Michigan Gov.'s Plan to Increase Savings Draws Mixed Reaction

Michigan Gov. Rick Snyder’s $50.9 billion budget proposal this week included stocking away more savings while spending more on education, roads and heath care.
by | February 8, 2013

Michigan Gov. Rick Snyder’s $50.9 billion budget proposal this week included stashing away more savings while spending more on education, roads and heath care. But his proposal to increase the state’s rainy day fund has some lawmakers pushing back after years of cuts.

"This is a responsible budget," Snyder, a first-term Republican, said according to a report from Michigan Live. "This is a budget that looks to the long-term and learns from our past mistakes."

Snyder’s budget would set aside $75 million more for the state’s rainy day fund, putting the total at $580 million. The move, which was expected, has drawn praise from some groups while elected officials have complained that money could be spent on their various interests.

Conservatives say money added to the reserve fund, known as the Budget Stabalization Fund, is money that could be used instead to reduce taxes.

"If you have $500 million sitting there in a bank account, why are you asking citizens to pay more taxes?" Scott Hagerstrom, state director of the Michigan chapter of Americans for Prosperity, said earlier this week according to the Detroit Free Press.

Meanwhile liberals say the money could be used to help those in Michigan who are still struggling from the effects of the recession.

"For lots of families, it is raining right now," said Gilda Jacobs, president and CEO of the Michigan League for Public Policy, told the Free Press.

But business groups lauded the savings plan. Business Leaders for Michigan, the state’s business roundtable, said adding to the reserve fund was critical to a full economic recovery and an essential part of the Michigan Turnaround Plan.

“We applaud the Governor for continuing his commitment to getting Michigan’s fiscal house in order and addressing the long-standing debt obligations that have beleaguered our state,” Doug Rothwell, president and CEO, said in a statement.

Created in 1977, the fund peaked at nearly $1.3 billion in 2000 and fell to zero in 2003. It held a balance of $2 million through most of the previous administration.

Other highlights:

Public education

Snyder is proposing a 2 percent funding increase for K-12 schools, community colleges and universities. But the state’s Democrats are still irked over funding cuts over recent years and are expected to ask for more. In addition, Steve Cook, Michigan Education Association president, says his group is “concerned that adequate funding for a quality education isn't reaching past pre-K for too many of our children. The governor and his allies in the Legislature slashed K-12 funding by $1 billion while giving CEOs over $2 billion in tax breaks. We urge our state's leaders to restore every penny taken away from our local schools, so that every child has the opportunity to succeed from preschool through college."

Transportation

The administration is proposing a fuel tax increase to 33 cents per gallon to pay for much needed road repairs. The tax hike, however, represents a 74 percent increase in the 19-cent gas tax and a more than doubling of the state’s 15-cent diesel tax. In addition to proposed vehicle registration fee increases, Snyder estimates the cost would be about $120 more per vehicle per year.

Medicaid

Snyder wants to expand under the Affordable Care Act, eventually adding roughly 470,000 Michigan residents to the program. Although the federal government will pick up the tab for the first three years, that support will decline in the out years, a fact which has some lawmakers worried about the future cost to the state.

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