My experience in Flint, MI: A small part of the solution

Chelsea Lewis

Chelsea Lewis

Ever since I was young, my parents stressed upon me the importance of volunteering and becoming a part of my community. I was told never be quick to judge someone but instead to listen to his or her story and be supportive, for someday I might appreciate the same kindness.

These conversations with my parents immediately came to my mind when I was reading the countless news stories coming out of Flint. The water crisis had taken over local, state and national headlines and the results were heartbreaking. The images of poisoned water and people demanding action stayed with me. I was upset and disappointed that something like this could happen in my state. (more…)

Expanding overtime will help more Michigan workers make ends meet

LANSING—The Michigan League for Public Policy issued the following statement on today’s federal rule change expanding the eligibility for overtime of salaried works. The League wrote a blog on this issue when it was announced last summer: www.mlpp.org/overtime-rules-just-got-better. The League also compiles a report entitled Making Ends Meet that lists the salaries that  different workers need to make ends meet by county, and also provides a calculator. The statement may be attributed to League President and CEO Gilda Z. Jacobs. (more…)

I’m done riding the revenue roller coaster

I hate roller coasters—they make my head hurt and I can never get my feet back under me after riding one. But twice a year, I ride one as I wait to see whether state revenues will come in above projections, below targets or on track. Yesterday’s revenue estimating conference made it clear that we will have some tough budget decisions to make for next year, but the truth is that it shouldn’t be like this.

The good news is that revenues, year after year, are projected to grow. However, Michigan’s growth isn’t as robust as we originally predicted only five months ago. This means that there will be less to work with when deciding funding priorities in next year’s budget, potentially leaving many Michigan residents, communities and schools further behind. Thankfully, Michigan is able to get federal funds for various programs, and lawmakers should review the budget and fund those areas, such as child care and the Heat and Eat program, for maximum impact. (more…)

Low revenues stress need to help struggling Michiganians, review billions in tax expenditures

For Immediate Release
May 17, 2016

Contact: Alex Rossman
arossman@mlpp.org
517.487.5436

LANSING—The Michigan League for Public Policy issued the following statement on lower state revenue estimates announced at today’s Consensus Revenue Estimating Conference. The League also released a report today, Review Tax Expenditures to Help Fix Michigan’s Broken Revenue Stream, offering a solution to the state’s money woes. The League’s budget priorities, including expanding child care assistance, can be found at www.mlpp.org/state-budget. The statement may be attributed to League President and CEO Gilda Z. Jacobs. (more…)

Review tax expenditures to help fix Michigan’s broken revenue stream

pdficonMichigan has a budget problem, and simply put, there just isn’t enough money to go around. Michigan has experienced crisis after crisis—the Great Recession, nearly record-high unemployment, municipal financial emergencies, the city of Detroit’s bankruptcy, the Flint water crisis and the financial struggles of Detroit Public Schools to name a few. In attempting to fix them, the state has relied on budget cuts, temporary Band-Aids or one-time pots of money. It hasn’t worked. Michigan’s disinvestment in its schools, infrastructure, communities and people needs to be reversed, and it cannot do so without more revenue.

Revenue tax expenditures chart 1Unfortunately, at the same time that the state needs more money, policy trends have continually pulled more out of our state budget. In recent history, we have spent more in state and local tax credits, deductions and exemptions each year than we do in total budget spending from state general and restricted funds—a difference of roughly $4 billion in 2015. On top of this, instead of increasing revenues to cover increasing costs, the Legislature shifts around our revenue streams, leaving potential shortfalls to be resolved with budget cuts. Lawmakers need to have a better idea of how much money we are failing to collect, review existing tax expenditures and earmarks to make sure they are still good policy, and provide accountability for new tax breaks and other policy changes.

