LANSING (AP) – Michigan Gov. Rick Snyder unveiled a $45 billion cost-cutting budget on Thursday, a day the former business executive predicted would be looked back on in the future as a “defining moment” for the state.
He also said he would take just a $1 salary in 2011 as part of “shared sacrifice.”
The first-year Republican governor proposed spending cuts for schools, universities and local governments and ending many personal tax breaks. The budget also would eliminate before- and after-school programs, cut hundreds of state jobs and ask public employees for concessions.
“Our tax system and budget system are both broken. They don’t work well. They don’t work right,” he said.
Snyder made his budget presentation to a joint session of the House and Senate Appropriations committees and the Senate Finance and the House Tax Policy committees, telling legislators the state’s citizens needed to come together to make a “shared sacrifice” for the good of the state.
The budget includes $1.2 billion in permanent spending cuts to help deal with a $1.4 billion shortfall.
The plan for the fiscal year that starts Oct. 1 also would drastically change the state’s corporate tax structure so only large “C” corporations pay business taxes. The move would give businesses a $1.8 billion tax break, larger than the $1.5 billion Snyder originally estimated the switch would cost.
“I hope we all look back and say: `This was a defining moment,”’ the governor said.
Senate Majority Leader Randy Richardville, who had been briefed on some details of the proposed overhaul, said Thursday that Snyder’s plan would be thoroughly reviewed. He said he and other Senate Republicans wanted to look at the big picture before discussing whether specific proposals should stick.
“We’ve asked the governor to put everything on the table,” said Richardville, of Monroe. “Now we’re looking at exactly what he puts on the table. Whether we go with the individual details or not, the discussion has started.”
Snyder’s proposal adds $1.7 billion to revenues by eliminating tax breaks for seniors and low-income workers and getting rid of many other income tax deductions, such as one for donating to public universities. Personal deductions would be phased out for individuals making at least $75,000 or couples making at least $150,000.
Michigan currently has the nation’s most generous tax credits for seniors, and Snyder’s proposal calls for eliminating the exemption on their pensions. That perk costs the state nearly $900 million a year. Snyder’s plan wouldn’t tax Social Security payments.
Michigan Senate Democratic Leader Gretchen Whitmer, noting proposed cuts to schools and changes to pension exceptions, said Thursday morning that the budget appears to put a big burden on kids and seniors to help fund business tax cuts. Whitmer, who was awaiting a briefing on the plan, said she hopes it includes enough detail so lawmakers can make educated decisions.
“This governor has talked about shared sacrifice,” said Whitmer, of East Lansing. “At first blush, this looks like we’re picking traditional winners and losers.”
Under Snyder’s plan, some business tax credits would also be reduced or eliminated. For example, Snyder would cap the amount of tax credits for companies that make movies in Michigan at $25 million. There currently is no limit.
Snyder would halt a scheduled decrease in the state income tax rate to keep the state from digging itself into a bigger hole. He would allow it to drop from 4.35 percent to 4.25 percent on Oct. 1, but would change the law that requires the rate dropping to 3.9 percent in future years. The scheduled decrease ultimately would have cost the state $700 million annually.
He proposes cutting public schools by 4 percent, or about $470 per student. School districts have barely kept up with inflation in the past eight years and were counting on getting more money because of an anticipated surplus in the school aid fund.
The state’s public universities would get 15 percent less, but $83 million would be set aside to be shared with universities that kept tuition increases around 7 percent or less, according to state budget director John Nixon. Community colleges would get the same $296 million they’re getting now.
It’s forcing universities to be efficient,” Nixon said.
In all, $12.2 billion would go to funding public schools, while $1.4 billion would be set aside for universities.
State employees are going to be asked for $180 million in cuts, which would have to be negotiated with unions. Nixon said he expects unions will agree to increase the share of health care premiums workers pay and make other changes rather than cutting wages.
Local governments also would see their state payments decreased. Most depend on the state for much of their funding other than what they can raise in property taxes. Local governments have complained for years that revenue-sharing cuts have left them increasingly unable to provide basic services, such as police and fire protection.
Nixon said the budget assumes the closing of one state prison later this year, although no decision has been made yet on which one should go.
The plan also would eliminate some state jobs, including 300 field worker positions in the Department of Human Services, six trial court judgeships and an undetermined number of state police posts. It would privatize some state jobs, such as those of the cooks and store clerks at prisons.
The Republican-controlled Legislature will take up the proposal. Snyder plans to give lawmakers just two combined bills, rather than separate ones for each department. That could make it harder for lawmakers and special interest groups to pick apart the governor’s proposals.
Snyder has asked lawmakers to approve the budget by May 31.
– View a copy of the budget – (.pdf format)
Copyright 2011 by The Associated Press. All Rights Reserved.