Gov. Rick Snyder will announce on Wednesday an increase in the minimum per-pupil allowance for K-12 schools of more than $233 — the largest hike since 2007, state budget officials said Thursday.
Snyder will also call for $325 million in general fund money to go into badly needed state road repairs — $175 million more than is called for in 2019 under the road funding deal the Legislature approved in 2015.
While K-12 schools and roads and infrastructure are targeted for significant hikes in funding, newly named Budget Director John Walsh warned the 2019 budget is tight and most areas — including community colleges and higher education — should not expect significant increases.
And tax cut legislation working its way though the Republican-controlled Legislature could alter Snyder's spending plans, Walsh said. Negotiations with key lawmakers continue, he said.
"We just have to be careful," said Walsh, who took office on Tuesday. "The budget is thin. It's not a big, fat growth budget. It's going to be followed by even tighter budgets in the next couple of years at least."
Despite nine years of economic growth, the state is facing tight budgets because of corporate tax cuts and tax credits, a road funding deal that will take $600 million a year from the general fund by 2021, and a sweetened homestead property tax credit, among other measures.
Walsh, along with outgoing Budget Director Al Pscholka, spoke exclusively with the Free Press on Thursday about Snyder's 2018-19 budget.
They said Snyder will mention his promised "Marshall Plan for Talent," intended to better connect students with in-demand careers, but Snyder won't fully roll out that plan until later in February.
"The emphasis on education, infrastructure and talent is really where we need to be," said Pscholka, a former state representative who is leaving after a little more than one year as budget director, citing family and personal reasons.
Snyder has proposed a mostly revenue-neutral increase in Michigan's personal exemption for state income taxes, from $4,000 today to $4,500 in 2021. That proposal is intended to offset what the administration says would be unintended state income-tax hikes for Michigan residents as a result of the recently approved federal tax reform package.
The House and Senate want to go further and are debating proposals to hike the personal exemption to as high as $5,000 and to add a $100 tax credit for residents 62 or older, at an annual cost of $200 million, or a dependent care credit, estimated to cost $81 million.
The Legislature is also close to finalizing legislation that would accelerate the refund of driver-responsibility fees owed by close to 350,000 Michigan motorists and cost the state about $98 million more than planned in 2018 and 2019 combined.
"On Wednesday, we're going to assume that it's (Snyder's) tax recommendation that's in place," said Walsh, who until recently served as Snyder's director of strategy and was a state lawmaker before that.
"Our recommendations will reflect a confidence of that revenue, but with a full understanding ... it will be a dynamic conversation on both revenue and spending."
In his State of the State address on Jan. 23, Snyder said K-12 students can expect the largest increase in the basic per-pupil foundation grant in 15 years.
Budget officials clarified that promise Thursday, saying the increase in the minimum foundation grant will be larger than the $233-per-pupil increase in 2006-07, which was 12 budget years ago, but not as large as the $500-per-pupil increase in 2001-02, which was 17 budget years ago.
The current minimum is $7,630 per pupil and the current maximum is $8,289. Officials said it's the school districts at the minimum — which is more than 60% of all districts —that will see an increase of more than $233 per student.
Don Wotruba, executive director of the Michigan Association of School Boards, said educators have heard the increase might be in the area of $240 per pupil. The foundation grant is only one element of K-12 funding, but it's critically important and the promised increase is "good news."
A $240 increase is only a little more than 3%, but no increase has topped $175 since 2007, state records show.
In his budget presentation last year, Snyder, for the first time, allocated an extra $50 per student for high schools. State Budget Office spokesman Kurt Weiss said a sweetener for high schools is likely to be a feature of this year's budget also — another measure Wotruba supports.
"We've known for a long time that it costs more to have a chemistry lab or a physics facility," Wotruba said. Adjusting the foundation grant upward for high schools "does reflect the actual costs the districts are facing."
On roads, "it's what people are still talking about," Walsh said. "If I'm in the grocery store, nobody is coming up and saying, 'Give me a break on my taxes.' The first words out of their mouths is 'When are we going to fix the roads?' "
The state can't make all the tax cuts the Legislature is discussing and still put an extra $175 million into road fixes, he said.
"That's what part of the negotiations will be," he said. "Like any prior budget, we'll negotiate our way through the committee process .. and keep the public up-to-date as we move along."
Higher education won't see a big bump in the 2019 budget, but it's an area that needs attention in future budgets, Walsh said.
"It's a critical discussion for the state to continue to have" because, at some point, the cost of higher education will exceed the ability for most students to attend, he said.
Both Walsh and Pscholka praised the staff in the State Budget Office, many of whom they said will be working all weekend on the budget.
"It's kind of like our Super Bowl," said Pscholka, and it's possible that when the actual game is on, "we could all be together here on Sunday."
Contact Paul Egan: 517-372-8660 or email@example.com. Follow him on Twitter @paulegan4.