Senate Republicans.

Senate Majority Leader Scott Fitzgerald, R-Juneau, said Tuesday he expects a vote on the tax cut package during a special Senate floor session on March 4. The Joint Finance Committee is scheduled to vote on a final proposal at its meeting Wednesday.

The Assembly already passed a version of the tax cut bill, but Assembly Speaker Robin Vos, R-Rochester, said GOP lawmakers in that house could support changes floated Tuesday by Fitzgerald.

A detailed proposal wasn’t available Tuesday, but Fitzgerald said it would retain Walker’s $98.6 million income tax cut and $406 million property tax cut.

In order to get 17 votes in his chamber, Fitzgerald expects to eliminate a required transfer of $113.1 million to the state’s rainy day fund. The fund’s balance would remain at $279.3 million, or about 1.8 percent of expenditures.

That money instead would remain in the state’s general fund balance, which would reduce the state’s structural deficit — the amount expenditures are expected to exceed revenues through mid-2017 — to $658 million, according to Fitzgerald.

The deal also includes extending an annual lapse of state agency funds totaling $38.2 million through mid-2016. Lapses are dollars that agencies must return to state coffers at the end of each fiscal year, either from excess program fees or spending cuts.

Moderate Sens. Mike Ellis, R-Neenah, Rob Cowles, R-Green Bay, and Luther Olsen, R-Ripon, all said Tuesday they support the bill with those changes.

Fitzgerald said he isn’t counting on support from Sen. Dale Schultz, R-Richland Center. Schultz said he continues to have concerns about the structural deficit.

Moving money into the state’s general fund balance would require changing a state law that requires depositing half of all unexpected revenues at the end of each year into the rainy day fund.

Wisconsin Taxpayers Alliance research director Dale Knapp said that could set a worrisome precedent.

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“If the rainy day balance was at a level that other states hold, it’s not as worrisome, but it’s not even close to what other states carry,” Knapp said. “From a fiscal perspective, given past history, you would have expected legislators to be a little more cautious.”

Ellis, the Senate president, said he discussed the change in law with Walker and the governor told him he would support the change.

“I don’t know why you would put more money in the rainy day fund and create a huge deficit,” Ellis said.

Walker spokesman Tom Evenson said the governor continues to work with legislators, but Evenson did not respond to a request for confirmation of his support for the change.

The structural deficit — a projection from the nonpartisan Legislative Fiscal Bureau that assumes no growth in revenues or expenditures — has been the biggest sticking point for moderate Senate Republicans as they decide what to do with a $977 million surplus projected by mid-2015.

Before the fiscal bureau counted the current surplus, the structural deficit stood at $706 million. Under Walker’s proposal it would have increased to $807 million.

The Assembly passed Walker’s proposal last week with some modifications that Fitzgerald said he doesn’t expect to remain in the final version.

Vos questioned whether a lapse was the best way to budget, but said his chamber could support the Senate changes Fitzgerald discussed.

“I support the governor’s plan as it was passed, but I think we can make those minor tweaks,” Vos said.

The budget committee plans to hold a public hearing Wednesday on the tax cut bill and a separate bill that would use $35 million in economic development-related surplus funds on job training programs.

Capital W: Plug in to Wisconsin politics

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