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Senate Wants $2B For Tax Cut; House $1.5B For Pensions

04/27/22 12:24 PM By John Reurink

Senate Republicans Tuesday attached $1 billion in one-time and $1 billion in ongoing "tax cut" funding to its General Government budget recommendation, creating a special pocket to finance potential tax reductions.

Meanwhile, a House subcommittee passed a special one-time $1.5 billion payment to local governments' unfunded liability through two different programs. The first is $900 million for local municipal retirement systems. The second $250 million goes to those who specifically adopt best practices. The third is $350 million for the Michigan State Police Retirement System.

"With families coping with record inflation, Senate Republicans are focused on finding a meaningful way to get money back into its taxpayers' pockets," said Sen. Kim LaSata (R-St. Joseph) at this morning's Senate Appropriations Committee meeting. "This amendment provides for these dollars to be set aside now to continue the conversation that has been ongoing between the executive, the Senate Majority Leader and the House."

Political insiders and observers alike have diagnosed Republican lawmakers with "tax cut fever" in Michigan.

In March, GOP legislators sent out a $2.5 billion income tax cut – dropping the income tax from 4.25% to 3.9% – and a six-month gas tax pause that would have eliminated around $725 million from road projects for the Fiscal Year (FY) of 2022.

The Governor vetoed both of them, specifically claiming the income tax reduction would "blow a recurring, multi-billion-dollar hole in basic state government functions from public safety to potholes."

However, Gov. Gretchen Whitmer has frequently reiterated that she's willing to negotiate and explore options of financial relief for residents.

"These families know best how to spend those dollars, while this will also allow us to move forward in the budget process and ensure that Michigan's budget is fiscally responsible and balanced," said LaSata on her amendment to

SB 831, the budget recommendation for General Government.

Sen. Roger Victory (R-Hudsonville), the chair of the Senate Appropriations Subcommittee on General Government, highlighted his appreciation for the amendment. He said it ensures $2 billion is made available "to the hard working men and women in the state of Michigan, especially in this climate of high prices."

The Senate Appropriations Committee's 12 Republicans approved the amendment, while five Democrats passed on giving a vote and Sen. Rosemary BAYER (D-Beverly Hills) voted against it.

 

"The one thing I would like to remind people of is that we've been underfunding in this state for generations. We're at the bottom when you look at the rest of the country. We're not taking care of our infrastructure," Bayer said. "We have an opportunity here and we've had a nice look at a proposal that helps to start to fix some of that…so immediately just handing it back out in small bits to individuals is not going to bring us forward."

Sen. Curtis Hertel (D-East Lansing), the minority vice chair of the Senate Appropriations Committee, described setting aside dollars as "premature."

"Through this budget process, we heard from the Chairman over and over again that this was an initial first step, that there were important things that they wanted to put in the budget and they couldn't because of the numbers that were given," Hertel said.

Hertel illustrated how back-to-back budget recommendations have lacked funding for job training and other things "because of some number we're trying to get to in order to justify this."

He abstained, he said, because he didn't know what specific tax cut would even be covered by the $2 billion pocket.

Throughout the budget making process, Democratic senators have noticed a slash in full-time equivalent (FTE) positions being funded from department to department.

For example, SB 829 for the Michigan Department of Corrections (MDOC) lowered FTEs by 20.7% from 13,484.4 currently to around 10,687.

However, there was $42 million infused into the budget recommendation to support economic adjustments related to salary increases, pensions and retiree health care.

The Democrats on the committee opposed the recommendation, with Hertel saying the FTEs that were funded in 2021 continue to not be "sufficient to actually keep both the prisoners safe, but more also (keep) the corrections officers (safe). I think if you talk to them, they're often working in very dangerous situations."

Additionally, the Senate Appropriations Subcommittee for K-12 and the Michigan Department of Education (MDE) did not include Whitmer's proposed investments for an educator recruitment initiative and mental health support in the MDE budget.

"I just want to make sure we call out the things that are missing that need to be put in here," Bayer, the minority vice chair of the MDE budget subcommittee, said. "Some of the major things would be the teacher recruitment and retention program. The additional costs and FTEs for that, as well as for mental health programing. We know how critical that is right now more than ever, and we know the shortage of teachers."

The Governor had proposed $800,000 extra in General Fund (GF) dollars and 4 new FTEs for educator recruitment initiatives, as well as $200,000 and one FTE position to "coordinate and provide technical assistance to schools receiving mental health funding."

Bayer was the one member of her party within the committee to approve an amendment to SB 833 for the MDE budget, while the other Democrats abstained on voting.

Republicans and Bayer OK'd an amendment moving from the MDE budget the creation of the Michigan Center for Education Research and Information, clarifying that the department will create the center and manage the consolidation and reorganization criteria.