More Budget Information

I was present at his presentation to the Kalamazoo Rotary luncheon Monday, February 21, as Governor Rick Snyder discussed his budget philosophy. I was struck by the fact that this man is no politician. He is a plain-spoken businessman who wants to run government like a business. We heard no platitudes or cheap promises. He was very straightforward. One of his main points was that we "have run the state credit card up to $47 billion and we aren't even making the minimum payments."

His FY 2012 executive legal budget and FY 2013 projected budget are designed to “bring state spending into line without any one-time funding fixes and create a tax system that is simple, fair and efficient for both businesses and citizens." The proposed $45.9 billion budget eliminates the projected $1.4 billion general fund gap in FY 2012, with $1.5 billion in spending reductions and structural reforms.

The administration said even with the spending cuts, the budget provides a safety net for those in need and preserves core, essential services as well as offering a carrot and stick approach in some areas of budget reductions.

Budget highlights include:

Tax Reform:

·         Replace the Michigan Business Tax (MBT) with a flat rate 6 percent Corporate Income Tax with “C” corporations subject to the tax and other businesses not classified as “C” corporations exempted resulting in tax relief for those corporations. Several thousand companies would pay not business taxes.

·         All credits and deductions related to individual income tax, with the exception of personal exemptions, exemptions for the disabled and special provisions for military personnel and veterans are eliminated. The Homestead Property Tax will be retained but phased out at a lower range.

·         Public and private pension income will be taxed but Social Security will not. Michigan is one of only a handful of states that do not tax pensions.

·         Eliminates business credits for films, Brownfield development, the Michigan Economic Growth Authority (MEGA), Next Energy, advanced battery, but would set aside $25 million for film credits and $25 million for business retention augmenting the $75 million in the 21^st Century Jobs Fund.

·         A previously scheduled reduction in the state income tax from 4.35 to 4.25 will take place, but stay there rather than continue to decline to the previously scheduled 3.9 percent.

Education:

·         Create a new State Education Funding Act (“P-20”) incorporating the School Aid Fund as well as available General Fund dollars to support education efforts from early childhood to higher education.

·         Cut the K-12 foundation allowance by a substantial $470 per pupil.

·         Cut Intermediate School District (ISD) operation budgets 5 percent.

·         Fund community colleges at FY 2011 levels.

·         Cut state universities 15 percent but set aside $83 million to reward universities that hold tuition and fee increases below the historical five-year annual average.

·         Roll funding for universities and community colleges from the General Fund to the School Aid Fund, the main funding source for K-12 schools.

Revenue Sharing:

·         Increase constitutional revenue sharing payments to cities, villages and townships by 4 percent but eliminate the statutory revenue sharing payments.

·         Allocate $200 million for an incentive-based revenue sharing program for cities, villages and townships that meet specific standards and adopt best practices. Details to be released in March.

Health Care and Human Services:

·         Phase out the current 6 percent tax on health maintenance organizations while broadening and reducing the tax rate to 1 percent and to all insurance claims.

·         Cut the Department of Community Health (DCS) budget $41.5 million resulting in reduced graduate medical education (GME) payments and other department programs. Further savings will be realized from behavioral health medications being added to the preferred drug list.

·         Set a lifetime limit of 48 months for residents receiving welfare payments but exempting for incapacity and hardship.

·         Reduce hourly rates paid to unlicensed aides and relatives in the child day care program.

·         Cut 300 field worker positions and before-and-after school program employees from the Department of Human Services (DHS).

Other spending reductions:

·         Reduction of 15 percent in payment in lieu of taxes (PILT) and fire protection grants to municipalities.

·         Cut state aid to libraries by $2.3 million in the General Fund, but direct $950,000 to the Michigan e-Library.

·         Recommend privatizing food service and prison store operations in Michigan prisons.

·         Close one as yet unnamed prison later this year.

·         Eliminate six trial court judgeships.

·         State employee concessions totaling $180 million.

·         Turn over the dairy farm inspection program to industry field representatives certified by the Department of Agriculture.

Gov. Snyder, who presented the two “omnibus” Executive Budget bills for legislative introduction, called on lawmakers to pass the budget by May 31. One bill includes all departmental operations. The second bill is comprehensive to education. Snyder will, in special messages to the Legislature, release details of additional government reforms in March and education reforms in April. The budget recommendations can be viewed at: www.michigan.gov/snyder