Revenue tax expenditures chart 2State Revenues Can’t Keep Up

Michigan’s revenues have not been able to keep up with inflation. In terms of actual dollars, total state General Fund and School Aid Fund revenues anticipated for budget year 2017 have grown about 22.7% since 2010, the trough of Michigan’s recent recession. However, when adjusted for inflation, the state is 17.7% below 2000 levels. What is most interesting though is that in actual dollars, for budget year 2017, state General Fund dollars are anticipated to be 4.4% below 2000 levels despite the fund’s more robust growth since 2010.

Revenue tax expenditures table 1While state revenues continued to be negatively affected by the decade-long recession felt in Michigan, the state became increasingly reliant on federal funds to help balance its budget. In 2001, the state General Fund and federal funds contributed nearly equal amounts to the state budget at 26.4% and 27.1% respectively, but the trends have diverged significantly since. Even after the federal government withdrew the American Recovery and Reinvestment Act (ARRA) funds following 2011, federal revenues still contribute over 40% of the funds necessary for Michigan’s budget, while state General Fund revenues have dropped to below 20%. Over the past 10 years, our total budget has grown by 29.7%, and federal funds appropriated in our state budget have grown by 75.1% in that same time period, while state spending from state resources has only grown by 8.8%.

Revenue tax expenditures chart 3It would be easy to blame Michigan’s revenue problems on the economy, but we are in our sixth year of economic recovery and still struggling. Our situation has been compounded by tax changes that have done little to help and even caused harm, including a tax reform that largely benefited businesses but meant less money for Michigan’s people and the state, and policy shifts that have made more of our revenue streams restricted in use. Michigan needs to take a hard look at the money it foregoes due to preferential tax treatment to ensure that Michigan has a fair and adequate revenue system.

Tax Expenditures: Not Just Loopholes Anymore

Revenue tax expenditures chart 4Tax expenditures, commonly called loopholes, are broadly defined as revenue foregone because of preferential tax treatment in the form of credits, deductions and exemptions, or lower tax rates given to individuals and businesses. The state generally divides them into five main categories: business privilege, consumption (such as sales and use taxes or tobacco taxes), personal income, transportation and local/property. These tax expenditures are often called silent spending because, like appropriations, they allocate resources for public purposes but do so through the tax code rather than through the annual state budget process. They have a significant impact on the annual budget process as they reduce or eliminate revenue that would have otherwise been collected, but are not regularly reviewed and evaluated.

Typically, these tax credits, deductions and exemptions are used for two purposes. First, they redistribute or reduce the impact of taxes on low-income individuals and businesses. For example, the Homestead Property Tax Credit helps lower property taxes and makes living in Michigan more affordable for residents with high property taxes. Additionally, the constitutional sales tax exemption on food helps level the playing field for lower income families as they tend to spend a higher proportion of their incomes on food, and without the exemption, would also spend more of their money on taxes. However, even with this targeted tax relief, Michigan’s lower-income families still pay nearly twice the tax rate of the wealthiest in terms of state and local taxes.

Revenue tax expenditures chart 5The second purpose of tax expenditures is to influence the behavior of individuals or businesses. The federal and state Earned Income Tax Credits are only provided to individuals who have income from a job or self-employment and are intended to encourage work while helping individuals make ends meet. And local property tax abatements encourage either the establishment of or the renovation or replacement of various business facilities (e.g., industrial facilities tax abatements or obsolete property rehabilitation abatements).

While they are commonly called loopholes, most true “loopholes” do not exist. The foregone revenue resulting from these credits, exemptions or deductions is not an unintended consequence of tax changes or unintended tax avoidance methods. Most of these expenditures were purposely written in the tax code. However, other intended policy changes can have tax implications whether intended or not. For example, changes made in 2012 to the Insurance Code resulted in automobile insurance providers being able to claim a tax credit amounting to $60 to $80 million per year. But this unintended consequence was not discovered until 2016. However, once these tax expenditures are written into the tax code, they are difficult to be unwritten, and their effect often grows.

Revenue tax expenditures chart 6Continued Erosion of the General Fund

Another trend in Michigan fiscal policy is to make funds restricted in use. These revenues are restricted by the State Constitution or state statute, or otherwise are only available for specified purposes, and generally remain in the restricted fund if they go unused during a budget. These include most fee revenue, the School Aid Fund and most funds that are used for transportation purposes. Most of the state-sourced revenue in Michigan’s budget is restricted funds.

