Wisconsin’s Democratic Governor, Tony Evers, alongside the Republican-led state Legislature, reached an agreement on a new two-year budget on Tuesday. The plan includes income tax reductions, boosted funding for the Universities of Wisconsin even after a proposed cut, and increased fees aimed at financing transportation projects.

This agreement comes in a politically divided state where Evers and the Republicans often struggle to collaborate. It was announced just after the deadline for budget approval, though Wisconsin does not experience government shutdowns due to budget delays. The Legislature is set to finalize the budget this week.

Evers called the deal “a pro-kid budget that’s a win for Wisconsin’s kids, families, and our future.”

Here is what to know about Wisconsin’s budget deal:

Tax cuts

The budget deal involves $1.3 billion in income tax reductions primarily benefiting the middle class, with over 1.6 million residents seeing an average tax reduction of $180 per year.

The deal would expand the state’s second lowest income tax bracket and make the first $24,000 of income for people age 67 and over tax-free. It also eliminates the sales tax on electricity, saving taxpayers about $178 million over two years.

Republican legislative leaders praised the deal as providing meaningful tax relief to the middle class and retirees.

“This budget delivers on our two biggest priorities: tax relief for Wisconsin and reforms to make government more accountable,” Republican Assembly Speaker Robin Vos said in a statement.

And Senate Republican Majority Leader Devin LeMahieu praised it as a compromise that cuts taxes but also stabilizes the state’s child care system and strengthens schools by increasing special education funding.

Higher education

The Universities of Wisconsin would see a $256 million increase over two years, the largest funding increase for the UW system in about two decades. UW Regents had asked for an $855 million overall increase and Republicans in June floated the possibility of an $87 million cut.

The deal also imposes a faculty minimum workload requirement and calls for an independent study on the system’s future sustainability.

Prison closing

Republicans will be voting on a plan Tuesday that would close the 127-year-old Green Bay Correctional Center by 2029 as Evers proposed. However, it’s not clear what other elements of Evers’ prison overhaul plan Republicans will endorse.

That part of the budget was not under the negotiated deal with Evers, which means he could make changes to it with his powerful partial veto.

Schools, roads and child care get more

There will be $200 million in additional tax revenue to pay for transportation projects, but Evers and Republican leaders did not detail where that money would come from.

The agreement increases funding for child care programs by $330 million over two years, a third of which will be direct payments to providers. The money will replace the Child Care Counts program started during the COVID-19 pandemic. That program, which provides funding to child care providers, expired on Monday. Evers, Democrats and child care advocates have been pushing for additional funding to address child care shortages throughout the state.

Funding for K-12 special education programs will increase by $500 million.

State employees, including at the university, would get a 3% raise this year and a 2% raise next year.

The budget deal was reached after Republicans killed more than 600 Evers proposals in the budget, including legalizing marijuana, expanding Medicaid and raising taxes on millionaires.

Democrats credit redistricting

Democrats said Republicans were forced to compromise because they didn’t have enough votes in the Senate to pass the budget without Democratic support.

Democrats gained seats in November under the new maps drawn by Evers and narrowed the Republican majority in the Senate to 18-15. Two Republican senators said they planned to vote against the budget, resulting in Senate Democrats being brought into the budget negotiations with Evers and Republicans.

“What we are seeing playing out in this budget is the consequence of Wisconsin’s new fairer maps — legislators working together to find compromise and make meaningful progress for the people of Wisconsin,” Democratic Sen. Jodi Habush Sinykin said in a statement.

Republican budget committee co-chair Sen. Howard Marklein said, “This budget has involved an awful lot of compromise.”

What’s next?

The deadline for finishing the budget was Monday, but unlike in other states and the federal government there is no shutdown in Wisconsin. Instead, the previous budget remains in place until a new one is signed into law.

The Legislature’s budget-writing committee was voting on the plan Tuesday. The full Legislature is set to meet starting Wednesday to give it final passage.

Once the budget clears the Legislature, Evers will be able to make changes using his expansive partial veto powers. But his office said Evers would not veto any budget provisions that were part of the deal he reached with Republicans.

Evers, who is midway through his second term, has said he will announce his decision on whether he will seek a third term after he has signed the budget. He has 10 business days to take action on the spending plan once the Legislature passes it.

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Associated Press writer Todd Richmond contributed to this story.