News: MI More MSA money to fix budget

Proposed legislation will force state to publish all expenditures
August 16, 2007?
BY DANIEL ACCIAVATTI
Where does the rabbit go when placed in a hat? How much money does Michigan spend each year on road repair? What about on cable TV for prisoners?
With the exception of the first question, the following are questions at hand in a Michigan lacking answers. Now, more than ever, taxpayers have a right to know how their hard-earned money is spent as the state faces an uncertain future due to budget woes. In the five years I have participated on the House Appropriations committee, never have I seen such a blatant display of negligence to the financial burden on the state of Michigan.
Numbers cannot lie. Revenue-neutral budgets will not ease the ever-growing deficit. As a result, taxpayers will be forced to produce the funds necessary for Michigan’s survival via a tax hike.
In response, House Republicans are streamlining the effort with legislation called the Michigan Government Funding Accountability and Transparency Act. This law would create a public, searchable Web site listing every expense incurred by state government.
The FAT Act is modeled on bipartisan federal legislation passed by Congress and signed into law last year. Minnesota, Oklahoma, Texas, Kansas and Hawaii have removed the magical curtain to allow taxpayers to know where their money is spent.
These five states have similar programs currently in place to show state expenditures at the click of a mouse.
House Democrats have voiced Michigan’s need to raise taxes to solve its budget deficit over and over again. How are taxpayers supposed to know if the claim is true? That question is especially important since they don’t even have a way to see how the government is spending their money.
Michigan cannot and will not be taxed out of poverty and into prosperity. Under the FAT Act, anyone surfing the net may view exactly how Michigan tax dollars are spent. This Web site takes away the curtain of government and allows taxpayers to decide if government is as lean as it claims or if there is room for improvement.
Taxpayers have a right to know how their money is spent. With today’s technology, there is no good reason to keep this information veiled by government.
Unfortunately, some Democratic leaders have already made their opposition to this plan known. The governor attacked this idea as a “distraction.” House Democrats’ spokesperson referred to the Republican proposal as “smoke and mirrors.”
It is difficult to understand opposition to this bill. Making government more transparent is a good thing. If there truly is no more fat to cut and government really is running as lean as possible, no one should have any objection to letting everyone see how the money is spent.
Posting state spending information will confirm to taxpayers that their hard-earned dollars are used in a way that is responsible. This would make government more efficient by exposing all excess. All lawmakers who are serious about solving Michigan’s budget crisis should support the Government FAT Act and assist in the implementation of this plan immediately.
Daniel Acciavatti, R-Chesterfield Township, represents the 32nd District of the Michigan House. Write him: Box 30014, Lansing, 48909-7514; call him: (517) 373-8931; or e-mail him: danielacciavatti@house.mi.gov

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Nearly a deal on business tax
Democrat charges sabotage; Republican rejects that

May 31, 2007
BY CHRIS CHRISTOFF, FREE PRESS LANSING BUREAU CHIEF

LANSING — Five hours of negotiations Wednesday by lawmakers to draft a new Michigan business tax broke off with one Democratic leader accusing Senate Republicans of sabotaging a potential deal.

Rep. Paul Condino, D-Southfield, said a deal was within grasp when Senate Republicans backtracked on agreements after meeting privately with Senate Majority Leader Mike Bishop, R-Rochester. Condino is a member of a bipartisan group negotiating a new business tax.

Condino said Bishop did not want a final deal in time for the Detroit Regional Chamber’s Mackinac Policy Conference, which began Wednesday and attracts some of the state’s leading business executives.

Some speculated the conference could be used as political theater by Gov. Jennifer Granholm and legislative leaders to sign a business tax deal.

“We made a lot of progress. The Senate didn’t want to sit at the table,” said Condino, majority vice chairman of the House Tax Policy Committee. “My feeling is Sen. Bishop did not want to cut a deal before going to Mackinac.

“Had we stayed at the table we might have reached an agreement. It was bad faith dealing by Mike Bishop who wanted to put his own ego on the line at Mackinac rather than do what businesses want him to do, which is put together a business tax plan.”

Bishop’s spokesman, Matt Marsden, fired back that Condino was out of line, and that Senate Republicans want to write a complex tax plan that is good public policy, rather than rushing to an artificial deadline.

“These negotiations will take time to create a policy that will move Michigan forward into the 21st Century, and stimulate the economy and create jobs,” Marsden said. “These things don’t happen overnight. Mr. Condino’s comments don’t contribute to the process.”

Condino said the work group whittled three major disagreements down to one before talks collapsed.

House Democrats and Senate Republicans have offered competing business tax plans. At the start of talks Wednesday, Granholm said the two sides were close, though she did not expect final votes to occur until next week.

The new tax would replace the Single Business Tax, which expires at the end of 2007 by edict of a Republican-led Legislature.

House OKs two bills

Also Wednesday, a key piece of Michigan’s budget puzzle cleared the state House. The chamber approved two measures to dip into large funds to plug more than half of an $800-million deficit this fiscal year. Both are expected to be passed in the Senate next week.

