By DAVID EGGERT, Associated Press
LANSING (AP) – Gov. Rick Snyder’s plan to sock away money has led to significant growth in Michigan’s savings account since he took office two years ago. To add more this year, though, he must persuade some lawmakers who think enough has already been set aside.
The Republican-led Senate is preparing to next week approve a budget without extra money in the rainy day fund, which at $505 million is the healthiest it has been in a dozen years.
Snyder is proposing to add $75 million to the rainy day account, or Budget Stabilization Fund, a byproduct of a mid-1970s recession that left the state needing ready cash for future downturns. The GOP-controlled House this week approved adding $50 million.
“We have enough in there now,” said Republican Sen. John Pappageorge of Troy. “That added little piece will not change our cash flow. It will not affect our bond rating. That’s why it’s not my first choice.”
By declining to tuck away more money, legislators could use it to pay for other priorities instead. Michigan’s tax incentives for the film industry might be preserved, for instance, and some health care-related spending could go up even if lawmakers reject Medicaid expansion and the initial savings that come with it.
After a decade of job losses and budget crises, just $2 million was in the account when Snyder took office. It had peaked at $1.3 billion in 2000 but was essentially tapped out within three years to keep budgets balanced.
Snyder says it is responsible to have a healthy reserve, something Wall Street looked at before recently upgrading the state’s credit rating. He eventually wants savings to equal 6 to 8 percent of state revenue, which would translate to $1.2 to $1.6 billion at current levels.
“We’re not trying to do that too quickly but just keep on chunking away towards that,” Snyder said in a recent interview.
The Republican governor recently staved off a proposal to use savings for emergency dredging in Great Lakes harbors hovering near historically low water levels. The Legislature agreed to find that money elsewhere.
At least one GOP legislator has suggested that hunting and fishing license fee increases could be avoided if the savings account were not fattened. Both the House and Senate approved budgets this week assuming the revenue from those fee hikes but have not yet taken up legislation to actually raise and restructure the fees.
While majority Republicans are sparring over whether to increase savings, Democrats wonder why the fund could not be drawn down by $100 million to boost state aid to public universities above the 2 percent increase planned in the next budget.
Business Leaders for Michigan, which includes executives at prominent Michigan companies, has called for annual $100 million funding increases to help reverse a roughly one-third cut to its support for higher education in the past decade.
“What this budget really represents is a dismantlement of public schools and the assurance that our college graduates will suffer from a lifetime of debt,” Sen. Morris Hood III, a Detroit Democrat, said Thursday after voting against the Senate’s university budget.
House Democrats have proposed pulling $158 million from savings as part of a plan to reinstate individuals’ tax exemptions and credits eliminated by Republicans, raise funding for education and local governments, and keep movie-making incentives intact.
House Republicans are more in line with Snyder’s thinking.
“What we have heard from rating agencies and others who like to see strong state budgets is that number, in order to be really impressive to those sorts of folks, needs to be north of a billion dollars,” said Republican Rep. Earl Poleski of Jackson. “We need to continue to build it to again generate the sort of confidence in our economy that investors need and business and, frankly, ultimately employees need to get a job.”
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