January and February may be frigid in Michigan, but those months are the ones when the Legislature is beginning to heat up for the year.
At the January 10 Revenue Estimating Conference, an unexpected revenue surplus was identified, causing policy makers to dust off their wish lists. In response to the news, the Republican Senate Finance Committee members quickly reported out a bill to reduce the overall income tax rate from its present 4.25 percent to 3.9 percent between by January 1, 2017.
With this as a backdrop, Governor Snyder presented his proposed FY15 and FY16 Executive Budget Recommendation on February 5. Including all state and federal revenue sources, it proposes over $52 billion in gross spending, nearly 75 percent of which is dedicated to education and health and human services. Nearly $22 billion are state revenues. The entire budget is about 2 percentage points larger than the current total appropriated FY14 budget.
His proposed budget includes funding increases throughout education, for transportation, health care initiatives and local government. He also called for property tax relief directed at middle and lower income persons rather than a tax cut for everyone.
The Governor proposed a 3 percent increase for community colleges, a 6.1 percent increase for higher education and a 3 percent increase to K-12 schools ($111 per student for lower-spending districts, sliding down to $83 for districts at the top of the scale) with another $7.3 million to assist financially distressed school districts. Increases for higher education are contingent on restricting tuition increases to no more than 3.2 percent. There also would be $10 million in emergency reserve funds for school districts at risk of closure during a school year and for districts that may have to enroll students from a dissolved district.
Of interest to all public employees is that the Governor responsibly proposes a $270 million increase to fund liabilities in the Michigan Public School Employees Retirement System. Information about the Annual Required Contribution for state employee retirees’ pension fund and the advance funding for state employee retiree health care benefits were not immediately available.
In health care, the budget contains $71.7 million to implement expanded Medicaid coverage under Obamacare and a $15.7 million increase to expand the Healthy Kids Dental program to 100,000 children in Kalamazoo and Macomb counties. There is an extra $15.6 million to support the initiatives proposed in the recent Mental Health Commission report. There is $5 million to expand home-delivered meals for seniors and to expand other in-home services. An additional $500,000 will expand anti-bullying and hate crime prevention initiatives.
On transportation, Mr. Snyder set aside an extra $256 million for roads, although about half of that will go toward the state making its federal match. He did not reiterate his continuing request for a permanent funding fix for road and bridge improvements through an increase in the vehicle registration fee and revising the sales tax on gasoline. There is $2.5 million for the development of a trail system from Belle Isle to Wisconsin.
For local governments, Mr. Snyder proposed a $36 million (15 percent) increase for discretionary revenue sharing. Constitutional revenue sharing will see a 3 percent increase while counties will receive $65.4 million, which the Governor claims puts the counties at 100 percent “full funding.”
On public safety, the Governor proposed $17.8 million for a trooper recruit school to train 100 new State Police troopers and 31 motor carrier officers and $25.3 million to update equipment in the Michigan Public Safety Communications System. He proposed to spend $5.2 million on a new helicopter. The proposed budget designates $3.5 million to hire and train 25 additional National Resources conservation officers, bringing the total number to 227, up from 186 in 2010.
The Budget Stabilization Fund would see an additional $120 million, bringing the total balance to $700 million. There also would be a new Michigan Health Savings Fund that would see a $122 million deposit. The budget also includes the Governor's proposal to put $17.5 million in tobacco settlement revenue over the next 20 years to assist in the Detroit bankruptcy settlement.
Democrats criticized the budget proposal as an election-year gimmick. It still leaves schools and local governments far short of what they need to recover from cuts imposed in the Governor's first budget and tax overhaul they said. The first budget and tax overhaul financed a $1.8 billion tax cut for businesses in Michigan while taxing some retirees, eliminating most tax credits, and cutting education funding.
Homestead Property Tax Credit Changes Proposed
The Governor’s tax relief plan puts $102.7 million toward expanding the Homestead Property Tax Credit that was restructured as part of the 2011 tax overhaul. The Governor’s proposal would affect 1.3 million taxpayers with 33 percent of the tax relief going to seniors.
Currently, the HPTC is available to homeowners and renters with incomes up to $50,000. Before the 2011 tax changes, the HPTC was available to homeowners and renters with incomes up to $82,650 a year. The proposed hike in the income limit to $60,000 will expand eligibility to between 200,000 to 250,000 people it is estimated.
