LANSING, Mich. — Gov. Rick Snyder and lawmakers will be able to spend slightly more than expected when they finalize the next state budget, after the administration and legislative economists agreed to revised tax revenue estimates Wednesday.
The $12.6 billion school aid fund — Michigan’s largest account — will have $340 million more than expected over this fiscal year and the next budget year than was projected in January, while the general fund — the second-biggest fund — will have $293 million less.
The new figures will influence budget talks among the Republican governor and GOP legislators, who want to finish a $55 billion spending plan in early June, four months before the fiscal year begins in the fall.
“There’s some issues with the general fund, but overall the economy is still growing and we’re in good shape,” budget director Al Pscholka said.
The Republican-led House and Senate have passed budget plans that would spend less than Snyder’s blueprint by leaving uncommitted hundreds of millions of general fund dollars — possibly to cut taxes (which seems unlikely), pay down debt, boost savings or transition newly hired teachers away from a traditional pension into a 401(k) plan. The latter is the preference of GOP legislative leaders. Snyder, a Republican, has reservations about closing the hybrid pension/401(k) system due to potential large, upfront transition costs.
Pscholka said he does not anticipate having to adjust the current budget, partly because having fewer social services caseloads than projected months ago “gives us a little bit of a cushion.”
Senate Appropriations Committee Chairman Dave Hildenbrand, a Lowell Republican, said state accounts are “fungible” and money can be shifted around. One possibility is spending more education funds than usual on public universities and community colleges to lighten additional pressure in the general fund, which typically covers most of the state aid to those schools, he said.
“The constitution allows it. We’ve been doing it since Gov. (Jennifer) Granholm was governor, and it puts us in a position to prioritize the spending needs of the state,” Hildenbrand said. “I think it’s justifiable. We’re investing it in education.”
But Rep. Fred Durhal III of Detroit, the top Democrat on the House Appropriations Committee, said school aid dollars should go toward K-12 “classroom” spending — not to close the Michigan Public School Employees Retirement System or for other purposes. Republicans counter that retiree pension and health care costs must be addressed because they are rising due to past underfunding and are eating up more of the budget.
“We’re not attracting teachers in our state,” Durhal said. “If you don’t have any incentives for anybody to become a teacher, why would they want to become a teacher?”