A few days after Republican Gov. Rick Snyder’s State of the State address, the Snyder administration has turned its attention to the budget.
Last week, the House Fiscal Agency projected a $454.4 million deficit in the state’s general budget due to an unexpectedly high number of businesses cashing in previously allocated tax credits. A later estimate released by the state’s Budget Director John Roberts reported the projected deficit was $325 million for the state’s general fund for 2015.
Along with a smaller projected shortfall in this fiscal year’s budget, net general fund revenues are now projected to be $532 million short of what officials expected for the 2016 fiscal year.
In an interview with The Michigan Daily, Thursday, Rep. Adam Zemke (D–Ann Arbor) said the implications of the deficit aren’t clear yet, but the state has to be cautious in using the general fund due to its flexibility.
“It’s something that we can shift money around,” he said. “It’s unclear for sure what is going to happen at this point.”
However, Zemke, the vice chairman of the House Education committee, said some legislators are pushing to ensure higher education funding will not see a large loss and will be maintained at adequate levels.
Dr. Michael Boulus, executive director of the Presidents Council, State Universities of Michigan, expressed similar sentiments in an interview Thursday.
Boulus said it’s difficult to know where Snyder will make cuts because details haven’t been announced yet. However, Boulus added that while the deficit could have an impact on higher education funding, he’s hopeful it will not.
John Austin, president of the State Board of Education, said he thinks the budget deficit will make it difficult for the state to get back on a favorable track for education funding.
In 2011, the Snyder administration cut higher education funding by 15 percent. After the initial cut in higher education funding, the Snyder administration has increased higher education funding by 3.1 percent in 2012, 2.2 percent in 2013 and 6.1 percent in 2014.
Education also saw several incremental decreases in funding during the previous administration under former Democratic Gov. Jennifer Granholm.
Austin said at one point, 4.1 percent of the state’s income went to education, including higher education. However, he emphasized that the 4.1 percent has now dropped to 3.4 percent.
The state of Michigan recently ranked one of the worst in the country in terms of higher education funding.
Though Snyder’s recent budgets have started to reverse the trend, Austin said plans to increase investment might be complicated by the deficit.
“With the budget situation and little temperature from the governor or legislature to raise new money, raise taxes in some way to put it into higher education and financial aid, it’s very tough to keep making positive headway,” Austin said.
Don Grimes, a senior research associate at the Institute for Research on Labor, Employment and the Economy, said the deficit means the University will probably receive less money next year.
For the 2015 fiscal year, 71.2 percent of the University’s budget comes from tuition and fees, according to the University’s Funding Snapshot. The state of Michigan currently contributes 16.4 percent of the University’s budget.
“Higher education has traditionally been one of the budget items that the state government, under both Republicans and Democrats, have used the most to balance shortfalls,” Grimes said. “In other words, they cut higher education traditionally when (we) think we’re out of money. It tends to be one of those flexible budget items that they address.”
Grimes added that universities have other means of generating revenue to perform university operations, which is a reason why higher education funding is often cut.
“Traditionally, the assumption is that the universities can get the money from other sources if they lose it,” Grimes said. “Essentially they can either take it out of their endowments, they can raise tuition or they could make budget cuts.”
Austin said the state government had several other options to support higher education despite the projected deficit, including rearranging the budget to invest more in student financial aid, raising taxes or reforming the tax code. He pointed to cutting corporate and business taxes and the lowering of the flat income tax from 7 percent to about 4 percent as other possible reasons for the state’s decrease in higher education funding.
Austin added that if the state of Michigan kept the same tax rate implemented under former Republican Gov. John Engler, higher education funding wouldn’t be a major issue.
“We would have eight billion dollars more to spend on education, higher education and roads — eight billion dollars — if we just had the same tax rates that we had 12 years ago,” he said.
Austin said a common perception is that universities receive the blame for raising tuition, but people should also recognize the impact of state funding declines.
“The rise in tuitions are not the universities’ fault at all,” he said. “They’ve had no choice but to raise tuitions to pay for the cost of educating (students) because the state has basically defunded universities.”
Snyder will propose plans to address the budget deficit when he releases his executive budget summary Feb. 11.