The HPTC is calculated by subtracting 3.5 percent of the taxpayer’s income from the amount of property taxes on the taxpayer’s home and multiplying that result by 60 percent. An enhanced credit is available for low-income seniors and those with disabilities. Renters calculate their credit using 20 percent of rent.
Beginning with tax year 2013, the Governor proposes to change the HPTC income percentage from 3.5 percent to 3 percent, allowing a greater percentage of property taxes to be refunded.
Taxpayers who qualify for and claim the existing credit will be issued a supplemental refund check in the summer of 2014 for the 2013 tax year without filing anything. The average refund is estimated to be between $70 and $80. Newly eligible taxpayers will need to file a HPTC form in order to receive a refund. In future years, eligible taxpayers will simply claim the credit by filing a Homestead Property Tax Credit return.
Grand Rapids State Senator Dave Hildenbrand introduced SB 752 that is similar to the Governor's proposal but allows the HPTC for households that earn up to $70,000. Modification of the HPTC will need legislative approval before it becomes law and is implemented.
Democrats had urged the Governor to use the surplus to increase education funding, eliminate the pension tax, and restore the Earned Income Tax Credit, which prior to the 2011 tax changes was equal to 20 percent of a filer's federal EITC but is now 6 percent. The Governor explained that a federal government report found that 21 percent to 25 percent of EITC payments at the federal level were improper so he didn’t want to use it as a basis for tax relief. As to rolling back the income tax rate, Governor Snyder said reducing the rate would mostly benefit higher-wage taxpayers. More than half the benefits of a general tax rate decrease would go to those making more than $100,000, he said. His plan concentrates relief to those making $60,000 or less.
Two New Ballot Proposals
At its February 6 meeting, the Board of State Canvassers approved as to form two more petitions for circulation to gather voter signatures.
322,609 valid voter signatures are required by July 7 to put the proposals on the ballot in November. They join four other petitions now approved for circulation:
Sponsors of a petition drive to increase Michigan’s minimum wage recently submitted proposed petition language to the Bureau of State Canvassers for approval. Raise Michigan needs 258,088 signatures of registered voters by May 28. The proposed initiated law would raise the wage to $7.90 an hour in January 2015, $8.40 in July 2015 and $9.50 in January 2016. There would be subsequent annual cost-of-living adjustments. The proposal would include tipped workers, who currently have a minimum wage of $2.65 an hour, and raise their minimum wage by 85 cents annually until they reach the full minimum wage. Raise Michigan says it has $1 million in hand to support the petition drive. A similar petition drive to increase the minimum wage was last attempted in 2006. Because it is very popular, the Legislature quickly passed an increase in the minimum wage to avoid a ballot issue. See www.raisemichigan.com for more information.
Pension Tax and HPTC Bills — There are a dozen or so bills proposing to repeal or modify the pension tax or Homestead Property Tax Credit. They are HB 4130, 4301, 4564, 4565, 4827, 5219, 5244, 5249, 5256 and SB 145, 280, and 752. See Michigan Votes at www.michiganvotes.org to look them up.
Okrie v State of Michigan Lawsuit — The Court of Claims is now within the Court of Appeals and is slowly adjusting to the sudden new assignment of jurisdiction. The Okrie case has been assigned to Judge Deborah Servitto, an experienced trial judge on the Court of Appeals. In 1986, Judge Servitto was elected to the 37th District Court. Governor James J. Blanchard appointed Judge Servitto to the Macomb Circuit Court in 1990, and she subsequently was elected three times to that court. Governor Jennifer M. Granholm appointed Judge Servitto to the Court of Appeals effective March 23, 2006. Her term expires January 1, 2019.
Gary Supanich, Tome Okrie’s attorney, has a Web page dedicated to the developments in the case, which he updates frequently.
Landline phone bill — SB 636 which would give traditional telephone companies a way to move customers off copper-wire landlines to internet-based service after January 1, 2017 without getting prior approval from the Michigan Public Service Commission has been approved by the full Senate and House Committee on Energy and Technology. It sits on the House floor ready for floor action. If you are concerned about this bill because you have a phone-monitored pacemaker, an implantable cardiac defibrillator, a medical alert device, or a home security service dependent on copper wire landline, call your Michigan House member immediately. You can locate your Representative and the contact information at www.house.mi.gov/mhrpublic. SERA opposes the bill as written.
SERA Recent News — If you are a SERA member, you are eligible to receive SERA Recent News, a periodic e-mail about breaking news and media stories of interest to state employees and retirees. Write to firstname.lastname@example.org, giving your name and chapter.
Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail email@example.com.
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