OK - he hasn’t killed it yet, but has set the stage for this. I heard about this because news of it crossed my email, and has many of the local faculty are already salivating to poach some faculty from Madison ASAP. There is a meeting on Monday with the Chancellor to see how much money can be found to recruit a few rock stars. That is how big of a deal this is.
Example: When the University of California hit their forced furlough period (cut in pay, but no change in teaching or research requirements), some top faculty were targeted for hiring by other schools. A few million in grants were lost, along with excellent faculty, just in my area of interaction.
So when a university changes the contract (like what Walker is pushing in Wisconsin), the best faculty will be more susceptible to offers from other universities. The impact of this can take awhile, as a few faculty leave and the best ones no longer take the offers. As they drop in quality, the quality of graduate students will decrease as well. Finally, the best faculty effectively pay for themselves thanks to grant money - but if they leave, that money often goes with them.