Governor Rick Snyder’s budget proposal calls for eliminating millions of dollars in business and personal tax breaks; big cuts to schools, universities, and local governments. The governor says it is bitter medicine necessary to cure the state’s budget troubles, and set the foundation for an economic recovery.
Governor Snyder says everyone will have to sacrifice to fix massive fiscal problems that have built up over decades under Republican and Democratic administrations. That includes growing pension and healthcare liabilities that the state will start to pay down.
“We are going to take responsibility for a legacy of debt that has built up over decades.”
To pay for that, balance the budget, and cut taxes for businesses, Snyder wants to shut down state police posts and at least one prison; start taxing pensions; cut money for schools, universities, and local governments; and ask public employees to pay more for their benefits.
Critics already say the budget will force more school districts and local governments into insolvency and families into poverty. The governor, who is a millionaire, says he will share in the sacrifice by working for a dollar a year.
Budget Director John Nixon says the administration’s proposal will end the state’s string of budget crises and will send a message that Michigan is managing its finances.
“A lot of people are going to be upset with this budget. We understand that. But it’s the right budget. It’s a responsible budget that takes into account the needs of our citizens and taxpayers’ ability to pay.”
About two dozen state employees protested in Lansing today as Governor Rick Snyder presented his budget plan to state lawmakers. They complained about plans to roll back public employee benefits and tax pensions. Tammy Warner works in the state Department of Human Services.
“The state is cutting all kinds of services not just to the poor – they’re actually decimating the middle class. They’re also decimating the state workers and they are making it impossible for us to live in this state.”
Public employees say they’ve already made concessions and accepted unpaid furlough days to help the state through earlier budget crises. Advocates for low-income families say ending state the earned income tax credit for the working poor will result in more children living in poverty. School and city officials say cuts will force more local governments into insolvency.
Democratic leaders in the Michigan legislature are reacting to Governor Snyder's budget proposal.
Senate Democratic Leader Gretchen Whitmer called the Governor's budget "the same old politics of putting corporate tax breaks ahead of the people. From Whitmer's statement:
"Governor Snyder's idea of shared sacrifice seems to mean that working families will do most of the sacrificing while companies continue to reap the rewards," said Whitmer. "He is balancing this budget on the backs of our kids, working families, and our seniors. Contrary to his rhetoric about 'moving all of Michigan forward,' this budget picks out who he's willing to leave behind."
Update 12:43 p.m.
Governor Snyder has placed his budget recommendations to the Michigan legislature online.
Update 12:11 p.m.
"The day of kicking the can down the road is ending," declared Governor Snyder in calling for tax and budget changes that he says should have happened twenty or thirty years ago.
Snyder says he used the principle of fairness in arriving at some changes, for example, an end to the Michigan Business Tax, the tax on unincorporated companies in the state. Snyder says the tax is unfair because it's a form of double taxation, since the business owner already pays personal income tax.
And he says individual pension income should be taxed. Snyder says it's not fair to tax the income of senior citizens who are still working, and not tax retired senior citizens living on pension income.
Snyder wants to eliminate many individual tax credits, such as the deduction for donations to public universities. But he would keep the deduction for personal property tax, although he says the property tax system will need to be overhauled at a later time.
Snyder says his budget keep the safety net for Michigan's poorest citizens intact.
Update 11:23 a.m.
Governor Snyder says he will share in the sacrifices he's calling for in the state budget by working for one dollar a year. The governor is presenting a budget that includes big cuts to schools, local governments, and public universities -- as well as eliminating many personal and business tax breaks. The governor's budget proposal also calls for an overall one-point-eight (b) billion dollar cut on businesses. - Rick Pluta
Update 10:48 a.m.
Michigan Government Television will carry Governor Snyder's presentation of his budget proposal live at 11 a.m.
These details of Michigan Gov. Rick Snyder's $45 billion budget proposal were outlined to The Associated Press on Wednesday.
- Drops the individual income tax rate from 4.35 percent to 4.25 percent on Oct. 1; the tax will then remain at 4.25 percent rather than being decreased to 3.9 percent in future years as scheduled.
- Eliminates the state income tax exemption for pensions, but Social Security benefits will continue to be exempt.
- Eliminates the Michigan Business Tax and replaces it with a flat 6 percent corporate income tax on major corporations.
- Eliminates business credits awarded for films, brownfield redevelopment, the Michigan Economic Growth Authority, etc., although current commitments will be honored. Sets aside $25 million for film credits from the 21st Century Jobs Fund.
- Rolls funding for universities and community colleges from the general fund to the school aid fund, the main funding source for K-12 schools.
- Cuts per pupil funds $300, in addition to the currently budged $170 per pupil reduction.
- Eliminates statutory revenue sharing payments for cities, villages and townships in FY 2012, leading to a net savings of $92.1 million. The change impacts 509 local units of government. Increases constitutional revenue sharing by 4 percent, to $659 million.
- Includes $200 million for a new incentive-based revenue sharing program for cities, villages and townships that meet specific standards to be detailed in March.
- Sets a lifetime limit of 48 months for residents to receive welfare payments, with exemptions for incapacity and hardship.
- Closes the Shawono Center in Grayling, and cuts 20 beds in capacity at the Maxey Training School in Whitmore Lake, resulting in $787,000 general fund savings.
- Eliminates 300 field worker positions in the Department of Human Services.
- Closes one prison to be named later this year.
- Reduces the number of Michigan State Police posts, saving $3.2 million.
- Reduces state aid to libraries in the Department of Education budget by $2.3 million in the general fund, with $950,000 directed to the Michigan eLibrary, resulting in net savings of $1.4 million.
- Suggests privatizing food service and prison stores operations in Michigan prisons, and suggests that resident care aide services at the Grand Rapids Veterans' Home be competitively bid.
-Turns the dairy farm inspection program over to industry field representatives certified by the Department of Agriculture.