Guest post: K-12 'increase' is actually a cut

By Mitch Bean

Compared to last year, this year's gubernatorial budget presentation was a bit boring. There were, however, a few interesting aspects worth mentioning.

Let's start with the way funding for K-12 was described. The description in the budget document is that the recommendation for FY 2013 is a 2.5 percent increase, and the "planning budget" for 2014 is a 0.8 percent increase. The problem with that description is, when you add up what the figures for this year, for FY 2013 and for FY 2014, total spending for K-12 declines from $12.74 billion in 2012 to $12.69 billion in FY 2013 -- and declines again to $12.6 billion in FY 2014.

So how is a recommendation to spend less an increase? Funny you should ask. When the budget was constructed last year, we (at the House Fiscal Agency) were asked to separate appropriations into two classifications, ongoing and one-time, in order to highlight that "one-time" spending wasn’t guaranteed.

There is nothing wrong with highlighting legislative intent, but that’s all it is – because all appropriations are "one-time." By law, the state budget is only good for one year, and a new budget must be passed each year. No one I know ever thought that the one-time funding for K-12 would really be one-time -- especially in an election year.

The recommendation for FY 2013 is described as a 2.5 percent increase because "ongoing" expenditures increase from $12.2 billion this year to $12.5 billion. However, what is labeled as "one-time" expenditures decline from $472.7 million this year to $150 million next year -- and there is a recommended supplemental for this year.

So when you add it up, total recommended expenditures, which are what schools are really concerned with, decline somewhat from $12.74 billion in FY 2012 to $12.69 billion in FY 2013, and in the planning budget (which is only intent and will be changed anyway) for FY 2014, spending declines again to $12.6 billion. That’s how a reduction can be characterized as a 2.5 percent increase.

It will be interesting to watch the reaction when the school lobby figures out that the recommendation for a "2.5 percent increase" in K-12 actually means a small cut in spending.

What Snyder didn't say

Also interesting from Thursday's presentation was what wasn’t discussed. There was only a passing, indirect reference to the package of bills that would raise the state's gas tax and increase registration fees by more than $1.4 billion. And there was no reference to the New International Trade Crossing (the second Detroit bridge). And there was no reference to a plan to eliminate the Personal Property Tax.

The improvement in Michigan's economy was front and center. The decline in the unemployment rate and the increase of nearly 80,000 private sector jobs last year (+79,600) is certainly good news, but net job growth was only 66,500 because the public sector continued to lose jobs (-13,100). Some will argue that fewer public sector jobs are a good thing, but the teachers and public safety personnel who are unemployed would see it quite differently.

It also will be interesting to watch the debate over the governor's fee proposals.

For three fees due to sunset, the recommendation is to eliminate or extend the sunset -- in other words, keep the fees in place. The proposal would increase or institute seven fees, and calls for revenue from more than 50 fees currently scheduled to decline to be maintained at current levels. The revenue generated by these fees is relatively minor; goes toward regulating various industries that pay them; and firms generally support them. However, the debate over some of them has been interesting in recent years.