LANSING – The state’s credit rating did not see an uptick as it could have because of the number of ballot proposals, State Budget Director John Nixon said on Thursday, and particularly because of the proposal to require a two-thirds vote of the Legislature or affirmative statewide vote to increase taxes.

“When the governor and I were in New York two weeks ago, we went there with one clear message. That was the message of we’ve got a structurally balanced budget, we think this budget will have over half a billion in the rainy day fund, which we started with just $2 million, and we’ve started to reform our long-term liabilities,” Mr. Nixon said at a press conference held by the Michigan Bankers Association. “It was a very powerful message to the rating agencies. But the one thing they wanted to really talk about was the impact of the proposals on the ballot.”

Nixon said just Wednesday the rating agencies reaffirmed their current ratings (AA- with a stable to positive outlook by Standard and Poor’s and Fitch, AA2 with stable outlook by Moody’s), but among the issues the agencies cited as concerns was the uncertainty that loomed with proposals like Proposal 12-5.

“On Proposal 5, you restrict the state’s ability to react to those increases in state spending. That really sets up on a difficult course and a course that takes us back decades and decades,” he said. “So as we have a new Michigan re-emerging, I think it’s really clear that we need to make sure that we have the opportunity and the flexibility to keep up with a changing Michigan.”

Jerry Ambrose, a longtime Ingham County and Lansing budget director now advising the emergency manager in Flint, said that local governments are also very concerned about the proposal.

“They will be impacted should it be passed,” he said, noting that most municipalities have expressed a concern over borrowing costs and some analyses that have suggested an increase from 5 percent to 5.2 percent. “It doesn’t sound like much, but if you were a municipality that would like to make an investment in water and sewage for example and you have to spend $100 million on it, the difference between 5 and 5.2 percent over 25 years is $2.5 million.”

He continued: “If this were to pass it will change the behavior of the state Legislature. It would be virtually impossible to make any swift, significant changes in the taxing structure, whether it’s lowering here or raising there. It will impact local governments because it will constrain the state government’s revenue stream and … as the state Legislature balances its budget it has to look at the support it gives to local governments and that often gets affected in ways that it shouldn’t have been affected.”

Ambrose also pointed to the Headlee Amendment, saying that provision of the Constitution and others make for a persuasive argument that what the state has already works well enough.

“I believe if you looked at per capita spending in Michigan compared to the nation, we’re certainly not at the top anymore, and I think that has boded well for the economic development of the state and its future direction,” he said. “If (proponents are) trying to reduce the size of government, they’ve only picked one piece of it. …I’m not sure that even if this were implemented as the drafters of this would like that it wouldn’t necessarily constrain the size of government. It would most likely shift many different fundings.”

Nixon said pending the results of the election, the state may go back to the credit rating agencies rather quickly.

“They’ve been very, very impressed with what we’re doing,” he said. “A lot of things we’re doing are credit positive.”

Meanwhile, Defend Michigan Democracy began running its first television advertisement against the proposal.

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