Debate begins over potential Michigan budget cash

It turns out Michigan's state government might have brought in more money from taxes and fees than previously expected in the fiscal year that ended Sept. 30. That likely will set up a battle this fall over what to do with the cash, which could total $285 million or more.
AP Wire
Oct 17, 2011

Democrats, outnumbered in the Michigan Legislature, say any extra money should be committed first to public schools and education programs that are dealing with budget cuts in the fiscal year that started this month. Republicans, including those in Gov. Rick Snyder’s administration, are hesitant to commit to any spending before they have a clearer picture of state revenues. And if there is extra money, Republicans might use it to pay off state debt or stick it in state government’s savings account.

“We need to wait and be sure that we understand what’s available,” Republican House Speaker Jase Bolger said. “Everybody’s talking about the money already — they are estimates at this point.”

Republican Senate Majority Leader Randy Richardville also urged caution among his colleagues at the state Capitol.

“Money gets spent real fast around here, before we ever get it in some cases,” Richardville said.

Snyder’s budget office is expected to close the books on the recently completed 2010-11 fiscal year in December. In January, officials from the state treasury and the nonpartisan House and Senate fiscal agencies will come up with consensus revenue forecasts that also will help build upcoming state spending plans.

The last official revenue estimating conference was held in May. The House Fiscal Agency recently estimated that the state brought in $145 million more than expected in its school aid fund and $140 million more than expected in its general fund that pays for various state departments. Revenue estimates from the Senate Fiscal Agency are even higher.

Snyder’s administration will wait until another month of information related to last fiscal year is available before making its estimates.

The state’s new $47.4 billion budget resolves a projected $1.5 billion revenue shortfall and partially addresses long-term pension and health care liabilities for public employees. The 2011-12 budget also had to make up for $1 billion in revenue lost through business tax cuts that will begin in January.

New spending plans for state departments and programs began this month with deep cuts to education. Many public schools will lose an additional 2 percent to 3 percent of their state aid this year, although the amount will vary by district. Universities lost 15 percent of their state aid, and community colleges lost about 4 percent.

Democrats opposed the education funding cuts approved by the Republican-led Legislature and say that’s the first place any extra money should go.

“It’s a no-brainer to me,” said Sen. Steve Bieda, a Democrat from Warren. “That’s where we need to put the money.”

Some key Republicans say money for the classroom could be a potential priority if extra money materializes. But there are other priorities that might rank higher on the list.

Republicans would seek cash to ease pension debts or more quickly pay back money Michigan borrowed from the federal government to cover shortfalls in the state’s unemployment insurance fund. Another Snyder administration priority would be putting more money in the state’s budget stabilization or “rainy day” fund, which might help the state’s standing with credit agencies.

Michigan’s state government might also need extra money in case some savings plans don’t materialize because of lawsuits or lack of progress in negotiations with unions representing state employees. In one high-profile example, a state law to withhold 3 percent of state employees’ pay to help cover future retiree health costs continues to be tied up in court.

All those factors make the Snyder administration unwilling to commit to more money for schools — or anything else — at this point in the process.

“At this point, we can’t answer that,” said Kurt Weiss, a spokesman for the state’s budget office. “It’s going to be part of the budget planning process. While education is a priority, there’s a lot of priorities in the budget.”
 

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