State budget surplus serves both policy and politics goals
Spreading Michigan’s budget surplus to cover as many bases as possible seems to be the goal of Gov. Rick Snyder’s final first-term spending plan, while not-so-subtly answering the demands of election year politics.
Presented recently, it’s a smart blueprint that gets a good deal of mileage out of the $1 billion windfall.
The big winner is education, both K-12 schools and public colleges and universities would receive sizable increases in the 2015 spending plan.
The governor also wants $254 million of the surplus for one-time transportation spending, an amount even he acknowledges is a temporary Band-Aid, well short of what’s needed to repair the state’s deteriorating infrastructure.
And there’s a tax cut – about $100 million to middle and low income Michiganians.
It’s no coincidence that the hike in education spending and tax relief for lower income families hit two major Democratic talking points that have already emerged in the gubernatorial race.
Using figures from earlier budget proposals, Democrats are attempting to tar Snyder for cutting support for schools, and for favoring businesses over individuals in tax policy.
It’s an election-year reality that the governor is not likely to get the $1.2 billion annual funding stream he wants to repair Michigan’s infrastructure.
While again asking lawmakers to consider raising the gas or sales tax or vehicle registration fees, Snyder is using the quarter-billion taken from the surplus as a hedge. It’s not enough, but if approved it will help keep roads and bridges from getting much worse.
Both Democrats and Republican lawmakers are clamoring for a tax cut. Snyder is bowing in the direction of Democrats in expanding the homestead property tax credit for families earning less than $60,000 a year. He’ll likely face a fight from his own caucus; GOP legislators want a more broad-based cut.
Snyder’s proposal makes up for some of what low-income workers lost when the earned income tax credit was wiped away. And most importantly, it provides relief on the bottom of the income scale, without sacrificing Michigan’s flat tax, which remains one of the state’s few tax advantages.
Even with so many hands grabbing at the surplus, Snyder stuck to his own priority of addressing Michigan’s long-term liabilities and stabilizing its budget.
The budget would shore up the state’s rainy day fund by another $120 million, bringing it to $700 million.
That’s a smart move. Michigan has a long way to go before its savings put it in a comfortable position to weather unexpected downturns. Ideally, that fund should grow to $1.6 billion.
Snyder also wants a separate savings account of $122 million to cover costs associated with Michigan’s recent Medicaid expansion.
Educators should be happy with this budget. Snyder is seeking a 3 percent increase in funding for K-12 public schools and community colleges and a 6.1 percent boost for higher education.
This is the largest jump in higher ed funding in Michigan since 2001 and would help restore some of the state support that’s shrunk considerably in the past decade.
In return, the governor rightly expects the state’s 15 public universities to hold tuition increases to less than 3.2 percent. In total, education gets a $600 million increase in this budget.
Lawmakers have a solid blueprint to work with as they begin budget deliberations. They can make it better by answering their responsibility to Michigan’s roads and bridges.