Faced with a $600 million budget hole that must be closed by June, Gov. Jim Doyle and top lawmakers Wednesday unveiled only a partial fix of tax hikes and spending cuts, signaling they would use expected federal aid to cover much of the remaining gap.

The decision provides a glimpse into how state leaders may try to solve an overall $5.7 billion deficit expected over the next 2½ years — a problem they’ll have to tackle by mid-summer.

"It’s only a first step. The rest of the solutions are going to have to come in the (later) budget bill," said Sen. Mark Miller, D-Monona, co-chairman of the Legislature’s budget committee. "We’re going to use everything available to us — revenue, spending cuts and federal money. You can count on that."

The package unveiled Wednesday, which goes to the budget committee of the Democrat-controlled Legislature on Tuesday, would also try to boost the state’s economy by approving spending federal money on roads and giving modest tax incentives to targeted businesses. It would cut the current year’s budget shortfall by $167 million and reduce the state’s overall deficit by about $700 million over the next 2½ years.

In spite of the spending cuts, Doyle said he remained opposed to furloughs or layoffs for state workers but stressed the state would continue to pare back services and close regional offices.

"We aren’t just facing a problem until June 30, we’re facing a big problem over the next 2½ years," the Democratic governor said, looking ahead to the 2009-11 budget he will unveil Tuesday. "We will take care of this year’s problem and ... the next two years as well."

But the measure also includes some new spending, including $50 million for the state’s Medicaid health programs for the poor, which faces huge increases in clients and an overall shortfall.

Assembly and Senate Republican leaders criticized the bill and said their GOP colleagues would overwhelmingly oppose it — despite the inclusion of transportation projects in their districts that are expected to create or save jobs and tax credits for business investments.

"The overall aspect of raising taxes by a half-billion dollars on businesses and the people of the state of Wisconsin outshadows anything that they could have put positively in this bill," said Rep. Jeff Fitzgerald, R-Horicon, the top Assembly Republican.

The plan includes:

• A hospital tax that would bring in $900 million more in federal money over 2½ years to help hospitals and the state’s budget shortfall and pay for expanding state health coverage to 41,000 childless adults.

• A requirement that companies pay the state’s corporate income tax on profits earned by out-of-state subsidiaries. This "combined reporting measure," which would close the "Las Vegas Loophole," would bring in $215 million.

• Changes to the way the state collects sales taxes that would reverse a recent court decision in a tax case and have the effect of making some Internet sales subject to the sales tax. That would bring in $81.6 million.

• A requirement on state agencies to give back $125 million to the state’s main account by cutting spending or taking it from other pots of money. The bill prevents taking the money from the state’s road fund — a favorite target of past transfers — but it also eliminates the state’s overall financial reserve requirement from its already razor-thin measure of $65 million.

• Approval of $300 million in state infrastructure spending that would be funded by the federal economic stimulus bill.

• Tax credits and other changes to help high-tech firms and the state’s dairy industry and $3.6 million for worker training programs.

• Several measures to help homeowners and tenants affected by foreclosures and to stabilize the state’s housing market. The proposal would also increase state regulation of, and fees on, mortgage brokers.

Even before the announcement, James Buchen, an official with business lobby Wisconsin Manufacturers & Commerce, criticized the tax increase on out-of-state corporate profits, saying it would cause companies to cut jobs further in a down economy. But Charity Eleson, executive director of the Wisconsin Council on Children and Families, praised the move for making companies pay their "fair share" of taxes.

State Journal reporter Mark Pitsch contributed to this report.