One bill would allow the state to sell up to $400 million in bonds, and pay back the money using annual payments to the state from five tobacco companies. The companies agreed in 1998 to pay the state about $300 million a year under a legal settlement.

Of the bond sale money, $204 million would go to public schools, and thus head off a reduction in state school aid in June.

A second bill would allow the state to shift money from a student loan program to balance the general fund budget. That money, about $90 million, is considered surplus and would not affect future student loans.

Critics of the plan to use tobacco money to balance the budget say it only delays difficult decisions to raise taxes or make painful budget cuts. Securitizing the tobacco money means the state will receive a lump sum that’s worth less than what it will pay back to bond holders.

“It’s the only choice they’ve got if they’re not willing to take on tough issues,” said Bill Rustem, president of Public Sector Consultants in Lansing. “It’s a bad idea because it takes away revenues from the future. It kicks the can down the road.”

Then there’s next year…

Granholm and House Democratic leaders are calling for a large tax increase to avoid an estimated $1.6-billion deficit in the fiscal year that begins Oct. 1.

That deficit could grow if the state’s economy continues its downward spiral.

House Speaker Andy Dillon, D-Redford Township, acknowledged that using the tobacco and student loan funds is a temporary fix. He said the agreement will avoid layoffs of state employees, and cutting money to schools and Medicaid recipients.

“You’ll see us moving quickly in the next couple weeks to avoid this kind of thing in the future,” Dillon said.

He added, “This is 20 years of problems we’re trying to deal with in 5 months. That’s difficult to do.”
Contact CHRIS CHRISTOFF at 517-372-8660 or christoff@freepress.com.

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Borrowing, funding shifts keep state afloat in 2007

Wednesday, May 30, 2007
By Peter Luke, Lansing Bureau

LANSING — That was easy. It took the House all of 10 minutes Wednesday to balance the 2007 budget, voting overwhelmingly to fill gaping fiscal holes with more than $400 million borrowed from future tobacco lawsuit proceeds.

The true cost of that borrowing was immediately unclear, but backers said it helps the state avoid deep budget cuts and delays a tax increase.

Michigan first tapped into anticipated proceeds from the decade-old national tobacco lawsuit settlement in 2005. Some $400 million in upfront cash being used to fund high-tech business development, venture capital and tourism promotion will eventually cost some $860 million when the debt is repaid in 2027.
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House lawmakers also transferred $90 million from the Michigan Higher Education Loan Authority to the Merit Award Trust Fund. That move provides a one-time savings for the general state budget.

The Senate is set to approve the deal next week. Combined with Friday’s budget action that closed a $308 million budget hole, the moves mean that the 2007 state budget has been balanced primarily through the borrowing and shifting of money among various budget accounts.

House Speaker Andy Dillon, D-Redford Twp., defended the use of one-time measures as preferable to cutting schools, health care providers and local governments this late in the fiscal year, which ends Sept. 30.

About $203 million in tobacco funds in particular were earmarked by lawmakers for the state school aid fund. That averts a $116-per pupil cut in K-12 funding in June. And the Department of Community Health notified health care providers Wednesday that a 6-percent cut in Medicaid reimbursement had been canceled.

Using borrowed funds also avoids a tax increase before Oct. 1, but it means higher taxes in 2008 because a solution to Michigan’s structural budget problem — estimated to exceed $1.5 billion — has been put off once again.

“Unless there are more cookie jars or gimmicks, we have to have a tax increase,” said Sharon Parks, a budget analyst for the Michigan League for Human Services. “The more we balance the budget with borrowed money, we are absolutely failing to address the structural issue that we have.”

Dillon vowed that lawmakers in both parties would be “aggressive” in drawing the outlines of a 2008 budget in coming weeks and adopting the tax increases required to pay for it.

Rep. Alma Wheeler Smith, D-Salem Twp., voted against the borrowing, arguing it could be avoided if lawmakers would just raise taxes this summer. Senate Republicans have successfully insisted that any tax hike be postponed until fall.

Two main proposals are under discussion. One would hike the state’s 3.9-percent personal income tax rate. The second would apply the 6-percent sales tax to some consumer services, such as movie tickets.

GOP lawmakers in the Senate also had been insisting on a net tax cut in any rewrite of Michigan’s main business tax. Negotiators Wednesday were close to a bipartisan agreement on a replacement that would generate at least the $1.9 billion firms pay annually through the Single Business Tax, which expires at the end of the year.

The new tax would contain an income tax with generous credits for payroll and property in Michigan. All businesses would receive a 50 percent cut in personal property taxes; manufacturers would see a 75-percent cut. The plan would also tax gross receipts.

Employers say lawmakers have to enact a new tax by July 1, to allow six months for implementation. Business and political leaders gathering on Mackinac Island starting today for the Detroit Regional Chamber’s annual legislative conference are anxious for action.

Matt Marsden, spokesman for Senate Majority Leader Michael Bishop, R-Rochester, didn’t know Wednesday whether there would be a deal to announce on the island today or Friday.

