Winners and losers in budget
Schools hit; business tax cut
The $46-billion balanced budget lawmakers delivered Thursday to Gov. Rick Snyder largely reflects a vision he laid out when he took office in January: no gimmicks, a $1.7-billion tax cut for businesses, shared sacrifice and finished by May 31. It’s the shared sacrifice part that has stirred discord. Higher income taxes for pensioners, a $300-million cut in state aid to schools and a $100-million cut in aid to cities were not topics of Snyder’s election campaign or his State of the State address. They are, however, pieces of an $8.28-billion general fund and a $12.7-billion School Aid Fund that Snyder and fellow Republicans said represent a giant step toward long-term solvency. Snyder said the speed of completion and the new budget’s content create a positive business climate, even if it dinged senior citizens — who will pay more taxes — and families on welfare for more than four years — who will lose cash benefits this year. “This sends a message to our citizens, the rest of the country and to the world that Michigan is focused on results and outcomes,” Snyder said. “More important than speed is quality. And this is a high-quality budget.” Snyder said that despite some cuts in welfare programs, there are no reductions in Medicaid health benefits, which will affect 1.8 million state residents. Praised by Republicans and business groups, the final budget plan didn’t receive any Democratic votes in the House or Senate. A 2.2% actual reduction in aid to schools — $300 per pupil, though some school districts will lose more — inspired a statewide TV and radio ad attack on Snyder by the Michigan Education Association, the state’s largest teachers union. The ads urge viewers to call their legislators to protest school aid cuts. Senate Majority Leader Randy Richardville, R-Monroe, said the budget required painful decisions, but confidently predicted the public will view it as a brave effort to fix state finances. “I think the people back home are going to be happy with the performance of this group,” Richardville said. Here are budget highlights: K-12 schools The $12.6-billion School Aid Fund will give a net $300 per pupil less to public schools than in the budget year ending Sept. 30. It continues a cut of $170 per pupil that was in effect this year, but many districts will lose more as one-time federal aid dries up. Districts also would recoup, on average, part of the reduction, as the state pays from $80 to $160 per pupil for pension costs. Another $100 per pupil is available for districts that adopt four of five “best practices” criteria: create an online dashboard to show finances and test scores, bid out non-instructional services, charge employees at least 10% for health care premiums, and name the district as policyholder for employee health benefits. But 40% of school districts and charter schools won’t qualify next year for the extra money, contends the Michigan Association of School Administrators, because existing union contracts don’t comply; their local teachers unions — not the district — hold district health insurance policies. Universities and colleges For the first time, the School Aid Fund will give $200 million to public universities and $195 million to community colleges. The budget cuts total aid to universities 15%, and 4% for community colleges. The budget for universities includes a prohibition against providing benefits to unmarried domestic partners of university employees, but no financial penalty. Also, universities would be required to report to the state on stem cell research, but there also is no penalty for not doing so. Snyder’s legal adviser has said both conditions are unconstitutional. Prisons and State Police Spending on state prisons — one of the state’s largest expenditures — will decline 3.5% to $1.94 billion in 2012. The budget assumes cost savings from switching to competitive-meals and stores, and possible private management of prison facilities. The State Police budget will drop 1.6%, to $524 million. Several posts and dispatch centers will close, overtime will be cut, and the work force will shrink through retirements. Administration officials said the changes won’t reduce road patrols much. Welfare A strict 48-month limit will be placed on cash benefits, applied retroactively with few exceptions, saving $77 million.An estimated 12,600 families — 15% — will lose benefits Oct. 1; currently, a family of three with no income gets $492 a month. Working parents can earn $4,000 a year more — up to $14,000 — without having welfare benefits reduced. Disability benefits will be reduced, from $269 a month to $200. An $80 annual clothing allowance for 124,000 welfare children will be eliminated — a $10-million savings. Revenue sharing Cities, villages and townships will continue to get their portions of $659 million in constitutionally required state aid. But $300 million in discretionary money will be replaced with $200 million to be doled out to communities that comply with “best practices” such as sharing costs of services with other communities, reducing employee pension costs and requiring employees to pay at least 20% of the cost of their health insurance as their contracts expire. Economic development The Legislature agreed with most of Snyder’s proposed changes to Michigan’s economic development strategy. The 21st Century Jobs Fund will be replaced by a $50-million business attraction and strengthening fund, with an additional $50 million in 2012 to subsidize urban redevelopment and historic preservation projects. Film incentives, formerly available through the now-defunct business tax code, will be made in the form of direct grants of up to $25 million — far less than the industry says it needs to keep attracting filmmakers to Michigan. The budget also contains $25 million for the Pure Michigan advertising campaign.
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