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Governor Whitmer Announces Budget Plans & Revenue Sharing Increase

Posted on March 5, 2019 by Dene Westbrook

Governor Gretchen Whitmer will talk about her budget plan at the MML’s 2019 Capital Conference March 19-20.

Governor Whitmer and State Budget Director Chris Kolb appeared before a joint hearing of the House and Senate Appropriations committees this morning to release her Administration’s budget plans for the upcoming fiscal year. We expect the governor to talk about her budget plan when she comes to the League’s Capital Conference March 19-20. She’ll be speaking during our opening general session on the 19th. Don’t miss this unique opportunity to hear from the governor first-hand. 

As expected, her budget outlined the key initiatives that the Governor had touted during her election campaign last year…road funding, education, and water infrastructure.  Additionally, within the overall budget, the Governor is recommending a 3% increase in statutory revenue sharing ($7.7M), in addition to the estimated 3.2% increase in Constitutional Revenue Sharing payments ($27.5M) that will occur as a result of expected growth in sales tax revenues.

This increase in revenue sharing is also coupled with a $5 million grant fund to support local projects targeting infrastructure, public safety, blight removal and other community revitalization efforts.

In order to accomplish the Governor’s goal of getting 90% of state roads to good or fair condition within 10 years, she is proposing a .45 cent gas tax increase phased in at .15 cents per phase between October of 2019 and October of 2020.  This proposal brings in $2.5 billion in new dedicated road funding.  The existing .26 cent gas tax would continue to be distributed through the PA 51 formula, while this new .45 cent increase would be distributed through a new formula that focuses on economically significant roads (91% directed to interstates, state trunklines, principal arterial roads, and minor arterials and major collector streets).  Transit, bridges and rural roads make up remainder of the distributions under this new formula proposal.

Under the existing road funding proposal, the planned $600 million income tax/General Fund diversion to roads would be eliminated and those GF/GP dollars would be freed up to be used to fund higher education appropriations that are being supported currently within the school aid budget.

The additional gas tax burden on Michigan residents would be off-set through a proposed repeal of the 2011 “pension tax” and a doubling of the Earned Income Tax Credit.  These two tax relief proposals would be phased in to match the proposed gas tax phase-in and would reduce GF/GP revenues by about $450 million per year.

The budget impact from this tax relief would be partially off-set by a proposed expansion of the state’s Corporate Income Tax to apply that tax to current pass-through business entities.  This expansion would bring in about $280 million in GF/GP revenue per year.

For school funding, the Governor is proposing to increase education spending by approximately $500 million.  The main component of the proposed increase would go to a Foundation Allowance increase of between $120 and $180 per pupil.  The School Aid increase is possible due to the shift of higher education budget support back to GF/GP, as outlined above in the road funding proposal.

Water infrastructure spending will see a $120 million increase within what was announced today.  Approximately $37.5 million would be dedicated to support lead and copper rule implementation expenses for local water systems.  The proposal also calls for $30 million for PFAS and other contaminate clean-ups and $40 million for Drinking Water Revolving Fund loan forgiveness for local water systems.

Additional specifics from today’s budget announcement can be found on the State Budget website here.

Governor Whitmer’s budget presentation slides and the State Budget Director’s presentation can be viewed here.

A statement about the budget from League CEO and Executive Director Dan Gilmartin can be found here.

Specific program white paper analyses can be found here covering the roads proposal, tax proposals, water initiatives, K-12 program spending, and higher education.

Both House and Senate Appropriations committees and the various departmental subcommittees will now begin their review of the Governor’s proposal and begin their individual departmental and program budget development over the next two months with an eye toward completing the FY2020 budget before the summer recess.

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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