Michigan House approves new incentive programs amid business warnings

Snyder pitches education boost, health cuts

Chad Livengood and Gary Heinlein
Detroit News Lansing Bureau

Lansing — The spending plan Gov. Rick Snyder proposed Wednesday reflected early second-term challenges brought on by budget-busting business tax credits and an escalating road-funding crisis.

To alleviate an immediate $325 million deficit blamed on surging business tax refunds, Snyder proposed slashing spending in state agencies by $207.3 million this year and shifting $166 million in community colleges payments to the School Aid Fund. Among the biggest losers were community health, prisons and film incentives.

The Republican governor also recommended lawmakers cancel a $80 million planned payment to the state's school employees pension fund to make room for the community college funding shift — a move that runs counter to Snyder's desire to pay down unfunded liabilities.

Snyder offered a $54 billion spending plan for the 2016 fiscal year that doubles state funding for skilled trades training and gives K-12 schools and universities modest funding increases, while providing less general fund revenue for road repair projects and slashing subsidies to hospitals for physician training.

"While we're cutting a number of programs, we're making investments," Snyder said.

But the governor acknowledged the state's budget picture could improve by spring if overall tax revenue collections improve and voters approve a hike in the sales tax from 6 percent to 7 percent. Passage of Proposition 1 would trigger $1.2 billion more for roads, $300 million for education and $95 million for municipal revenue sharing, which remained flat in Snyder's budget plan.

"The ballot proposal ... would be a material enhancement to resources for our state, to make safer roads," Snyder said.

Because of the drop in revenue, Snyder said, general fund support for roads will decrease from $285 million to $113 million, which is needed to meet the state's match for federal funding of highway projects. In recent years, Snyder and lawmakers have tapped the state's general fund to make up for a structural deficit in the transportation fund because of declining fuel tax revenue.

Snyder and Lt. Gov. Brian Calley used their annual budget presentation to lawmakers to continue campaigning for a "yes" vote on the May 5 ballot proposal. "Doing nothing is the highest-cost option," Calley said.

In a meeting with reporters after the presentation, Snyder stepped up his rhetoric to illustrate the consequences if voters defeat the sales tax plan.

"It requires a tax increase, but this is common sense," Snyder said. "By doing it this way, we're going to have much better roads. If we don't do this, you haven't seen anything ugly yet in terms of conditions of our roads."

Payouts to businesses for refundable tax credits have ballooned from $75 million in the 2013 fiscal year to $681 million this year and an estimated $807 million in fiscal year 2016 — the main culprit of a $532 million shortfall in revenue.

Snyder said his administration is still studying the depth of the state's tax credit liability — last estimated to be $6.5 billion — and speaking privately with some corporate taxpayers about how to better anticipate when they will seek large tax refunds.

"We want businesses to be successful in our state, so we should honor these agreements," Snyder said.

School aid use questioned

Rep. Sam Singh, D-East Lansing, said the governor's budget moves are designed to cover up for the revenue impact of the $1.8 billion annual tax cut he delivered to businesses in 2011.

"They're solving a lot of problems for the budget by using the School Aid Fund," Singh said. "Why aren't we using that School Aid money to go back to those schools instead of solving budget problems that were created by a tax system created by this governor?"

Sen. Dave Hildenbrand, chairman of the Senate Appropriations Committee, defended moving the remaining community college funding to the School Aid Fund, which is allowed under the state constitution.

"I think that's an appropriate source of funding for community colleges," said Hildenbrand, R-Grand Rapids.

Snyder's mid-year cuts were targeted and varied in 11 state agencies, ranging from $51 million in the Department of Community Health to $23.7 million in the Department of Corrections' $2 billion budget.

"This was not an across-the-board cut," Snyder said at the budget presentation. "I believe across-the-board cuts are bad management."

The mid-year cuts are expected to make minor reductions in the state's workforce, perhaps as few as 30 full-time jobs, state Budget Director John Roberts said.

"This is not anticipated to lead to massive layoffs in any case," Snyder said.

The governor also wants to withhold $12 million from a $50 million fund for incentives granted to movie and television production companies that film in Michigan. But in his 2016 fiscal year budget, Snyder proposes restoring funding to $50 million, double the amount he has recommended in prior years.

Snyder's budget ax spared revenue-sharing for municipalities, K-12 schools, community colleges and universities.

The House and Senate appropriations committees plan to meet Thursday to vote on part of Snyder's budget cuts, a $103 million executive order.

Disaster assistance cut

The majority of Snyder's $23.3 million in cuts to the state police budget came in a $16 million reduction in disaster assistance and a $2.8 million line-item cut to general law enforcement and traffic safety.

Col. Kriste Kibbey Etue, commander of the state police, said the disaster assistance was reduced because the state spent $14 million from $30 million appropriated to aid recovery efforts from flash flooding in Metro Detroit in August.

Snyder also eliminated a training school this year for 31 new motor carrier enforcement state troopers who monitor truck weights for commercial trucks. "We still have 58 (officers) out there, but they're going to work twice as hard," Etue said.

For the 2016 budget, The Detroit News first reported Wednesday Snyder wants lawmakers to add more than 275,000 children in Wayne, Oakland and Kent counties to the Healthy Kids Dental program at a cost of $21.8 million.

The program is already available to children on Medicaid in Michigan's other 80 counties, but the proposed expansion will only cover children in the three counties up to age 8 because of general fund budget constraints.

Snyder said he hopes to gradually add all children and young adults up to age 21 in the three counties in future years.

"Financially, I didn't find the resources to do all three counties at once. But I wanted to make a commitment to move forward," Snyder told lawmakers. "Let's make that commitment that we can continue to invest over the next three or four years to get all of our kids covered."

Snyder also wants to expand access to dental care for 600,000 low-income adults on the Medicaid health insurance program by boosting payments to dentists by $23 million, with $7.9 million coming from the state's general fund.


2016 budget proposal

Highlights of Gov. Rick Snyder's proposed $54 billion plan:

■Adding 875,000 low-income children and adults to the Medicaid dental programs.

■Doubling state spending on skilled trades training programs from $10 million to $20 million.

■Boosting per-pupil school aid by $75. Increasing to $275 if Proposal 1 is approved by voters in May.

■Cutting $172 million in general fund aid for roads.

■Increasing public university aid 2 percent if they keep tuition below 2.8 percent.

■Hiking community college aid 1.4 percent.

■Adding $7.7 million to train 75 new state troopers.

■Spending $3.4 million to process DNA from sexual assaults and prosecute offenders

Source: State of Michigan Budget Office