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For budget, Snyder must resell plan on Medicaid

LANSING — When Gov. Rick Snyder unveiled his state budget proposal last year, it included two big-ticket items — a $1.2 billion increase to improve the state's roads and bridges and the expansion of Medicaid.

The transportation proposal never happened. And while Medicaid expansion was approved, it will be of significant interest in the new budget that Snyder will present to the state Legislature on Wednesday.

One of Snyder's selling points for Medicaid expansion was that it would save the state $206 million this fiscal year, and Snyder planned to put half of that amount in a special savings account. That money then would be used to begin paying the state's share of the expansion when the federal government stops paying all of the cost after 2016.

But there are now two problems with that plan: The total savings amounted to only $133 million because the Legislature did not give the bill immediate effect, pushing back its implementation by about three months. And the Legislature never created the savings account.

On Wednesday, Snyder again will call for the creation of the fund and make a new recommendation for how much should be put into it.

The governor's budget is expected to be about $52 billion, of which about $10 billion goes toward the general fund, around $11 billion into the School Aid Fund and most of the rest flowing from the federal government into specific programs.

In this budget, Snyder also will lay out his proposal for what he would like to see done with the more than $1 billion in surplus revenue projected for the state.

In his State of the State address last month, Snyder said Michigan must first pay bills, put money toward paying off long-term liabilities but also use it to provide some type of tax relief for "hardworking folk." The amount of that relief is not expected to exceed $100 million.

Tax relief

Last week, the House and Senate moved forward with their own dueling plans for tax relief.

The Senate plan, written by Sen. Jack Brandenburg, R-Harrison Township, and contained in Senate Bill 402, would drop the state income tax rate to 3.9 percent by 2017. It now stands at 4.25 percent.

A House package (House Bills 5265-5267) would lower the rate to 4.05 percent by 2016 and allow for further reductions of 0.1 percent annually if, in the preceding year, state income tax revenue increased by $300 million or more.

Senate Majority Leader Randy Richardville, R-Monroe, and House Speaker Jase Bolger, R-Marshall, said they are not backing one proposal over another and are waiting to hear the governor's plan.

Regardless, the rate now is higher than it would have been if Snyder and the Republican-led Legislature had not halted a scheduled annual decrease in the rate in 2011.

Higher education

Michael Boulus, executive director of the Lansing-based Presidents Council, State Universities of Michigan, hopes to be pleasantly surprised Wednesday with word that Snyder will put more money into higher education.

In Snyder's first budget, he slashed higher education funding 15 percent and in the following two years increased it by 3 percent and 2 percent, respectively.

But the past two increases come nowhere close to recouping those cuts from the first year, Boulus said, and in total have been part of a decade of disinvestment in higher education in the state.

"I think it's time for a strategic reinvestment in our public universities," he said.

With each of the past three budgets, strings were attached regarding performance metrics and tuition restraint.

But as a Senate Fiscal Agency report last year found, as the state contributes less to higher education and universities rely more on tuition, the strings will mean less.

Last year, for example, Wayne State University forfeited $534,700 in state aid by increasing its tuition more than 3.75 percent. Instead, its 8.9 percent increase brought in an estimated $14 million.

Boulus said it's unclear whether more universities will follow suit. "Each university is going to have to look at it and do the math," he said.

Workforce development

In last year's budget, Snyder included a new $10 million skilled trades training fund to assist companies across the state. The state's Workforce Development Agency has requested that the program continue this year at the same level.

Patty Vanaman, a specialist at the agency, said awards for the funds went out Oct. 1 to help 177 companies with short-term needs for skilled labor. All the money has been disbursed, but requests totaling more than $15 million are pending, Vanaman said.

Delaney McKinley, director of human resources for the Michigan Manufacturers Association, said the success of the program shows the need exists.

If the companies that received the funds do as projected, the money will have helped train 10,881 existing workers and 1,773 new ones. As entry-level workers receive new skills and are promoted, the companies said, they plan to hire 1,357 more workers to replace them.

Rainy-day fund

When Snyder came into office in 2011, the state's rainy-day fund was down to $2.2 million. It now stands at $580 million.

Last year, the governor recommended depositing $75 million into the fund, and a similar deposit is expected again.

Kurt Weiss, a spokesman for the Michigan Department of Technology, Management and Budget, said a state having 6 percent to 8 percent of its general fund in a rainy-day account is considered a best practice by most states. The governor's goal is eventually to build the fund back up to between $1.2 billion and $1.5 billion.

Detroit settlement offer

The $350 million proposal that the governor unveiled last month to help support Detroit pensioners and the collection at the Detroit Institute of Arts requires legislation outside of the budget proposal.

Snyder's preference is to divert $17.5 million annually for 20 years from the state's tobacco settlement fund. Michigan will receive $250.9 million from the tobacco settlement in the next fiscal year.

Still, Snyder said he will take it into account in his budget proposal because he will have to decide whether to continue to fully fund any programs that the tobacco settlement money previously funded.