LANSING – Governor Rick Snyder and the Republican-led Legislature appear well on their way to wrapping up the 2012-13 fiscal year budget by their self-imposed deadline of June 1 after they inked an agreement Wednesday on an overall framework for the budget that provides more funding for many programs than initially anticipated. The agreement calls for doubling the amount of money available for the state’s film incentive from $25 million to $50 million.
As is always the case with the so-called target agreement, full details of the spending plans will await the negotiations of legislators on individual budgets for departments and major budget areas. The first House-Senate conference committees, for the budgets funding the departments of Environmental Quality (SB 953 ) and Natural Resources (SB 960 ) already are scheduled to meet Thursday.
The signed target agreement, which was first reported by Gongwer News Service, would prefund the Michigan Public School Employee Retirement System by $130 million and provide $20 million more in revenue sharing to local governments than what Snyder originally proposed. Budget Director John Nixon said the bulk of that would go to cities, villages and townships although counties would get some too.
“I appreciate all the hard work by our legislative leaders,” Snyder said in a statement. “The agreement on spending for the 2013 budget makes strategic investments in Michigan’s future and sends another strong signal to our citizens and job providers that we have our fiscal house in order.”
Nixon, in an evening conference call with reporters, called the spending framework “year two of a triple A budget,” referring to the Snyder administration’s goal of getting a AAA credit rating for the state from the major ratings agencies. Not only is the state investing in education and local government services, but it will move on a plan that cuts $16 billion from the unfunded liability in MPSERS.
“It’s a real balanced approach,” he said.
Besides the $130 million for prefunding, another $74 million was made available for K-12 schools with the way it will be spent to be determined.
The deal delivers on the push by Bolger (R-Marshall) to provide income tax relief and makes available $90 million to pay for it, but the form of the cut has not yet been determined, Nixon and Bolger said. Bolger has spoken of speeding up the reduction of the income tax, now scheduled to drop from 4.35 percent to 4.25 percent on January 1, to July 1, as well as increasing the personal exemption.
Contrary to a published report that said the personal exemption change had been ruled out, Bolger and Nixon said it remains to be negotiated what approach to take or to use some combination of the two. And while no date has yet been picked to have the income tax cut take effect instead of the current January 1, officials said a report that claimed the tax cut would occur April 1 was wrong (since that would represent a delay of the tax cut, not an expediting of it).
Bolger said some of the highlights were paying down debt, individual tax relief, putting money into the savings account, keeping the spending increase in the general fund below the rate of inflation and retiring debt.
“With this budget agreement, people can see the focus on funding classrooms, paying down debt, putting money into savings and providing relief to individual taxpayers,” he said. “I appreciate the governor and Senate majority leader working with me to provide immediate taxpayer relief within this budget. Not that long ago, no one would have believed that after just two years, Michigan would have deposited $500 million in savings while paying down billions of dollars in debt and cutting taxes.”
In comparing the target numbers to the versions of the budget proposed by Snyder and passed by the Senate and the House, the targets generally come in higher than any of the three initially proposed for the smaller departments and agencies. However, the Department of Corrections target is closer to the House’s total spending, more than what the Senate passed and less than Snyder.
On community colleges, the targets go with the House and Mr. Snyder in using $96.5 million from the general fund. The Senate wanted to use only School Aid Fund to provide aid to colleges. And on the Department of Natural Resources, the funding level is closer to Snyder’s version than the lower levels passed by the House and Senate.
Snyder has agreed to support legislation (HB 4521 , SB 351 ) moving through the Capitol that would redirect part of the 6 percent sales tax on gasoline to roads, but the governor insisted on a one-year sunset and a cap of $110 million. That would ensure the state gets its full federal matching funds and is a departure from Snyder’s proposal to use general fund.
The agreement calls for $15 million more in the Department of Community Health than Snyder initially proposed in February, but what programs will see increases has yet to be finalized, Nixon said. Snyder proposed considerable new funding in the department, namely for covering autism treatment under Medicaid and expanding the Healthy Kids Dental program; lawmakers had balked at those proposals.
And the agreement calls for doubling the amount of money available for the state’s film incentive from $25 million to $50 million. That was a huge priority of Richardville’s (R-Monroe).
There is also a one-year solution on home heating assistance for the poor, using $60 million in Temporary Assistance to Needy Families funds to pay for it while the Legislature figures out a long-term funding source. The Senate has begun work on legislation on this issue (SB 1134 , SB 1135 ).
And the budget includes a $140 million deposit into the state’s Budget Stabilization Fund.
It appeared the question of whether the state would close the Michigan Reformatory prison in Ionia remained unresolved and that lawmakers will decide whether to cut operational spending as the Senate passed or close the prison as called for in the House version of the Department of Corrections budget.
Also unresolved are some of the most pronounced differences in the budget that did not have to do with the amount of money to be spent, but under what conditions the state would provide increases. Conference committees and the Snyder administration will continue to work on those issues in the higher education, community college and K-12 budgets. The question of whether to punish universities from receiving additional funding for not reporting on their embryonic stem cell research or refraining from mandating students have health insurance remains unresolved.
Democrats took a dim view of the Republican plan. House Democrats especially continued their criticism of the income relief as an election year gimmick designed to mitigate the damage majority Republicans inflicted on themselves politically when they supported taxing pensions and wiping out a slew of individual income tax credits.
“The Republicans seem to be taking a small step in the right direction, but in our opinion the middle class deserves more,” House Minority Leader Richard Hammel (D-Mount Morris Township) said in a statement. “We applaud the idea of middle class tax relief but don’t feel as though $20 a year per individual justifies the $1.8 billion tax increase the Republicans passed last year. House Dems stand united that real tax relief should be in the form of a repeal to the pension tax, increased funding to the (Earned Income Tax Credit), restoration of the Homestead Property Tax Credit, full roll back of the income tax and extra dollars returned to our schools to truly help the middle class.”
Bob McCann, spokesperson for Senate Minority Leader Gretchen Whitmer (D-East Lansing), called the proposal “very clearly an election-year budget.” He criticized Republicans for claiming to invest in education when so much was cut fr
