On Tuesday afternoon, approximately 18 Michigan residents met in at the District Library in Dexter, Mich. for a budget town hall with state Rep. Donna Lasinski, D-Dexter. She was joined by two panelists, state Budget Director Chris Kolb and state Rep. John Cherry, D-Flushing. During the meeting they discussed the state budget process, upcoming proposals and the community’s priorities.
Lasinski began by giving a brief overview about the state’s budget process. She began by explaining that Michigan operates under a balanced budget, meaning in any given year the state cannot spend more money than it receives.
She pointed out that the “The Michigan Tax System and Budget Chart” of the 2018-2019 budget given to attendees was a good visual explanation of the past sources of taxes and revenue, the major state funds and the appropriations by area. She then gave a brief overview of the process of deciding the annual budget process.
Lasinski said the process of deciding on the state budget beings in January with the first revenue estimating conference. During this conference, the House and Senate Fiscal Agencies and the Department of Treasury come together and agree on how much they believe should be the revenue for the upcoming year. The governor then issues her first recommendation by early February. This can take two to three weeks longer when there is a new governor — like this year — because they have been sworn in just a few weeks prior.
“It then kicks over to the House and Senate, where there is an Appropriations Committee and subcommittees for all the budget areas, and they start creating their budgets,” Lasinski said. “After that, we start to review those budgets and then, right about now, we take our first action. The bills start to get reviewed by the Appropriations Committee, then brought to the House floor and then voted off of the House floor. And this week Friday, there is going to be the second revenue estimating conference.”
Lasinski then mentioned the state’s fiscal year runs from October to October (Oct 1-Sept. 30). The second revenue estimating conference will be held this week for forecasted revenues and estimating and how the budget should be adjusted. The official budget targets will then be set and the governor will review and sign by mid-June. This is done in order to give schools more information to plan their budgets which begin July 1.
Kolb then began his explanation of the budget recommendation for the fiscal year of 2020-2021 with a presentation. Kolb prefaced by saying the new governor has big priorities. He explained the general fund revenue is $10.7 billion with a total budget of $60.2 billion.
“Sounds like a lot of money until you really start finding out what you have in your budget,” Kolb said. “The largest portion is the federal fund which is mostly Medicaid, special education and others. The second is the school aid fund … then restricted funds and then the $10.7 billion is the general fund.”
Kolb summarized the 10-year goals of the new budget. By 2029, the government wants to have 90 percent of state roads in good and fair condition, know that everyone in the state of Michigan has safe clean drinking water, make sure that at least 60 percent of residents have some sort of post-secondary educational attainment and make sure Michigan is a top-10 state in literacy.
Michigan’s roads, as Kolb pointed out, are some of the worst in the nation after 40 years of disinvestment. Michigan is ranked 46th out of all 50 states in per capita spending on roads.
“There will be a point in time in the future, if we don’t do anything, that we will not be able to afford to repair our roads,” Kolb said. “Every day that we don’t do anything about it, it gets more expensive.”
It is estimated that annual cost to fix our roads will be between $2.2 to $2.7 billion. To fund this, a 45-cent fuel tax will be applied in phases beginning with a 15-cent increase on Oct. 1, 2019, another 15 cents increase on April 1, 2020, and then another 15 cents increase on Oct. 1, 2020. When fully implemented, this will raise $2.5 billion in annual revenue.
“The plan is both transparent and accountable,” Kolb said. “Local road agencies will have to come up with a five-year asset management plan, and it will all be online so you can track the progress towards our goals.”
Kolb acknowledged residents might be upset over this fuel tax, which is why the government proposes on doubling the Earned Income Tax Credit as a tax offset from low-income working families from 6 to 12 percent. A repeal the retirement tax on seniors by retracting the expanded taxation of pension benefits is also being proposed.
“Another critical issue is education,” Kolb said. “We’re last in proficiency of fourth grade readers in the country and only 44 percent of adults have completed some form of secondary education. This budget proposal, if enacted, would be the largest increase for school operations in a generation of students.”
The proposed budget also includes a weighted funding system that will recognize the higher costs of educating special education students, aid students who are economically disadvantaged and career and technical education for career readiness. It will also triple the budget of the number of state-funded literacy coaches by increasing this budget from $30.9 million to $55.4 million. They also propose to expand the Great Start Readiness Program by increasing the budget form $245 million to $329 million.
For health and safety, there is a proposed $4 million investment in Double Up Food Bucks program. There is also a projected $120 million drinking water proposal that will increase funding for lead and copper rule implementation and create contaminate identification, treatment and clean up.
“The budget is structurally balanced,” Kolb said. “We use ongoing resources to pay for ongoing costs.”
Cherry then explained how the House pulls together their response. While the governor is a Democrat, the House is controlled by a Republican majority. Thus, the proposals that come out of the House and the Senate are going to reflect a Republican proposal.
“Typically, what happens is the governor proposes the budget,” Cherry said. “Then the house committee members will typically go through and look in detail at the areas of their subcommittees.”
Both the House and the Senate have appropriations committees that review appropriations subcommittees’ recommendations and considers proposed amendments. There are then target meetings which allow House leaders, Senate leaders and administration officials to negotiate an overall framework for the final version of the budget that will be enacted into law — the stage the House is currently in.
“What we are seeing right now as we are going through the budget process is that the positioning of the Republicans to create a counter proposal on roads in the House,” Cherry said.
The next step will be for the appropriation bills to be assigned to a conference committee. Once a conference committee adopts a conference report, the report is presented to both the House and the Senate and cannot be changed — it can either be accepted or denied by each chamber. Once it is signed by both houses, it is presented to the governor who has 14 days to approve or veto the bill. The process is scheduled to be completed by June.