Gov, GOP leaders agree on tentative spending plan

Chad Livengood
Detroit News Lansing Bureau

Lansing — Gov. Rick Snyder and Republican legislative leaders have reached a tentative agreement on the state’s 2017 spending plan that includes about $166 million in aid for the Flint water crisis and ends a lucrative tax credit for auto insurers.

“The framework’s in place. There’s still a handful of things that aren’t major that we still have to work through,” Senate Appropriations Chairman Dave Hildenbrand told The Detroit News late Tuesday.

Lawmakers remain deadlocked on how to fix debt-ridden Detroit Public Schools’ financial problems, with about three weeks to go before their summer recess begins June 16.

The agreement preserves $128 million for immediate relief for Flint’s water-contamination crisis this fiscal year as well as $38 million for the fiscal year that begins Oct. 1, Hildenbrand said.

“It was important to me and I think it was important to all parties,” Hildenbrand said of the Flint aid. “It’s a tragedy and a crisis, and I think we’ve got to do everything we can to address it.”

Hildenbrand, R-Lowell, said the budget plan is about $350 million less than Snyder had recommended spending in his February budget presentation because of lower-than-expected tax revenue projections.

Much of the reduction will come to a $165 million statewide fund Snyder wanted to begin replacing aging underground water and sewer infrastructure in other cities. Lawmakers have agreed to put $5 million in the fund, Hildenbrand said.

“We think it’s legitimate and there’s certainly a good case to be made there,” Hildenbrand said.

To make up for the drop in revenue, the budget plan includes eliminating a tax credit auto insurance companies have been claiming for covering the medical bills of passengers and pedestrians injured by uninsured drivers.

The tax credit was created as a result of a 2012 change in the state’s insurance law and is projected to deplete the state’s general fund by $60 million this year and $80 million in the 2017 fiscal year. House Appropriations Chairman Al Pscholka, R-Stevensville, has called the tax credit a mistake and “the most lucrative handout ever.”

“Even the insurance industry will admit it wasn’t expected,” Hildenbrand said. “I think it’s the right thing to do to remove it and repeal and go back to the way it was.”

But the auto insurance industry lobby, business groups and the conservative political group Americans for Prosperity Michigan have defended the credit, arguing that repealing it would result in a $40 per vehicle “car tax” on drivers.

“We’ve got a lot of work to do in the Legislature to educate members,” Hildenbrand said.

The 2017 spending plan calls for a $60-$120 boost in per-pupil funding for public schools, Hildenbrand said.

A spokesman for House Speaker Kevin Cotter cautioned that the budget deal is not finalized, especially an agreement on ending the tax credits for auto insurance companies.

“We’re a good ways done, but there’s still some details to be worked out,” Cotter spokesman Gideon D’Assandro said. “An agreement is close, but not finalized yet.”

Even with a budget deal in the works, lawmakers remain deeply divided over how to solve Detroit Public Schools’ debt crisis.

Snyder and the Senate favor a $667 million plan with controls on the growth of new charter schools, while the House Republicans favor a $500 million plan with no limits on charters.

Sen. Goeff Hansen, sponsor of the Senate’s DPS rescue plan, expressed frustration with the stalemate.

“It’s challenging when you have different groups that are putting out false information,” the Hart Republican said.

Staff Writer Jonathan Oosting contributed.