New governor prepares first budget with ‘no easy answers’
LANSING, Mich. (AP) — Gov. Gretchen Whitmer wants to spend billions more to fix the roads and boost a lagging education system.
But as the Democrat prepares to deliver her first budget proposal to the Republican-led Michigan Legislature, she faces fiscal pressures that complicate her task.
She notes that the general fund — Michigan’s second-biggest account — has not grown much from 20 years ago. Inflation-adjusted revenue, in fact, is down during that period after a series of tax cuts, and the fund is being increasingly tapped to bolster the budget for road and bridge repairs.
Whitmer, who will present her plan Tuesday, recently told a conference of township officials that she also must account for a number of lawsuits that were filed against her predecessor’s administration over the Flint water crisis and other issues.
“I tell you all of this not to complain, but so that you have an understanding of the pressures that we are under as we are creating this budget,” she said. “There are no easy answers.”
The budget presentation is Whitmer’s opportunity to detail just how she plans to “fix the damn roads” and pay for priorities like letting high school graduates attend community college for free. What to look for:
Whitmer has long been building her case for a multibillion-dollar infrastructure package. She contends that Michigan’s pothole-ridden roadways are forcing drivers to pay hundreds of dollars a year on vehicle repairs and a failure to act now would ensure that road conditions deteriorate further. The rub is how to finance it. She campaigned on seeking unspecified “user fees” — which typically means fuel tax or vehicle registration fee increases. A backup option could include borrowing, but that would hamstring the state in the long term, according to a new report from the nonpartisan Citizens Research Council. It is unclear to what extent, if any, Whitmer could seek to overhaul a funding formula that favors less-used rural roads.
Between 1995 and 2015, Michigan ranked last among states in the growth of K-12 education spending, according to a study by Michigan State University. Whitmer hopes to significantly boost the base per-pupil grant to districts. One option she has publicly backed is to no longer “raid” the $14.8 billion school aid account to help fund universities and community colleges, which became routine under former Republican Gov. Rick Snyder. The nonpartisan Senate Fiscal Agency reports that $908 million is being shifted from the school fund to postsecondary education this fiscal year. The obstacle for Whitmer would be plugging the corresponding hole in the general fund. Educators also will watch to see if she proposes weighting the base funding amount to factor in higher costs to teach certain students, as she outlined in her campaign.
Whitmer will detail the cost of her proposal to provide free community college to all high school graduates or a two-year, $2,500 annual scholarship to certain qualifying graduates attending a four-year college or university in the state. Adults age 25 and up without a bachelor’s or associate degree could go tuition-free to a community college, union apprenticeship or an industry certificate program. Michigan once provided a merit-based scholarship, but it was cut nearly a decade ago. Whitmer wants to grow the number of residents with a postsecondary credential.
Outside of her call for more transportation revenue, Whitmer said little specifically during her campaign about raising taxes to fund other spending priorities. She has been open to them in the past, having backed some as a legislator. It is unclear what she might propose. She spoke last year about closing unspecified “loopholes,” or targeted tax breaks. Democrats generally contend that Republicans cut taxes too much for business during their eight-year run controlling the state. Any bid to increase business taxes, however, would be resisted by GOP legislative leaders.
One area where Whitmer and lawmakers could find common ground is revisiting a 2011 law that eliminated or reduced exemptions from the taxation of pension and other retirement income. Whitmer campaigned on ending the “retirement tax,” which was included in the law that slashed business taxes. A Republican-led House committee voted overwhelmingly Thursday to repeal the so-called pension tax, endorsing a $330 million tax cut for seniors. Whitmer spokeswoman Tiffany Brown said retirees “need relief” but because of the “huge fiscal impact,” the taxation of retirement income should be discussed as part of the budget process. “We look forward to working with the Legislature on a real solution that provides relief and is fiscally responsible,” she said.