Six big proposals in Gretchen Whitmer’s first Michigan budget

Update: Michigan Senate panel rejects Whitmer gas tax, as budget dance continues

The conventional wisdom that many of Gov. Gretchen Whitmer’s campaign promises to protect the environment, invest in education and fix the roads would pack a punch to the state’s wallet has finally come to fruition.

Whitmer’s first budget proposal, unveiled Tuesday, calls for a 3.6 percent increase in state spending over the current fiscal year, including an additional $507 million for K-12 schools and a hefty 45-cent bump in the state gas tax to be used for roads.

During a joint House and Senate appropriations committee hearing Tuesday morning, Whitmer, a Democrat, acknowledged to legislators that supporting those increases won’t be easy. “I know how difficult your job is.”

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“We ran a lot of different solutions” for raising the $2.5 billion necessary to repair roads, Whitmer told reporters. “It’s the solution that requires one historic vote that pulls a lot of levers and solves a lot of problems.”

Whitmer’s proposal represents a first volley in what will likely be a months-long negotiation with Republicans who control the House and Senate. GOP leaders didn’t call her budget a non-starter, but indicated that they’re concerned about the size of the gas tax increase.

Analysis: Whitmer's budget banks on Michigan GOP backing one historic tax hike
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“I’ve said it before and I’ll say it again: We will always have a road-funding problem in Michigan until every penny we pay in taxes at the pump is devoted to fix the roads,” House Speaker Lee Chatfield, R-Levering, said in a statement, referring to the portion of the sales tax that goes to the School Aid Fund. “The people of this state already said no to a reckless $2 billion tax hike not that long ago. We can’t continue to gloss over the long-term structural problem, while asking families, workers and seniors who are already living paycheck to paycheck to pay even more.”

Here are some of the most significant proposals Whitmer made in her first budget plan.

$2.5 billion more for roads

Whitmer proposed a 45-cent gas tax hike metered out over a year (the tax would raise by 15 cents three times between October this year and October 2020), which she said would cost the average Michigan family $23 more per month. That money would be used to fix "the most heavily traveled roads and the most economically important (state and local) roads,” state budget Director Chris Kolb said.

Whitmer hasn’t shied away from the prospect that her “fix the damn roads” campaign promise would cost billions. But during the campaign, she shied away from using the T word, talking instead of the possibility of raising funds through “user fees” (which are most commonly taxes or registration fees). Indeed, during a debate in October, she shot down Republican gubernatorial candidate Bill Schuette’s allegation that she would raise gas taxes by 20 cents. “Ridiculous,” Whitmer responded at the time. Her budget proposal more than doubled that estimate.

“It was not always my plan” to raise the gas tax that much, she told reporters Tuesday in response to a question about the debate exchange. “We did undertake a lot of debate and explore a lot of different possibilities, and this was the smartest, quickest way to remedy the problem.”

Related: Gretchen Whitmer’s plan to fix Michigan roads: Nearly triple gas tax

Doubling the Earned Income Tax Credit

To offset the cost of the gas tax increase, Whitmer proposes doubling the Earned Income Tax Credit — a state tax benefit for low- and middle-income people — from 6 percent to 12 percent. That would save the average low-income family $30 per month, she said.  

Repeal the pension tax

Whitmer’s budget proposal calls for repealing the state’s widely unpopular tax on some pension income, passed in 2011 as part of former Republican Gov. Rick Snyder’s larger tax overhaul. As a state legislator, Whitmer voted against the tax changes partly because of the pension component.

A repeal of that tax would cost the state about $330 million in individual income tax revenue, according to a recent House Fiscal Agency analysis of a bill that has cleared a House committee. That would amount to about $255 million from the state’s general fund, and another $75 million from the School Aid Fund. Supporters say repeal would take more of the state’s tax burden off individuals, namely seniors, while critics say it would treat retirement income differently and becomes an issue of fairness.

$180 more per student in lowest-funded schools

Whitmer proposed increasing state spending on K-12 education by 3.8 percent, which she’s called “the biggest investment in education of our kids in a generation.” Her proposal includes $235 million more to the state’s foundation allowance and mimics the “weighted” system of education funding (in which the state spends more on the neediest schools) which used in states like Minnesota and Florida, which have seen higher achievement or faster student growth than Michigan.

Her proposal also budgets more funding for programs for special education, at-risk and career and technical education students, in response to recent studies that have recommended extra funding for programs that help students who need more support to succeed.

How does Whitmer propose paying for new education funding: She would return $600 million in road funding back to the state’s General Fund (which was put there after the 2015 road funding plan passed) to be used for higher education. That would free up money currently used for higher education to be used for K-12.

Related: Gov. Whitmer: Boost Michigan schools by $507 million
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3 percent more for higher education

Michigan universities and community colleges would get 3 percent more in state funding under Whitmer’s proposal, as well as a 3.2 percent cap on how much universities can raise tuition without being penalized by a reduction in state funding. Universities would be funded entirely through the general fund, returning $500 million to the School Aid Fund for use by K-12 schools.

Whitmer’s half-billion-dollar education increase would include $110 million to fund the first two years of her proposed Michigan Reconnect program, which aims to encourage adults without a postsecondary credential to return to school to complete it. Her budget does not commit funds to the Michigan Opportunity Scholarship, which would provide debt-free community college and money to pay for two years at a four-year university, because that program won’t be rolled out until 2021.

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$120 million for drinking water infrastructure

Whether it’s lead or PFAS, toxic chemicals have been found in drinking water across the state. Whitmer proposed $120 million in state spending on improving the state’s drinking water infrastructure, including $37.5 million to help communities comply with the state Lead and Copper rule, $30 million to tackle PFAS and other contaminants and $60 million for installing “hydration stations” in schools.

119 Michigan water systems have tested positive for PFAS, which can increase the risk of cancer and stunt childhood development. It can cost more than a million dollars just to clean up one water system.