Lansing — Republican Gov. Rick Snyder is set to call for increased spending on road repairs and K-12 education on Wednesday in his final budget proposal, setting up a potential showdown with GOP leaders focused on cutting taxes and forgiving driver fees.
Senate Majority Leader Arlan Meekhof and House Speaker Tom Leonard last year temporarily froze Snyder out of budget talks before striking a compromise on a teacher pension reform plan. The fellow Republican leaders could again butt heads with the lame-duck governor as annual negotiations begin.
Sources familiar with the plan say Snyder will propose a per-pupil K-12 funding increase of $120 to $240 per pupil, depending on the district, which would amount to a $312 million overall boost. Budget officials have said he also will ask for $175 million in extra road funding on top of the $150 million already set to be dedicated under a 2015 law.
“You can also expect him to address funding for the infrastructure initiatives he unveiled last week,” said spokeswoman Anna Heaton.
The initiatives include an annual $5 water customer fee to pay for lead pipe replacement and other underground infrastructure upgrades, along with a higher landfill fee to pay for toxic waste site cleanup.
Meekhof, R-West Olive, said he is “anxious” to hear the governor’s budget proposal and believes there are “some opportunities to spend and invest in areas that are going to make a difference for our citizens.”
But tax cuts are a top priority for Meekhof and Leonard, who are negotiating plans to increase the state’s personal exemption and create a child or senior tax credit. Leonard, R-Dewitt, is also pushing to forgive “driver responsibly fees” owed by about 300,000 residents, many of whom lost their licenses over inability to pay.
The tax cut and fee amnesty plans would reduce state revenue as Snyder is pushing for more spending, a potential impasse that could complicate efforts to complete the budget by June.
A House-approved income tax cut plan is projected to cost $358 million a year once fully implemented in 2020. A Senate-approved plan would cost $287 million by 2022.
Snyder briefed Senate Republicans on his budget plans Tuesday afternoon and stressed the importance of cooperation.
“Just how it’s about partnership and how we can continue to work together to do great budgets that have shown great results in terms of Michigan becoming a stronger and better state,” the governor said after the meeting.
GOP leaders have leverage heading into budget talks: Each chamber has passed tax cut plans with enough votes to override a veto, and legislators know Snyder wants to keep his streak of early budgets intact as he looks to cement his legacy during his final year in office.
“The governor is in a mood where he wants his budget to be eight for eight,” Meekhof said.
Snyder is likely to push back against income tax cut plans by highlighting tax relief efforts already underway and warning legislators against using one-time funding to support cuts with long term budget implications.
The 2015 road funding law included an expansion of the Homestead Property Tax Credit designed to offset the impact of gas tax and registration fees for middle- and lower-income residents. The expanded credit will take effect next year, creating a $200 million hit for the general fund, the state’s main revenue source for discretionary spending.
The road funding law is also phasing in an annual shift in the general fund, which will cost the state $150 million next year and $600 million annually by 2022.
Snyder’s continued push to repair pothole-filled roads with additional funding and put more money into K-12 classrooms are popular with Democrats, who largely backed recent tax cut plans but have long called for targeted “investments.”
“We should be investing in education. We should be investing in our infrastructure, and if the governor is willing to stand up for that, I’m willing to stand with him,” said Sen. Curtis Hertel Jr., D-East Lansing.
Hertel said the budget debate should not be limited to Snyder’s proposed targeted increases or the Legislature’s personal income tax cut bills. He noted the governor spearheaded a 2011 tax code overhaul that cut business taxes but eliminated many credits and exemptions for individuals, saying he thinks “corporations should pay their fair share.”
Snyder and legislators will have one-time money to work with after the state ended fiscal year 2017 with a surplus of around $280 million. They’ve already spent about $53 million of it in a supplemental budget bill.
The governor is hoping to use additional savings to launch what he’s calling a “Marshall plan for talent,” which he is expected to detail in coming weeks.
As outlined during development of Detroit’s failed bid for Amazon’s second headquarters, Snyder could seek $120 million for new computer science student scholarships, school and university grants, K-12 teacher training and child care for technology workers.
“It’s what you would describe as a massive pilot program and a major scale,” Snyder told The Detroit News last month, explaining that he will propose using one-time funding for the talent plan but hopes the state’s next governor will continue it.
“If it’s working after two to three years, and you’re seeing thousands of people get a well-paying job, it’s not hard then to get everyone behind finding continuing resources.”
Leonard wants to use some of the surplus to forgive driver responsibility fees, which he and other critics call a devastating double penalty for drivers because they are assessed on top of traditional traffic fines.
House-approved bills would forgive a collective $630 million in outstanding debts by October. But because the state was not expected to collect many of the older debts, the plan is projected to cost $51 million over the next three years, according to the nonpartisan House Fiscal Agency.
“I believe the money is there to offer tax relief to the citizens of the state, increase transportation funding as well as give these 300,000 people their driver’s licenses back,” Leonard said Thursday.
A state Senate panel approved the driver fee amnesty plan last week, setting it up for a floor vote as soon as Meekhof and Leonard negotiate the final plan.
“I hope it’s a key part of the negotiation process for the budget, not just a standalone issue,” said Sen. Mike Shirkey, R-Clarklake, who supports full forgiveness over a scaled back Senate plan approved in October.
“I understand that it puts a little more pressure on the budget, but it was a dumb idea when it was created,” Shirkey said of the 2003 fee law that Snyder already agreed to phase out.