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Legislature Wraps Up Action on State Budget

Posted on June 12, 2018 by Dene Westbrook

Late this afternoon, both chambers completed action on the state’s omnibus budget bill for the coming fiscal year.  Senate Bill 848 combined each of the departmental conference reports that had been approved over the course of the past week.  Included in this omnibus bill are numerous line items or programs of interest to municipalities:

General Government/Revenue Sharing:

  • The budget maintains $6.2 million in supplemental revenue sharing payments that cities and villages received as an increase in the current year budget.  The Governor had originally proposed removing this increase entirely and the House budget chair worked to ensure these dollars remained in the upcoming budget.  Additionally, $5.8 million that has been included in recent budgets to bring 100 townships and one city back into the statutory distribution was also continued in this budget.  Counties maintained their current year appropriation level and then were given an additional $1 million in supplemental funding.  Both our $6.2 million and the county $1 million supplemental amounts were written with boilerplate language that ties those dollars to pension, OPEB, or general debt expenses, unless the local unit has no such expenses.
  • This budget also reduces the payment threshold for local units to qualify for a statutory revenue sharing payment.  Under current law, only communities eligible for payments in excess of $4500 would receive a CVT revenue sharing payment, this budget allows payments to go out to any community eligible for at least $1000, resulting in about 48 additional villages and townships being eligible for a statutory payment.
  • Constitutional revenue sharing payments are expected to rise, based upon economic activity related to the sales tax.  An additional $21.5 million (2.6% increase) is expected to flow to Constitutional payments in the coming budget, subject to actual collections.
  • The Governor’s proposal to distribute any remaining Personal Property Tax funds left after all units have received 100% reimbursements as an additional revenue sharing payment (approximately $70 million) was not included in the final budget agreement.  These PPT reimbursement dollars will continue to be distributed in the same manner as the past two years, but will only be available to cities, villages, townships, counties, and community colleges (see LARA budget summary below).
  • A new boilerplate section within the Treasury budget (Section 940) calls for the department to investigate the cost of having residents file their Principal Residence Exemption forms directly with the state as opposed to the local unit.
  • Regional Prosperity grants were increased by $1.5 million.

MDOT Budget:

  • Following the positive economic and revenue news the state received during last month’s Consensus Revenue Estimating Conference,  $300 million in additional General Fund (one-time) is being added to this budget.  This addition will provide  $65.4 million more to city and village road budgets.
  • $150 million of new money is expected due to the road funding package.  This increase combined with growth in gas tax and registration fees will result in $43.4 million new dollars for cities and villages.
  • Between these two additions, $108.8 million more will be available for city and villages roads in the coming budget.
  • A new Community Service Infrastructure Fund has been created within the Transportation Economic Development Fund (TEDF) providing $3 million in on-going funding. This fund will provide matching grants of up to $250,000 for construction and preservation of streets in cities and villages with a population less than 10,000.  Additional legislation will be required to implement this new grant program.
  • The budget includes $2 million for a rail project, repairing the line from Ann Arbor to Traverse City. (one-time funding)
  • A $1.5 million increase in local bus operating funding was also provided.

LARA budget:

  • This budget provides nearly full funding of the $84+ million of indigent defense commission plan costs for locals that serve as court funding units.  This appropriation represents a significant increase from the Governor’s original $46 million reimbursement proposal.  Also dropped from the Governor’s original plan was his proposal to charge court funding units a per capita amount as part of their local cost share.  This concept was dropped completely by the Legislature.  Boilerplate associated with the $84 million in grants specifies that local indigent defense systems are not required to implement or maintain standards if sufficient funding is not provided through grants as described in the Act.  Additional changes relative to indigent defense commission plan implementation were adopted as part of HB 5985 earlier today.
  • Traditionally, the LARA budget has also included a line item for fire protection grants to local units that host certain state facilities (approx $10 million in FY18).  Due to the elimination of Driver Responsibility Fee revenue, this grant program is no longer funded through the LARA budget.  Going forward, these grants will be supported by a segment of Personal Property Tax funds remaining after all eligible local unit reimbursements have gone out at 100%.  HB 5908 was passed out of the Senate today with language funding fire protection grants at $13.6 million.  While the earmarked amount is less than the Governor’s original $15 million recommendation, the $13.6 million represents the historic high water mark for these grants.
  • Local law enforcement will receive a $1.2 million increase in liquor law enforcement grants as a result of increased liquor license fee revenues.

DEQ Budget:

  • The Governor had originally proposed an increase in the state’s solid waste tipping fee and a water user fee to fund clean up and remediation, recycling grants, and infrastructure improvements.  Neither of those fee proposals made it into this budget.
  • Renewing Michigan’s Environment Program: $25 million for environmental site remediation and redevelopment including vapor intrusion and PFAS. These dollars will help offset the loss of Clean Michigan Initiative bond funding as the revenues from those bonds are no longer available. (one-time)
  • Grants for the remediation and redevelopment of sites contaminated by lead paint received $2 million.
  • Recycling grants were increased by $1 million to expand the Recycling Initiative  program.  This program builds partnerships with stakeholders to increase the number of counties with access to recycling; promotes regional collaboration; provides education and technical assistance; and develops a measurement system to quantify recycling participation.

DNR Budget:

  • $4 million in increased camping fee revenue and recreation passport sales will support numerous recreation investments, including additional support for  Recreation Passport local grants.

Pending the Governor’s signature, the budget will take effect October 1, 2018.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and chackbarth@mml.org.

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