Flanked by Speaker of the House Jase Bolger, left, and Senate Majority Leader Randy Richardville, Gov. Rick Snyder announced last month the plan to spend Detroit $350 million to rescue Detroit's pensions and save the collection at the Detroit Institute of Art. (Dale G. Young / The Detroit News)
The conversation about the $350 million state bailout of Detroit is proceeding as if it’s a done deal. The money is already being tallied in the ledger column offsetting the amount needed to keep creditors from raiding the vaults of the Detroit Institute of Arts.
But there’s still a lot of bargaining to be done before that money can be counted on to help resolve Detroit’s bankruptcy.
Republican lawmakers, particularly in the Senate, are skeptical about committing $17.5 million a year for the next two decades to the city. And while they’ll likely come around in the end, they’ll also want something to offset the election-year risk of so heavily favoring Detroit.
My bet is that something will be a tax cut.
The GOP isn’t happy with the roughly $100 million in tax relief Gov. Rick Snyder included in his new budget proposal. The governor wants to target that money at lower and middle income families by expanding the homestead tax credit.
Republicans want a larger and broader tax cut. They’d use more of the $1 billion surplus to begin rolling back the state income tax rate to 3.9 percent from 4.25 percent.
Snyder is balking. He argues focusing tax relief on the residents who need it most will have a larger impact than giving a few dollars to all taxpayers. A rate reduction inevitably puts more dollars in the pockets of higher income earners.
There are campaign considerations at work. Democrats hope to hammer Snyder for tax policies favoring businesses over the poor. Trimming taxes for lower income families helps mute that charge.
But lawmakers have their own priorities, and they also have leverage.
While Randy Richardville, the Senate majority leader, doesn’t believe his caucus will link the tax cut to the Detroit bailout, he acknowledges he faces huge resistance in pushing the package for the city.
“A lot of members are not signing up until they see more details,” Richardville says. “I hope they can see this as a relatively small amount of money to make Detroit’s problems go away.”
Detroit’s case in Lansing wasn’t helped by condemnation last week of the state intervention by the Fitch bond rating agency. A Fitch executive warned Snyder’s favoring of pension funds over banks could set a dangerous precedent that would make it harder for other Michigan communities to sell bonds in the future.
“That hurt,” Richardville says.
Facing the possibility they may be harming their own communities by helping Detroit, lawmakers are bound to strike a tougher bargaining position. They have to come home with something big. A tax cut might fit that need.
Snyder, when asked Friday about the give-and-take necessary to get the Detroit aid passed, said, “I’m not much of a horse trader.”
But with the settlement of Detroit’s bankruptcy on the line, the governor won’t have a choice but to play “let’s make a deal.”
Follow Nolan Finley at detroitnews.com/finley, on Twitter at nolanfinleydn, on Facebook at nolanfinleydetnews and watch him at 7:30 p.m. Thursdays on “MiWeek” on Detroit Public TV, Channel 56.