John Fund explains why Wisconsin is such a big deal to liberal/Democrat/unionists. First, though, he summarizes what got their panties in a bunch:

Mr. Walker’s proposals are hardly revolutionary. Facing a $137 million budget deficit, he has decided to try to avoid laying off 5,500 state workers by proposing that they contribute 5.8% of their income towards their pensions and 12.6% towards health insurance. That’s roughly the national average for public pension payments, and it is less than half the national average of what government workers contribute to health care. Mr. Walker also wants to limit the power of public-employee unions to negotiate contracts and work rules—something that 24 states already limit or ban.
The governor’s move is in reaction to a 2009 law implemented by the then-Democratic legislature that expanded public unions’ collective-bargaining rights and lifted existing limits on teacher raises….The labor laws that Wisconsin unions are so bitterly defending were popular during an era of industrialization and centralization. But the labor organizations they protect have become much less popular, as the declining membership of many private-sector unions attests. Moreover, it’s become abundantly clear that too many government workers enjoy wages, benefits and pensions that are out of line with the rest of the economy.

The symbolism and history of Wisconsin as being in the vanguard of Progressivism is playing a key role:

The Badger State became the first to pass a worker-compensation program in 1911, as well as the first to create unemployment compensation in 1932. The American Federation of State, County and Municipal Employees—the chief national union representing non-federal public employees—was founded in Madison in 1936. And in 1959, Wisconsin became the first state to grant public employees collective-bargaining rights, which influenced President John F. Kennedy’s decision to grant federal employees the right to join unions three years later.

Further, Governor Walker’s reforms will undercut some of the, um, “advantages” union organizers have enjoyed:

Walker would require that public-employee unions be recertified annually by a majority vote of all their members, not merely by a majority of those that choose to cast ballots. In addition, he would end the government’s practice of automatically deducting union dues from employee paychecks. For Wisconsin teachers, union dues total between $700 and $1,000 a year.
“Ending dues deductions breaks the political cycle in which government collects dues, gives them to the unions, who then use the dues to back their favorite candidates and also lobby for bigger government and more pay and benefits,” [Labor historian Fred] Siegel told me. After New York City’s Transport Workers Union lost the right to automatic dues collection in 2007 following an illegal strike, its income fell by more than 35% as many members stopped ponying up. New York City ended the dues collection ban after 18 months.
Myron Lieberman, a former Minnesota public school teacher who became a contract negotiator for the American Federation of Teachers, says that since the 1960s collective bargaining has so “greatly increased the political influence of unions” that they block the sorts of necessary change that other elements of society have had to accept.

Walker hopes to change that.