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Original article URL: http://bridgemi.com/2012/02/the-tough-nerd-sidesteps-a-fight/

Peter Luke:
Eye on the Capitol

Insights into the inside workings of Michigan's state government from a veteran newspaper correspondent.

The ‘tough nerd’ sidesteps a fight

For all the talk, from Clint Eastwood on down, that Michigan is turning the corner, Gov. Rick Snyder’s new budget fails to match the moment.

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.

5 comments from Bridge readers.Add mine!

  1. Robert

    So much focus by Snyder and the Republicans on tax cuts as a driver for revival of this state. But we have been a middle of the road tax state, not a high tax state. We have real needs in this state, to fund education, health care, and road contstruction. I am all for reform, and we have started on this road and need to continue to reform where needed. But most reform seems akin to union busting. That is not real reform. The Bridge often talks about our bloated Corrections budget, and that is one area the Republicans need to address but seem reluctant. Ultimately, we need to decide, are we worth investing in ourselves? Low taxes are nice, and might help attract business. But good roads and good schools go a long way to attract business to this state as well. Money collected in taxes does not go into a black hole as so many conservatives think. It pays for the roads and schools, and the jobs that go with them. And those that hold those jobs do spend money in our state just like those employed in the private sector. We all can’t work for the government, and we need some government to get things done and fund necessary services. It is about balance, and we need a little more of that right now.

  2. T.W.Donnelly

    I am concerned with the raiding of the K12 budget to fund colleges. Combining k-12 and colleges pits one group against the other. K-12 can not charge tuition, while colleges can. These are different animals. Lumping them together at the same trough does not address their different needs.
    The president of U of M makes $550,000. The University has an endowment of $ 4.0 billion. The tuition is frightening for in-state students. How one justifies paying a college president that kind of money is beyond my understanding. And yet, lumping U of M and K-12 together makes proper k-12 funding less likely, given the rapaciousness of the college budgets. School kids struggle to have milk money while the sky boxes at Michigan Stadium serve pate de foie gras. It is an outrage!

  3. Mike R

    I commend Mr. Luke for a knowledgeable analysis of a very dense subject. While I deplore much of Governor Snyder’s agenda (I agree with Mr. Donnelly that it’s a tragedy what Snyder and his cost-cutting-obsessed cohorts in the Legislature have done to education), in general I had to give him grudging credit for publishing his agenda and pushing it through in a relatively transparent, honest way. That approach seems to have gone by the wayside in this new budget process, and he has fallen back into the standard politician’s Orwellian habit of describing something as its opposite often enough so that people start to believe it, e.g. a net decrease in educational spending is served up as an increase. I would encourage him to return to the path of honesty and transparency, and resist the temptation to abandon his “tough nerd” independence for the convenience of back scratching, log rolling, politics-as-usual. And a P.S. to Mr. Donnelly’s comments: While I don’t necessarily condone a high salary for its President, I don’t think the University of Michigan or any other state supported college in Michigan actually asked to be lumped in with the K-12 SAF, in part for the very reasons you’ve rightly highlighted.

  4. Matt

    Before we get too far down the road of Michigan spending too little or too much on education how about answering the question of where does Michigan compare in its per pupil expenditure (state local and federal) vs what other states and nations are spending? There never seems to be any discussion of what we get for what we spend or what we should expect for it. Seems like a constant problem with Center for Michigan’s point of view, we’re always being told to keep sending the money with no performance metric for the funds already in the system.

    Likewise I notice that we in Michigan pay more total tax on each gallon of gas than do the surrounding states (gas tax AND sales tax!). Seems like something is out of wack there too!

  5. Dave Friedrichs

    Investment in MDOT is investment in infrastructure. And, investment in infrastructure is investment in economic growth (if those who manage it are worth their salaries). While no specific project priorities are referenced, I urge that highest priority and our most skilled leadership (BLM and Mr. Snyder) focus on how to optimize MDOT’s “D.I.F.T.” project as a first order of business. There is no “I for an I” return (on infrastructure investment) that can exceed what I foresee as a TRIFECTA for Michigan in the re-development of SE Michigan into a HUB for the Heartland (of North America) through intermodal distribution and logistics, i.e., freight transportation (rail and highway). Place three bets Michigan: D.I.F.T., G.F.G., and N.I.T.C.; and pass the winnings on to your grandchildren! Please!!!
    For secondary infrastructure “for good for all”, I urge widening of key commuting corridors such as the US23 corridor from south of Ann Arbor to Saginaw (I-75). Doing so can eliminate bottlenecks to tourism and business commuting that waste time and lessen enjoyment of the state’s wonderlands – on all days of heavy travel. How we enjoy Pure Michigan or The Upper Hand, if we can’t get there! Build vehicle access to Michigan as an urgent priority. The world is coming to the Great Lakes State. To realize HQ status for global manufacturing, Michigan needs only the highways and HUB (Inland Port – GFG) for the world to beat a path to its door. From great investments in infrastructure, citizens can expect great investments in other sectors to become not only real – but sustainable.
    Thank you.
    D.R.Friedrichs
    2-22-2012

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