Budget deal: $310M more for schools, $25M for films

Paul Egan and Karen Bouffard/ Detroit News Lansing Bureau

Detroit — Gov. Rick Snyder and Republican legislative leaders announced this afternoon a deal to give part of the state's surplus revenue to K-12 education, calls for fewer concessions from state employees, $25 million in film incentives and keeps open the Mound Road prison in Detroit.

A total of $310 million of the more than $428 million surplus will go to secondary schools.

The money will be split up by earmarking $150 million for districts that adopt "best practices" such as establishing a dashboard to track progress in key areas, consolidating or privatizing, and $160 million will go toward school districts' future retirement costs or to pay down retirement debt.

The deal also calls for:

--$25 million for film incentives, which Snyder had originally proposed, but was cut to $10 million in the House.

--Reducing the amount of concessions sought from state employees from $180 million to $145 million.

--$30 million in additional funding for local governments, half of which would go to cities, villages and townships in the form of incentive grants, with the other half going to county revenue sharing.

--$50 million added to the Michigan Strategic Fund for economic development, brownfield redevelopment and historic preservation.

--Putting nearly $400 million in "savings accounts," including $255 million in the state's rainy day fund.

"There are no gimmicks (and) there are no one-time funds (used to balance the budget)," Snyder said. "We were able to mitigate a number of cuts...and reserve for rainy day and (to pay down) debt."

The deal divvies up about $900 million in surplus funds, including about $428 million higher-than-expected tax revenues received by the state this fiscal year, with the remainder left over from the 2011 budget, state Budget Director John Nixon said.

Senate Minority Leader Gretchen Whitmer, D-East Lansing, said she was disappointed the money for schools will go to administrative endeavors rather than to classrooms.

"Last week we had an agreement we would use some of the surplus for per-pupil — (now) they want to attach strings for best practices, they (want to) direct it to the retirement system," Whitmer said. "I don't like being lied to."

This morning, Snyder said he will lead a state delegation to New York City to seek improvements to Michigan's bond ratings once the budget is completed for the fiscal year that starts Oct. 1.

Snyder said he thinks the budget could justify improvements in Michigan's bond ratings, which in turn could save the state huge sums in borrowing costs.

"I think it's important, being a new governor in particular, that I'm able to establish a relationship with the bond rating companies," Snyder said after speaking to the Michigan Hispanic Chamber of Commerce at the Detroit Athletic Club. He said his officials would try to set up meetings in New York between the bond rating representatives and himself, Treasurer Andy Dillon and Nixon.

Moody's and other bond rating agencies have downgraded the state's credit rating in recent years, citing "the state's depletion of financial reserves, reduced liquidity levels," and "deteriorating financial and economic outlook, as well as a reliance on non-recurring budgetary measures to offset revenue shortfalls."

Michigan has an AA- rating from Fitch Ratings and Standard & Poor's. It has an Aa2 rating from Moody's.

All three are considered "high grade" ratings, Treasury Department spokesman Terry Stanton said. For example, AA- is just two notches below the highest rating of AAA, he said.

Stanton couldn't estimate a one-notch improvement in Michigan's credit rating would save the state.

"The higher the rating, the lower interest paid, so clearly it is better to have the highest rating possible," he said.

Snyder said he's optimistic the ratings can be improved.

"I can't speak for them," he said of the bond rating agencies. "What I would say, though, is having a much more stable, thoughtful tax system is a major plus."

Snyder said he thought the bond rating agencies would look favorably on the fact "we've essentially wiped out the tax credit system," the presentation of a second-year budget for planning purposes, and the fact the state has started paying down its long-term debt such as expenses associated with retiree health care.

Even the fact the state's budget appears close to being approved months ahead of the recent norm is a plus, he said.

According to the chamber's website, Michigan is home to approximately 10,800 Hispanic-owned businesses that employ more than 14,000 workers and generate revenues of more than $3.8 billion.

"I doubt many people realize that," Snyder told the breakfast meeting. "It's something we should be proud of and actually market it more."

He said he favors encouraging more immigration to Michigan, particularly by people with advanced degrees who can help Michigan's economy.

"I don't believe Michigan should be looking at any Arizona-type (immigration) laws," he said during a question and answer session. "All you're doing is encouraging a divisive atmosphere."

The Arizona law requires immigrants to carry their registration documents at all times and requires police to question people if there's reason to suspect they might be illegal aliens. A similar bill has been introduced in the state Legislature.

A linchpin of Snyder's February budget was repealing the Michigan Business Tax and replacing it with a 6 percent corporate income tax.

The new income tax only applies to "C" corporations that issue private or public stock. Most Michigan businesses, including LLCs, partnerships and sole proprietorships, will no longer be subject to business tax once the changes become law.

The Republican-controlled Legislature recently approved the tax changes. Snyder is expected to sign the bills within days, but has yet to schedule a signing ceremony.

pegan@detnews.com

(517) 371-3660

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