Gov. Rick Snyder's proposed budget would cut spending for public schools, universities and local governments while ending many personal tax exemptions, the governor told The Associated Press on Wednesday, a day before he was to present the proposal to lawmakers.
The $47 billion proposal includes $1.2 billion in permanent spending cuts to help deal with a $1.4 billion shortfall in the budget year that starts Oct. 1.
It adds $1.7 billion to revenues by eliminating tax breaks for low-income workers, phasing out most senior tax breaks 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.
"This is approaching it as a total solution," Snyder said. "We're getting rid of all the special-interest kind of items."
Under his plan, public schools would see a 4 percent cut, or about $470 per student. Intermediate school districts would be cut 5 percent.
The state's 15 public universities would get 15 percent less, but $83 million would being 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.
Spending on universities and community colleges would be switched from the state's general fund to the school aid fund. School districts have criticized the move, saying it would draw money away from public schools just as the school aid fund begins to again build a surplus that could allow per-pupil payments to rise. 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. 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 would see their state payments cut. Most depend on the state for much of their funding because they can't raise their tax rates. 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.
Some revenue sharing is required under the Michigan Constitution, and that actually would increase 4 percent under Snyder's plan to $659 million. But more than 500 governments also split $300 million annually in statutory revenue sharing payments, and they would get nothing under Snyder's plan. Snyder would put aside $200 million for a new incentive-based program that would reward cities, villages and townships that agree to share services or change their pension plans from defined benefit plans to defined contribution ones.
The Republican governor wants to cut business taxes by $1.8 billion by switching from the unpopular Michigan Business Tax to a new 6 percent tax on corporate income that would affect only large corporations. That cut is larger than the $1.5 billion he originally said the switch would cost.
Snyder's budget maintains Medicaid payments for health care providers. It gets rid of a 6 percent tax on health maintenance organizations that doesn't meet federal guidelines and replaces it with a 1 percent tax on all health claims.
Nixon said the governor would like to close a state prison, although no decision has been made yet on which one should go. The budget recommends closing the Shawono Center in Grayling and reducing the capacity at the Maxey Training School in Whitmore Lake, two detention and treatment centers for young men.
The plan also calls for eliminating 300 field worker positions in the Department of Human Services, before- and after-school program and reducing the hourly rates paid to unlicensed aids and relatives in the child day care program.
The plan still must be approved by the Republican-controlled Legislature. 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.
One of Snyder's bills would include all education funding; the other would include everything else.
Details of Michigan Gov. Rick Snyder's $47 billion budget proposal, which he 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.