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 2004-05
Budget Deal Opens Way For Legislative Action
Gongwer News Service, September 2, 2004
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When the
Legislature returns to session on September 8, it will have
little more than three weeks left to enact the 2004-05 budget
before the fiscal year starts. But it will have at least a
leadership agreement on most elements of the budget.
Thursday afternoon Governor Jennifer Granholm and the
legislative leadership announced they had finally reached
agreement on all elements of the 2004-05 budget, except for the
higher education budget, after months of meetings.
According to state officials the agreement means the 2004-05
general fund budget will total some $8.7 billion.
Combined with the increase in the state's cigarette tax, which
took effect in July, and the increase in the tax assessed the
Detroit casinos, which took effect on Wednesday, the agreement
on cuts and spending will close an anticipated $1 billion
deficit.
The agreement also calls the Legislature to attempt to enact HB
5323, a controversial bill that would eliminate single business
tax credits for professional employer organizations. If enacted,
the measure may raise an estimated $3 million.
The budget agreement also includes a controversial provision
limiting additional payments to the state's school districts
that spend more than $9,000 per pupil (see related story).
When the budget is finally completed it will be the latest state
government has completed action on its annual spending plan
since the crushing recessions of the early 1980s.
Compared to the agreement reached in 2003 that was marked with a
press conference, Ms. Granholm and legislative leaders confirmed
they had reached an accord through press releases.
Ms. Granholm said the agreement will "improve the quality of
life in Michigan and continue to grow the state's economy."
Reaching the agreement was difficult because of reduced federal
funding and a national and state economy that continues to grow
sluggishly, Ms. Granholm said. However, a number of her
priorities were included in the agreement, she said, including
restoration of the $6,700 per pupil school foundation allowance.
Senate Majority Leader Ken Sikkema (R-Wyoming) said the
agreement will allow the state to boost job creation and invest
in new technologies. One part of the agreement will add $15
million to Life Sciences Corridor funding, a major priority of
Republicans.
"From day one, I have said that Michigan's budget deficit is not
the most pressing problem facing the state; it is that Michigan
is not positioned to create jobs in a new economy. Our deficits
are but a symptom of Michigan's economic problem. This agreement
today acknowledges this reality," Mr. Sikkema said in his
release.
Through his spokesperson, Keith Ledbetter, House Speaker Rick
Johnson (R-LeRoy) said he was "encouraged we could work together
in a bipartisan manner with the governor and the other leaders.
We have a lot of work to do because the budget has to pass the
House, but we are encouraged by the spirit of cooperation."
When looking at the entire agreement, Mr. Ledbetter said, the
state is continuing to educate its students and keeping
prisoners locked up.
The higher education budget has been the budget most bedeviling
the leaders as coming to an agreement on the inflation rate used
as part of the tuition restraint agreement has proven elusive.
For several weeks now there have been indications that budget's
final agreement might be left to the House/Senate conference
committee - chaired by Rep. Sandy Caul (R-Mt. Pleasant) and Sen.
Mike Goschka (R-Brant) - and Thursday Greg Bird, spokesperson
for the State Budget Office, said the officials decided not to
delay agreement on the other parts of the budget because of the
hold up on the higher education side. The conferees will
negotiate with the administration on an agreement, and a
conference committee meeting has already been scheduled for
Tuesday morning.
The agreement was signed by Budget Director Mary Lannoye along
with Mr. Sikkema, Mr. Johnson and House Minority Leader Dianne
Byrum (D-Onondaga) after the group met at 11 a.m. on Thursday.
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Budget Details: Cuts to 20j Schools Tops List
Gongwer News Service, September 2, 2004
List of Affected 20j School Districts
Oakland County schools had announced their opposition to
anticipated changes to the additional funding paid to the
highest spending districts, but they will have to carry their
fight to the full Legislature as the budget agreement does call
for the additional payments to be frozen at current levels.
That proposal is one of more than two dozen changes and
agreements - including some already implemented - that are part
of the budget deal signed Thursday by the administration of
Governor Jennifer Granholm and legislative leaders.
