Gov. Snyder unveils his budget plan

Republican Gov. Rick Snyder, before a joint session of the House and Senate Appropriations Committees this morning, unveiled a budget plan full of deep spending cuts and new taxes on seniors, the poor and the middle class to offset a business tax cut.

The budget has been an overwhelming focus of Snyder’s time since taking office Jan. 1. The proposal had to address structural issues in revenues and spending streams which have created nearly $1.8 billion in deficits for the fiscal year which begins Oct. 1.

In a press release announcing highlight of his plan, Snyder had this to say:

“This is a comprehensive plan to lay a new, sound foundation for Michigan’s reinvention and put an end to the significant budget deficits that state has experienced for the past decade,” Snyder said. “It reflects difficult but necessary decisions that will result in a shared sacrifice, but ultimately will benefit citizens, families and communities through the economic growth and job creation that is generated. By stimulating the economy while preserving core, essential services and ensuring a safety net for those who are vulnerable, we’ll all move forward together.”

While Snyder says the proposal will result in “shared sacrifices,” his plan to restructure the tax system will strongly shift the tax burden away from businesses. Under Snyder’s plan, the Michigan Business Tax will be axed and a new six percent corporate tax will replace only part of the MBT revenues. Overall, businesses will see a reduction in their taxes of nearly $1.8 billion.

That $1.8 billion business tax cut is being offset by tax increases and steep cuts to other parts of the budget, including a new tax on public and private pensions for retirees. Under current law, public pensions are entirely untaxed in the state, while private pensions are exempt from taxation up to $45,000 for individuals and $90,000 for couples. That tax would raise about $1 billion a year in new revenue.

In addition to the new pension tax, Snyder would also eliminate most income tax credits individual tax filers can claim. Snyder says the plan will keep in place only the personal exemption, homestead property tax credit and other minor subtractions.

On the spending side, Snyder’s plan would also reduce local revenue sharing by a third. That is tax funding sent to the local communities that help pay for local services such police and fire service, parks and recreation programming and more. The plan would also change the way such revenue is shared; instead of being distributed by population, communities would have to compete for the funds based on their willingness to share services and make other reforms.

Snyder has also proposed a cut of 15 percent to state university budgets, and proposes a four percent — or about $470 per pupil — cut in local K-12 spending. Snyder says his plan protects community colleges. He would also provide a pool of cash as incentive for universities to keep tuition increases below seven percent.

Unsurprisingly, his budget met with immediate criticism.

“Gov. Rick Snyder’s proposed budget is heavy on cuts to families and children, and short on the shared sacrifices that he himself has called for,” said Progress Michigan Executive Director David Holtz. “To move Michigan forward, everyone must share in the pain and the governor’s proposed budget doesn’t pass that test. Governor Snyder’s budget proposes raising taxes on low-income workers, retirees and giving Big Business a tax cut. That’s just wrong for Michigan.”

The Michigan Municipal League — which represents local governments — also issued a statement calling Snyder’s plan “harmful to our communities.”

In a press statement, Carol Shafto, president of the Michigan Municipal League Board of Trustees, had this to say about the governor’s budget presentation:

“Rest assured cuts of this magnitude will harm our residents in communities and neighborhoods across the state, and when they do, we will firmly and pointedly ask our governor and state legislators why they created the mess our local governments are in? When local governments layoff more police officers and firefighters, when more roads and bridges crumble, when our waste water treatment systems fail, when our parks and libraries close, who will want to live here? When do we stop the fiscal insanity and end this foolish and reckless attempt to undermine Michigan’s return to prosperity? These cuts give our public university students another compelling reason to leave Michigan for states that are investing in the types of amenities that create places where young, talented, educated and entrepreneurial people want to live and work. If these cuts are approved, Michigan will shove another generation of young people out the door. These cuts are not about turning off the lights. They are about taking the lights down.”

House Democrats were also not pleased with the budget.

“Instead, his plan makes it harder for our kids to get the quality education they need to compete for jobs, puts a college education farther out of reach for middle-class students, increases taxes on seniors and working families, and takes more police and firefighters off the street. It gives huge tax breaks to corporations while shifting the burden to others who can least afford it,” said Rep. Richard Hammel, (D-Mt. Morris Township) and House Democratic Leader. “House Democrats cannot support that type of approach. We wanted to see more reforms in state government and more sacrifice at the top. We also expected to see a more detailed budget, given the Governor’s emphasis on transparency in government.”