Wisconsin Preparing for Potential Federal Default

As Democrats and Republicans battle it out in Washington on how to raise the debt ceiling and reduce debt, leaders in one state capital are hunkering down and preparing for default.

Wisconsin's administration secretary wrote a memo to Gov. Scott Walker, R-Wis., pointing out which federal funds Wisconsin receives and where to expect cuts if the federal debt limit isn't raised.

"Federal revenues make up approximately 29 percent ($9.3 billion) of the Wisconsin state budget on an annual basis," Sec. Mike Huebsch wrote. "Top programs include Medicaid, UW federal research grants and student financial aid, transportation, TANF block grant funds, child care and child welfare services funding, low-income energy assistance, workforce training, and community development block grants."

Wisconsin was recently locked in its own contentious budget battle in which Walker and Republicans in the state legislature curbed union rights to balance the budget. But a federal default could pull funds Wisconsin and other states use to even out their bottom lines.

"Federal revenues are considered a part of the state's general fund for accounting purposes and Wisconsin has sufficient cash in the short-term (at least three months) to continue to fund federal obligations if desired..."

But the report shows a lowered bond rating that results from default could cause greater problems for Wisconsin.

"State revenue collections could be dramatically affected if federal default results in further economic deterioration and return to a recessionary situation," Huebsch's report reads.

The report shows that Wisconsin agencies receiving federal funding are already watching for information from the federal government about which programs could lose funding first if the nation defaults.