The state budget will face a $652.3 million shortfall, according to state officials Wednesday, $200 million more than projected last month. In a memo to the state Joint Finance Committee, which helps write the budget, the nonpartisan Legislative Fiscal Bureau said the deficit is largely due to decreased tax collections.

The state budget is written assuming tax collections and earnings would increase at a certain rate over the next two years, the rate typically being around 3 percent.

LFB Director Bob Lang said in the memo state income, sales and corporate taxes will all not reach the rate anticipated when the budget was written, so the deficit is likely to occur. Lang said economic slowdown in the national economy, along with high-profile court cases involving state funds, could also increase the deficit.

One of the court cases includes $200 million transferred from a malpractice insurance fund during the budget process last fall. A doctors group is currently suing the state over the transfer. “I have directed state agencies to take immediate action that will save $111 million over the biennium,” said Gov. Jim Doyle in a statement responding to the projected shortfall, “but we must work together and be prepared to all shoulder some of the burden.”

Doyle said he would not raise taxes in response to the shortfall. Leaders in the Republican-controlled state Assembly also said they would not raise taxes. Assembly Speaker Mike Huebsch, R-West Salem, said in a release he would try to work with Doyle to solve the problem by cutting spending.

Senate Majority Leader Russ Decker, D-Weston, said he wanted to help Wisconsin businesses by revising the current tax structure in the state. He said he wanted to close a loophole in state law allowing companies to not pay taxes if they have corporate headquarters in Las Vegas, Nev.

The Democrat-controlled state Senate made closing the loophole the major funding source for the economic agenda announced earlier this year.