LANSING – The Michigan Senate version of the budget is $40 million general fund below Governor Rick Snyder’s recommendation, not $300 million, Ellen Jeffries, director of the Senate Fiscal Agency, said Monday.

Last week, when the Senate Appropriations Committee reported all budget bills, Sen. Roger Kahn (R-Saginaw Township), the committee chair; Jeffries; and other Senate officials said the Senate had cut $300 million more from the general fund than Snyder.

But Monday, Jeffries said while the Senate did cut $331.2 million more from the general fund than Snyder did in the departments and most major budget areas, it also spent $305.8 million more than Snyder from the general fund in education areas. It replaced $499.7 million that Snyder wanted to use from the School Aid Fund for universities with general fund and spent $193.9 million less from the general fund than Snyder did on K-12 schools (producing the overall $305.8 million figure).

So when the approximately $25 million in additional net general fund cuts above Mr. Snyder approved by Senate Appropriations is combined with the transfer of $15 million from the Comprehensive Transportation Fund to the general fund, the Senate has cut $40 million more, Jeffries said.

To reach the additional $150 million in cuts agreed to by Snyder, Senate Majority Leader Randy Richardville (R-Monroe) and House Speaker Jase Bolger (R-Marshall), the Senate would take that $40 million and combine it with a $50 million beginning balance and an $80.6 million revenue reduction to school aid resulting from a revision in the impact of the income tax changes to the School Aid Fund, Jeffries said.

Meanwhile, the House has approved general fund spending in its budget bills totaling $7.895 billion compared to $8.105 billion for the Senate and $8.131 billion for Snyder.

Essentially, the difference between the House and Senate is that the House cut more from school aid, Jeffries said.

Kahn, asked about the revised overall cut number, said he wanted to re-examine the fund shift numbers between the general fund and School Aid Fund, but stressed that the Senate had cut $331 million more from the general fund than the governor.

A couple of the Senate cuts have raised eyebrows around the Capitol on whether they are realistic. One was the $22 million cut through a 10 percent reduction in administrative expenses throughout the Department of Human Services. Another is a $5 million reduction in the Department of Corrections through changing truth-in-sentencing to allow the parole of terminally ill inmates, a policy that the chair of the Appropriations Corrections Subcommittee, Sen. John Proos (R-St. Joseph), has said will be difficult to pass.

Bolger spokesperson Ari Adler, speaking of how the House approached its budgets, said, “We told our Approps members to create real budgets that take a look at what actual revenues are and what actual expenses are and make them balance. And we also have a caucus that is committed to structural reform, and sometimes that means difficult decisions and having to cut areas of the budget that we simply cannot afford to have at the level they have been at previously.”

Asked whether there was concern in the House Republican majority about the direction taken by the Senate, Adler said there have been great negotiations so far and an agreement will eventually be reached.

“But the speaker has said repeatedly that we are done with one-time fixes,” he said. “We are going to balance the budget in a way that is structurally balanced.”

The House GOP also is sounding a different note on what to do with additional revenue realized as a result of the May 16 Revenue Estimating Conference. Richardville has said it could be used to reduce the size of the K-12 school cut, and Kahn has said it could considerably change the dynamics on the overall budget.

“We are not looking at it as a pot of gold,” Adler said. “We are committed to making reforms in government spending. And if you want to make some reforms, one of the quickest ways to do that is to rein in the funding.”

Kahn said there are any number of ways additional revenue could be used. Yes, it could all be put into the Budget Stabilization Fund, but there is significant desire to defray cuts to schools, the Graduate Medical Education program and prisons, he said.

He also said one possibility that intrigues him is using the additional revenue to start switching current public school employees from defined benefit to defined contribution retirement plans. New public school employees were moved into a hybrid system last year, but Kahn said the additional revenue is an opportunity to address the upfront costs of switching to a defined contribution system for existing employees, who would see their current pensions frozen at present levels and realize any additional retirement income through a 401k-style plan.

Kahn said the idea has not gotten wide discussion, but he thinks it would stop the bleeding caused by rising retirement system costs.

“There are multiple ways the money can be utilized,” he said.

The coming week will be another huge one on the budget.

The Senate is expected to approve all 16 of its budget bills Tuesday and Wednesday. Meanwhile, the House Appropriations Committee will report the House budget bills by the end of the week with meetings scheduled Tuesday, Wednesday and Thursday. And the House Tax Policy Committee is expected to vote on the income and business tax plan (HB 4361 ) with a full House vote possible later in the week.

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