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Budget: Schools and movies get boost; taxes fall

11:48 PM, May 23, 2012   |    comments
  • The capitol in Lansing.
  • Gov. Rick Snyder - from Detroit Free Press
  • Michigan House Speaker Jase Bolger (R-Marshall)
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LANSING, Mich. (Detroit Free Press) -- Snyder and the lawmakers, meeting to finalize the outline of the state's 2012-13 budget, decided to cut $90 million from individual income taxes, though whether that will take the form of a rate reduction or a larger personal exemption, and when it would go into effect, remained up in the air.

State House Speaker Jase Bolger, R-Marshall, the income tax proposal's biggest booster, said the agreement showed that state government can "focus on funding classrooms, paying down debt, putting money into savings and providing relief to individual taxpayers."

The tax cut proposal, first reported Sunday by the Free Press, had attracted criticism from advocates for poor people, who said the money should be targeted to low-income workers, and Democrats, who said it was a blatantly political ploy to deflect criticism of the GOP's 2011 tax cut for business.

But Snyder said Wednesday he didn't view the income tax cut as political. Rather, he said, it was one component of an overall budget agreement that makes prudent investments, is structurally sound, addresses long-term debt and doesn't rely on accounting gimmicks.

Probably the biggest surprise in the target agreements reached Wednesday was the decision to double the state's $25-million film subsidy program in 2013.

The move comes only a year after the state's nascent movie program was cut sharply - from an open-ended subsidy of up to 42% of all project costs - out of concern it was becoming unaffordable and an inefficient use of tax dollars. The cuts prompted a steep slide in TV and film activity in Michigan.

Budget Director John Nixon said in a conference call with reporters Wednesday afternoon that the extra money - which became available when state tax revenues increased more rapidly than expected - is not guaranteed over the long term.

There should be "no expectation that it goes beyond 2013," Nixon said. Many of the areas targeted for new funding - after revenue estimates were revised upward last week - were deemed one-time spending decisions, including an extra $110 million for roads and transportation.

A statement from the GOP leaders said the "additional funding will help bridge the gap (in 2012-13) until a more permanent solution can be found" for roads and transportation.

Nixon also characterized $60 million for home heating assistance for low-income households contained in the agreement as one-time funding.

Snyder and Budget Director Nixon have said repeatedly they want to avoid the roller-coaster budgeting that characterized Michigan's recent history, as the governor and Legislature spent all available revenue on ongoing programs, then had to make deep cuts when a slumping economy eroded tax revenue.

Wednesday's agreement includes a modest ($10 million) addition to $130 million already targeted in 2012-13 for the state rainy day fund. That would bring the overall fund to about $500 million, only two years after it was nearly depleted altogether.

Final decisions on a host of issues - including the income tax cut, university and prison spending and the division of additional revenue-sharing dollars for local governments - are expected to be reached in the next two weeks.

Nixon said the final product was shaping up to be "a real balanced approach," one that makes investments in education, infrastructure and public safety while enacting reforms to long-term pension and benefit plans that will save billions.

"Last year, we did a lot of right-sizing ... a lot of tough decisions," he said. "This year, relative to other states, we're much better."

By Dawson Bell, Detroit Free Press Lansing bureau

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