The agreement resulted in some $280 million in cuts to budget,
officials said.
Among the other agreements are cuts to the higher education
tuition grant program, though not an outright elimination, and a
phase-in of a funding shift in county tax collections.
And the Lottery Bureau will be allowed to use NASCAR stock car
racing images on some game tickets.
Revenues: The big revenue increase as already has been in place
for two months, that being the 75 cents per pack increase in the
state's cigarette tax. Following that is the increase in the tax
assessed the Detroit casinos.
The agreement calls for legislative action on one new tax
proposal, HB 5323, that would eliminate single business tax
credits for professional employer organizations. The proposal,
which will likely be hotly challenged, could raise as much as $3
million.
The major change in fees as part of the agreement is that the
Michigan Underground Storage Tank Financial Assurance fee will
now sunset on December 31, 2010. The agreement also calls for
$37.5 million of the fees raised to be used for tank cleanups,
which will free up general fund and restricted funds for other
purposes.
At least three other existing fees will be increased: the vital
records fee in the Department of Community Health which should
raise as much as $3 million; the septage waste fee and the
public recreation fee, both in the Department of Environmental
Quality, raising $100,000 and $300,000 separately.
Ms. Granholm's proposal to boost the state's liquor tax and to
decouple the state's estate tax from the federal tax, which is
expiring, was rejected.
Her proposal to shift $6 million from the 911 fund surplus was
also rejected. Ms. Granholm had also called for eliminating the
current pharmacy research SBT credit and it was agreed to delay
the effective date of the credit.
The agreement also calls for the state to sell some of excess
property, with funds going to the general fund and fire
protection grants for cities with state property. Separate from
that sale, the state will sell its Macomb/Oakland Regional
Center, raising at least $1.9 million.
And the agreement calls for the Lottery Bureau to be able to use
images from NASCAR on some game tickets, a move that could boost
sales by an estimated $11 million.
K-12 education: The decision dealing the 20j provision in the
school aid budget will affect 18 difference school districts
that allocate more than $9,000 per pupil as part of their
foundation allowance.
Under the provision, those districts will continue to receive
Section 20j monies, but at the rate paid during the 2003-04
fiscal year not the rate set for 2004-05. The change means those
schools will not see another $74 per pupil.
Five of the districts - Birmingham, Southfield, Bloomfield
Hills, Farmington and Lamphere - are in the Oakland County
Intermediate School District. The other districts affected are
Burt Township, New Buffalo, Beaver Island, Whitefish, Oneida
Township, Grant Township, Bois Blanc Pines, Mackinac Island,
Centerline, Jefferson, Covert, Ann Arbor and Grosse Pointe.
The budget agreement will also cut $14 million to the state's
ISDs, which will include eliminating $7 million Ms. Granholm
wanted to allocate to the Great Starts program.
The budget also makes a change to the pupil count days, with a
blended count of 75 percent during a fall count day and 25
percent in the winter. Currently there is an 80/20 count, and
the administration had proposed a 50/50 blended count.
Higher education: While the bulk of that budget is still
unresolved, there were some changes agreed to, including a $3
million cut to the Higher Education Tuition Grant program that
helps fund students going to private colleges. Ms. Granholm had
proposed eliminating that program.
The agreement also does not call for any cut to Michigan State
University's Agriculture Experiment Station or the Cooperative
Extension Service. Ms. Granholm had proposed cutting those
programs by $1.9 million.
Community Health/Medicaid: The pharmaceutical dispensing feed
for Medicaid prescriptions will be cut from $3.77 for each
prescription to $2.50.
But there will be no additional cuts or changes in Medicaid
eligibility requirements for most programs. However, the state
will freeze enrollments for the EPIC prescription program for
the elderly and the adult benefit waiver enrollments. The budget
will restore Medicaid podiatric services for adults that was cut
in the current year's budget.
The budget will also create a disproportionate share payment
program for out-state hospitals.
And it will call for Medicaid fraud auditing in an effort to
recapture money.
