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Lansing — Public education and low-income residents emerged the surprise winners Thursday in a compromise road funding agreement between Gov. Rick Snyder and legislative leaders.

The multifaceted plan calls for pouring $300 million more into public education and restoring $260 million in tax credits for the working poor if voters approve an increase in the sales tax from 6 percent to 7 percent on the May 5 ballot.

In a rare victory for the minority party, Democrats extracted the tax relief and extra money for schools as a stipulation for their support of placing the sales tax proposal before voters.

“If this ballot proposal passes, it will be a big win for schools and education in our state,” said House Minority Leader Tim Greimel, D-Auburn Hills.

State aid for public schools was thrust into the road funding debate when House Republicans passed a plan earlier this month dedicating existing sales tax revenue from fuel purchases to transportation expenses.

It created a potential $600 million hit to education funding because taxes on gasoline and diesel largely go to the School Aid Fund — reigniting debates from the recent election about past legislative tinkering with K-12 school funding sources.

“There are potholes in our roads, but there also are potholes in our schools and this helps both,” said Brad Biladeau, lobbyist for the Michigan Association of School Administrators.

The ballot initiative would include a change in the state constitution that stipulates the School Aid Fund can only be used to fund preschool through community college programs.

For the past four years, Democrats have fought Snyder and the Republican-controlled Legislature’s use of $400 million annually in School Aid money for community colleges and the state’s 15 universities.

By shifting the $200 million received by universities back to the General Fund — the state’s main checkbook — there could be an extra $500 million available in coming years for schools and community colleges, said Senate Minority Leader Gretchen Whitmer, D-East Lansing.

“There will be constitutional protection from our School Aid Fund from further raids and pressures,” Whitmer said.

If the 17 percent sales tax increase is approved by voters, the $300 million in additional revenue would be constitutionally earmarked for schools, representing an extra $200 per student for the state’s public schools.

In 2011, the GOP-controlled Legislature and fellow Republican Snyder reduced the Earned Income Tax Credit to 6 percent of the federal earned income credit, down from the 20 percent state credit adopted during Democratic Gov. Jennifer Granholm’s administration.

Democrats have railed against the reduced EITC for the past three years, but Snyder and GOP leaders have resisted proposals to undo the cuts.

Gilda Jacobs, president and CEO of the Michigan League for Public Policy, said restoring the tax credit to previous levels would help the families of 1 million children in Michigan make ends meet.

“It would help working families stay on the job by assisting them with transportation costs and would lift many more families from poverty,” Jacobs said.

Some conservative Republican lawmakers labeled the extra money for schools and the working poor as giveaways.

“They had to pay off $560 million just to get Democratic support,” said Sen. Jack Brandenburg, R-Harrison Township.

Snyder acknowledged Thursday the tax relief was needed to win support of at least two-thirds of the House and Senate members to get the sales tax constitutional amendment on the ballot.

“We’re making a big difference in terms of a long-term tax relief because, again, those are the people that bear the major burden of the increased revenue stream,” Snyder said. “That’s where we found common ground.”

clivengood@detroitnews.com

(517) 371-3660

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