By Peter Luke/Bridge Magazine correspondent
Instead, the administration has agreed to play “small ball” with Republican lawmakers worried about re-election prospects. This budget appears to be carefully crafted to protect GOP House incumbents in 2012.
The minimum foundation grant for K-12 schools is maintained. Higher education receives a modest increase*. Additional law enforcement money for Michigan’s poorest cities represents but a start.
A 2013 budget continues the path charted in 2012, but lacks the current budget’s ambition to craft big new solutions for long-standing problems. The big idea last year was to repeal state business taxes for most firms, replace them with a less complicated levy on corporations and address inequities in the income tax code.
With some Republicans itching to use the first real budget surplus in years to return the income tax rate back down to 3.9 percent over time, Snyder, Lt. Gov. Brian Calley and Budget Director John Nixon reiterated that a budget that assumes the stability of a 4.25 percent rate won’t be financing new tax cuts.
If the administration sticks to that, it’s a large deal in that it defies conservative orthodoxy that any new dollar in revenue should be promptly returned to taxpayers. What the budget doesn’t do, however, is redress budget harm caused by what has been an ideological refusal to adequately fund state services as essential to economic health as proponents say tax cuts are.
Such caution explains perhaps the budget proposal’s worst feature: The transfer of $116 million from the general fund to ensure the Michigan Department of Transportation can fully match federal highway aid.
While the move perhaps bows to political reality, it undercuts the efforts of lawmakers who took seriously Snyder’s appeal last year that roads and transit require another $1.4 billion in annual investment. In a budget presentation delivered two weeks after the bills were introduced to raise that kind of cash, Snyder said, “We need to look at the fact that we have infrastructure that’s going away very quickly and we need to invest more in infrastructure for the long term.”
His budget, however, assumes that the revenue required for that additional investment won’t be approved in time for a 2013 construction season that starts 14 months from now. Thanks to a one-time surplus in the general fund, lawmakers can take a pass. But it’s money not available for programs the general fund already is inadequately supporting.
For example, that $116 million could restore half the 2012 state aid cut to universities. Instead, Snyder’s budget gives universities that have lost $2,300 per student in state aid since 2001 a mere $130 of that back.
Universities will continue to receive about $200 million in School Aid Fund dollars. Conversely, the SAF gets it right back through an equal contribution from the general fund. That preserves another pretty big 2012 move to convert a SAF designed for K-12 into more of an all-purpose pool for preK-16.
That doesn’t have to be a bad thing, as Nixon questioned whether the current funding stream for education is “still appropriate for the services we’re trying to deliver.”
It’s a stream diminished annually through declining property values and the ongoing shift in consumer spending from taxable goods to untaxed services. The stream will be further narrowed if no reliable source of revenue is found to off-set a phase-out of the state’s personal property tax sought by Republicans at the Capitol.
But as with transportation fees and revenues, any discussion of, say, extending the sales tax to consumer services, which could both bolster state aid for education and finance a business property tax cut, will be put off. There apparently won’t be the time, given Snyder’s insistence that full-time lawmakers complete the budget at the same swift pace a part-time legislature would.
Policy prescriptions Snyder outlined last year to tackle shredded local balance sheets, crumbling infrastructure and K-12 performance are all sound. It’s expected that his March message on criminal justice will take on tough challenges as well.
The effort put into those special messages by the administration suggests the issues have the same priority on the list of “relentless positive action” items that the business tax overhaul did — an overhaul the governor told the Detroit Economic Club had significantly improved the state’s standing as a place for employers to invest.
But, as they are being addressed with relatively small pots of money — quite unlike the business tax cut – Snyder’s budget makes it plain they really don’t.
Peter Luke was a Lansing correspondent for Booth Newspapers for nearly 25 years, writing a weekly column for most of that time with a concentration on budget, tax and economic development policy issues. He is a graduate of Central Michigan University.