In addition, the agreement adds $15 million for Healthy Michigan
Fund prevention programs. Ms. Granholm had called for an
increase of $30 million.
Revenue Sharing: There will be no additional cuts to revenue
sharing programs, however there will be a change in how county
property taxes are collected which will affect the county
revenue sharing payments.
Ms. Granholm had originally called for collecting the county's
property taxes, now paid in the winter, in the summer. The
entire switch was to take place in one year, but that was
opposed by counties and legislators.
As part of the agreement, the switch in tax collections will be
phased in over three years with one-third of the county tax
collected in summer 2005, two-thirds in summer 2006 and the
entire amount in summer 2007.
Job Creation: The agreement allocates an additional $15 million
to the Life Sciences Corridor portion of the Technology
Tri-Corridor, bringing the life sciences initiative up to $30
million to help generate new economic growth among those
companies.
P.I.L.T.: Ms. Granholm had proposed making the payments in lieu
of taxes out of the state's revenue sharing. Under the
agreement, the local PILT payments will be made out of general
funds and some restricted funds.
Other Cuts: The agreement also calls for cuts of:
$17.5 million to the Department of Corrections, coming out of
administrative fees.
$4 from the Department of Information Technology.
$2 million from the Department of Human Services.
$1.5 million from the Department of History, Arts and Libraries
either coming from the Detroit Public Library or the state's
document digitization project.
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Budget Agreement Unwelcome to Some Groups
Gongwer News Service, September 2, 2004
School groups were quickest to be vocal on the budget agreement
announced Thursday, but a number of interests around the state
are expected to welcome the budget with less than warm
greetings.
Among the provisions of the agreement are changes to the way
school aid is calculated, cuts to intermediate school districts
and higher education (though that budget has not yet been
completed), cuts to pharmacists, and single business tax
increases for human resources companies.
"Enough is enough," said Michigan Education Association
President Lu Battaglieri of proposals to cut school funding. "If
the state Legislature and governor approve a compromise that
fails to adequately fund all public schools, then they will
compromise the educational future of students across the state."
A group of school associations, school districts and
intermediate districts, and school legislative services calling
themselves Public Education Advocates sent a letter to Governor
Jennifer Granholm dated Wednesday saying they were "strongly
opposed" to any budget deal that included cuts to education. In
particular, they opposed proposals to eliminate Section 20j
money for high-spending districts and the $15 million grant for
Detroit Public Schools as well as a change in the school aid
formula that would give more weight to the prior year pupil
count.
"It is imperative that the legislature fully funds Proposal A as
originally proposed to meet the educational needs of Michigan's
school children," the letter said.
The Section 20j funds, put in place to reduce the effects of
Proposal A on some of the higher-spending districts, would
affect 18 districts in the state. The districts currently
receive between $9001 and $15,387 per student, well above the
$6,700 that most districts would receive. But those districts
have argued that cutting the funds would essentially mean those
districts would face stable or reduced funding every year while
other districts see increases until the foundation grant reaches
what they are already spending.
The agreement also provides for a reduction in the dispensing
fee to pharmacists to $2.50 from $3.77 per prescription, which
the Michigan Retailers Association argued would cost its members
as much as $18 million based on prescription volumes this year.
The association, which could not be reached for comment
Thursday, had argued the reduction in the fee could also mean a
reduction in the number of pharmacies willing to fill Medicaid
prescriptions.
And a group of human resources contractors, companies that lease
employees to other companies and provide related human resources
services, have argued that a bill (HB 5323) to change the way
those companies are taxed would essentially be a tax increase to
them. That bill is part of the agreement, though it still has
not passed the House so will not be part of any quick action on
the budget next week.
Members of the group opposed to the bill could not be reached
for comment Thursday.
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List of Affected 20j School Districts
Michigan's proposed budget agreement, yet to be adopted by
the legislature and signed into law by the Governor, freezes
payments at current levels under Section 20j of the Michigan
School Aid Act for schools which are currently reimbursed $9,000
or more per pupil. Click here to download
the PDF document updated September 8, 2004.
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