Snyder to propose saving $260M as GOP lawmakers seek tax cut

FILE - In this Jan. 17, 2017, file photo, Michigan Gov. Rick Snyder delivers his State of the State address to a joint session of Legislature at the Capitol in Lansing, Mich. Snyder is scheduled to unveil his budget plan Wednesday, Feb. 8, 2017. (AP Photo/Al Goldis, File)

By DAVID EGGERT
Associated Press
LANSING, Mich. — Gov. Rick Snyder will propose growing Michigan’s savings account to $1 billion, even as Republican lawmakers push for an income tax cut.
State budget director Al Pscholka told The Associated Press on Tuesday that Snyder will ask to deposit a “sizable” $260 million to the budget stabilization fund — also known as the rainy day fund — in the next fiscal year. It would be the largest deposit since Snyder’s first year in office, when the fund had just $2 million.
The Republican will unveil his budget plan today. It will include no tax cuts and is expected to feature modest spending increases for education, public safety and infrastructure.
Pscholka said it’s smart to save money because of “one-time” tax revenues and looming budget pressures.
“It’s good conservative budgeting,” he said in a phone interview, adding that saving more and addressing long-term liabilities such as those facing the Public School Employees Retirement System are “maybe not the sexiest” but are “very smart things.”
The GOP-controlled Legislature voted to permanently shift general funds to road and bridge repairs starting in 2018 as part of a 2015 transportation funding deal that hiked fuel taxes and vehicle registration fees.
Other squeezes include the cost of expanding Medicaid to more than 600,000 low-income adults under the federal health care law and the phase-out of business equipment taxes.
Snyder also will propose directing $1.2 billion to the teacher retirement system and continuing a formula whereby lower-funded K-12 districts get double the increase in per-pupil state aid that higher-funded districts receive. The state’s 15 public universities would get 2.5 percent more overall for operations, with increases varying by school.
While university funding would be restored in aggregate to 2011 levels — when Snyder cut aid by 15 percent to address a budget deficit — four schools’ state payments would remain below what they were when he took office.
To get their full funding, universities could not raise tuition and fees more than 3.8 percent.
The Detroit Free Press first reported details of the higher education budget proposal.
GOP legislators have called for gradually eliminating Michigan’s 4.25 percent income tax. Pscholka said the governor on Wednesday will note tax and fee reductions already made under his watch. They include business tax overhauls, a cut for people who trade in their car or boat for a new one, a pending break for some homeowners and renters, and the elimination of extra “driver responsibility” fees imposed on people driving without insurance or proof of insurance. Those tax cuts will total $2.1 billion over three years, Pscholka said.
Republicans have expressed frustration that they have not enacted a broad-based cut for individuals, though, despite controlling state government for six years.
The savings account, which has $612 million now, is projected to grow to $707 million this year, according to the budget office.
The Snyder administration estimated that if $260 million is added in the budget year starting in October, the fund would surpass $1 billion once interest is factored in.