Schools, pensions, revenue sharing could take major hits

Gov. Rick Snyder told Michigan residents during his campaign against Lansing Mayor Virg Bernero that there would be shared sacrifice needed in order to get the state’s fiscal house in order, and the sacrifices that various constituencies may have to take have been laid out for Michiganders to see — and criticize — in the new governor’s proposed $45.9-billion state budget for Fiscal Year (FY) 2012.

“This is a comprehensive plan to lay a new, sound foundation for Michigan’s reinvention and put an end to the significant budget deficits that state has experienced for the past decade,” Snyder stated in a press release. “It reflects difficult but necessary decisions that will result in a shared sacrifice, but ultimately will benefit citizens, families and communities through the economic growth and job creation that is generated. By stimulating the economy while preserving core, essential services and ensuring a safety net for those who are vulnerable, we’ll all move forward together.”

The short-term sacrifice for long-term good, however, didn’t sit well with some voting blocs, particularly some of the interest groups relying on state funding to do their jobs. And that criticism isn’t limited to Lansing big-wigs.

Among the reductions laid out in Snyder’s spending plan for FY 2012, which begins Oct. 1, is an additional $300 per-pupil reduction for schools on top of the $170 per pupil cut they were already anticipating. That doesn’t sit well with local districts, which are facing upcoming budget years with barrels of red ink staring them in the face, although one school official said there is a possibility that an even more drastic reduction could be looming based on estimations administrators in West Bloomfield had heard of — $700 per pupil.

“A cut of this magnitude ($700 per pupil) would mean approximately $4.7 million” added to the district’s anticipated $2.9 million budget deficit for the upcoming fiscal year, ballooning that figure to about $7.6 million, said Pam Zajac, public relations and marketing coordinator for the West Bloomfield School District.

Other local officials aren’t happy either.

“Governor Snyder’s proposed cuts to K-12 funding would be devastating to public education in the state of Michigan,” said Waterford School District Superintendent John Silveri in a prepared statement. “After years of adjusting to inadequate funding and managing to do more with less, the scope of the funding reductions we are facing under this latest proposal far exceeds anything we’ve seen before, which puts us in a very precarious position. As always, Waterford Schools will continue to make the best of what we are given, and we will make whatever difficult decisions may be necessary in the best interests of student learning.”

Constitutional revenue sharing appropriations to local governments would be increased by 4 percent ($25.5 million). However, Snyder has also called for an elimination of traditional statutory revenue sharing that communities rely on, and instead basing the distribution of funds from a new $200 million pot of cash on local governments implementing so-called “best practices.” More details on that proposal are expected next month.

The Michigan Business Tax (MBT), which has been the subject of significant ire from Republicans — and some Democrats in conservative-leaning districts — would be eliminated under Snyder’s FY 2012 budget, which would replace the 2007 tax with a 6-percent corporate income tax on Class “C” corporations, which are generally those that issue public or private stock. Snyder estimated that over 95,000 firms would no longer have to file a state business tax return under the plan.

The change would result in a $1.8 billion budget hole that would be filled with further modifications and simplifications to the state’s tax code, in addition to the corporate income tax, which would make the proposal revenue neutral by FY 2013, according to Snyder.

Business groups lauded the proposed business tax relief they have been championing for years.

“Gov. Snyder has identified out-of-control state spending and a job-killing business tax (MBT) as substantial barriers to job growth and he has proposed bold changes to make Michigan more competitive,” said Michigan Chamber of Commerce President & CEO Rich Studley. “Governor Snyder has set the tone that we must take responsibility for a legacy of debt and his budget and tax initiatives are devised as long-term solutions.”

In perhaps one of the most controversial aspects of his budget plan, Snyder is calling for the nixing of the tax exemption both public and private sector employees have enjoyed on their pensions — a move that has caused upheaval in some sectors, but one that Snyder said was about equity in the tax code.

“We found plenty of sacrifice on middle-class families but we did not find enough sacrifice on the part of business,” said Mark Gaffney, president of the Michigan chapter of the AFL-CIO. “Our members and retirees are proposed to give by the taxing of pensions, seeking further cuts by state workers, ending the earned income tax credit and cuts to the funding of higher education, cities and public education. Tax relief for the rich will continue and over a billion dollars in tax exemptions for business will continue. But at the same time, the Michigan Business Tax would go away. This budget proposal needs a lot of work and a lot of negotiations. The sacrifice needs to be more broadly shared. The wealthy, their profitable businesses and the CEO’s must also share in sacrifices.”

The budget proposal also calls for $180 million in concessions from state employees that are expected to be negotiated with labor organizations; $2.9 billion for road and bridge construction and public transportation programs throughout the state; nearly $500 million for natural resources, state parks, and environmental protection and pollution prevention under the budget of the reconstituted state Department of Environmental Quality and state Department of Natural Resources; $1.8 billion for the Department of Corrections; and $13.8 billion in K-12 education and university and community college funding.

State Rep. Chuck Moss (R-Orchard Lake), who chairs the House Appropriations Committee, withheld judgment on specific aspects of the proposed budget, saying that people shouldn’t “pull this or that out” and say that it’s off the bargaining table when lawmakers burn the midnight oil to hash out a final budget plan.

“There is probably something in it for everyone to hate,” Moss said. “We’re all going to have to make sacrifices to get Michigan going again. We’ve forgotten what it’s like to have an expanding economy.”

“It’s obviously going to get massaged in the House and Senate and the eventual final product may differ slightly,” said state Rep. Hugh Crawford (R-Walled Lake, Wixom). “It’s a tough-love budget.”

Moss has said that he wants a budget passed by June 1, well ahead of the 11th-hour negotiations that have been commonplace in Lansing in recent budget standoffs.