“We’re more interested in making sure that we’ve got sound public policy that’s gong to move Michigan forward,” he said.

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Budget deal reached
State schools are spared; no tax hike — for now

May 26, 2007
Mark Hornbeck and Charlie Cain / Detroit News Lansing Bureau
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LANSING — State lawmakers and Gov. Jennifer Granholm Friday came to a budget deal for the current year, breaking a 3 1/2 -month impasse, that avoids shutting down government, cutting per-pupil state aid or enacting a major tax increase.

Legislative leaders, the governor and key aides huddled behind closed doors all day Friday and a deal cutting $317 million from the budget was announced to lawmakers about 6 p.m. About an hour later and without debate, the Democratic House approved the pact on a 69-37 vote; the Republican Senate quickly followed suit, 26-10.

The deal also involves tapping a substantial amount of money from the lawsuit settlement with tobacco companies — as much as $400 million.

Budget cuts include $26 million from universities, $3.6 million to arts and cultural programs, $5 million from lottery advertising, $4.5 million from the Legislature and $2.9 million from the judiciary. A reduction of $3.2 million from the Health Michigan Fund would affect programs that target minority health, family planning, cancer and smoking prevention.

Part of the solution rests with more budget gimmicks — such as delaying payments to colleges and universities by $83 million and tapping $167 million from a variety of funds. Those include the state campaign fund, the refined petroleum fund and the convention facilities pot.

Local governments were spared revenue sharing cuts of as much as $40 million. Many communities use revenue sharing for police and fire protection, and other basic services.

The agreement also averts a $116 per-pupil reduction in promised school aid that had been threatened since May 1. School district officials said that kind of loss at the end of the school year would be devastating.

House Speaker Andy Dillon, R-Redford Township, said he regrets some of the cuts, particularly in higher education.

“I’m not proud of these cuts,” he said. “But it gets us to our end goal.”

The legislative sessions scheduled for today — weekend sessions are rare — were canceled. Lawmakers will return to work next week to complete action on dealing with this year’s $800 million shortfall; the entire deficit was not eliminated by Friday’s action.

While this year’s problem will be addressed without a major tax increase, the same cannot be said for the budget year beginning Oct. 1, when spending is expected to exceed revenues by at least $1.6 billion. Chances are that income and sales tax increases will be needed to close that gaping hole; economists don’t expect a turnaround in Michigan’s economic fortunes until sometime in 2008.

Dillon declined to comment on any agreement on next year’s budget, saying only: “I’m comfortable we’re headed in the right direction.”

Under the agreement, the Senate will drop its proposal to siphon $290 million from the 21st Century Jobs Fund to deal with the deficit. That fund is the governor’s primary economic development tool.

The state’s leaders also agreed to abandon plans to cut $19 million in Medicaid reimbursement to doctors and hospitals.

Senate Majority Leader Mike Bishop, R-Rochester, was a key player in negotiations and insisted all along that the current year’s budget will be resolved without a tax increase that Granholm had sought.

“I am confident the trust we established will allow us to eliminate the remaining 2007 deficit without a tax increase,” he said. “I am more confident than ever before that we have the wherewithal to solve this crisis and do right by the citizens of this state.”

Liz Boyd, the governor’s press secretary, said Friday’s negotiations resulted in “progress that will protect the priorities of this administration which are public education and health care.”

“We have made significant progress and talks continue,” she said. “But we are fully confident that when all is said and done, the end result will be a resolution of the budgets for 2007 and 2008.”

Leaders are certain to draw criticism for resorting to another short-term fix — the tobacco settlement fund — to address a long-term budget imbalance. But Granholm and legislative leaders were under intense pressure to strike a deal by June 1 without cutting school aid or raising taxes, which limited their options.

“It’s not ideal,” said House Republican Leader Craig DeRoche, R-Novi. “But the important thing is we balanced the budget without tax or fee increases.”

Chunks of the tobacco money are already committed to paying for merit scholarship awards for students and fueling Granholm’s 21st Century Jobs Fund, her major economic development plan. Those programs are not threatened by this agreement, leaders said.

John Artis, superintendent of the Dearborn schools, welcomed news that school aid would not be chopped, which could spare the district $2.2 million in cuts. But he called the situation ridiculous and said schools were used as a “political football.”

“There should never have been the politics played with schools that were played,” he said.

Jimmy Womack, president of the Detroit Public Schools’ board, said the cuts would have left a $14 million hole in the city schools’ budget.

“It would have been devastating for our district,” he said.

While the Legislature was considering the new deal, Leon Drolet of the Michigan Tax Alliance looked on from the gallery sporting a “recall Granholm, recall Lansing” T-shirt. His group has been vigorously lobbying against a tax hike to balance the budget. The specter of the 1984 recalls of two Democratic senators who supported an income tax increase has hovered over the budget deliberations since the beginning.

Detroit News Staff Writer Mike Wilkinson contributed to this report. You can reach Mark Hornbeck at (313) 222-2470 or mhornbeck@detnews.com.