Revenue tax expenditures table 2Over the past five years, the Legislature has passed two main packages that have continued the trend in making funds restricted: the Personal Property Tax repeal and the roads plan of 2015. The repeal of the Personal Property Tax was originally enacted in 2012, amended in 2014, and made effective by a ballot initiative in August of 2014. Most of the discussion centered on how to reimburse schools and local units of government for the revenue lost due to the repeal, and the mechanism for making them whole was dedicating some of the currently unrestricted Use Tax revenue exclusively for that purpose.

Revenue tax expenditures chart 7Furthermore, in 2015, lawmakers enacted a road funding plan that included some new restricted revenue in tax and fee increases, but also dedicated a significant amount of currently unrestricted income tax revenue to transportation purposes. Ultimately, this will shift $600 million annually away from our General Fund to be used for road repairs and maintenance.
These two changes are anticipated to divert over $800 million away from our state General Fund by budget year 2020, potentially squeezing our budget and jeopardizing other funding priorities. Once changes to the Homestead Property Tax Credit are taken into consideration, the diversion and foregone revenue total around $1 billion. This will have a long-term, lasting and detrimental impact on our state budget.

Where to Go from Here?

Michigan has already endured enough crises—the state’s dissolution of two public school districts, the city of Detroit bankruptcy, the Flint water crisis, the Detroit Public Schools financial crisis, in addition to many other schools and municipalities that are struggling—and is one more crisis away from not being able to fund the basic services Michigan residents rely on. Policymakers are intentionally stifling the state from being able to invest in its infrastructure, schools, people and businesses. Michigan must take a look at its inadequate revenue streams to determine where there is room for improvement.

 

Revenue tax expenditures chart 8Stop the erosion of state funds: Every year, the state nickels and dimes away at state funds without regard to—or sometimes knowledge of—the possible budget implications. These changes include new tax breaks, tax policy changes and shifting funds to pay for different services and programs. The funding that is left is often strained by growing budgetary pressures. Lawmakers should review existing restricted fund streams to ensure that they are sufficient to meet the state’s needs. Legislators must also understand the costs of each tax policy change to make sure that the benefit actually offsets the cost to other important state programs.

Review existing tax expenditures: Michigan lawmakers need to determine whether the benefits of various forms of preferential tax treatment still outweigh the costs to the state. While some of these credits, deductions and exemptions continue to suit the purpose for which they were intended, many go unchecked and simply cost the state money with little return. Michigan does have an annual report on state tax expenditures, but it does not include vital information as to the funds affected, the history of the expenditure, or an analysis as to whether it is serving its purpose. The state should establish a process for reviewing these spending measures to ensure that they are still accomplishing set goals and that the loss of state revenue is justified. As part of this evaluation, expenditures that no longer meet their intended purposes—or are no longer necessary—should be eliminated.

Revenue tax expenditures chart 9Make tax relief strategic, measurable and adjustable: The truth is, no one really likes paying taxes. But we should not cut taxes simply for this reason. Tax benefits should be given for a reason, whether to balance the scales for lower-income individuals through the Homestead Property Tax Credit or to encourage specific behaviors like the Earned Income Tax Credit, and the outcomes should be measurable. New tax expenditures should include measures to allow lawmakers to determine their usefulness, such as expiration sunsets for periodic review, accountability measures, or clawbacks to reclaim money from recipients that do not comply with requirements.

Endnotes:

  1. Patricia Sorenson. Losing Ground: A Call for Meaningful Tax Reform in Michigan. Michigan League for Public Policy. January 2013. Rachel Richards and Alicia Guevara Warren. Enough is Enough: Business Tax Cuts Fail to Grow Michigan’s Economy, Hurt Budget. Michigan League for Public Policy. November 2015.
  2. Both the Personal Property Tax repeal and the 2015 road funding plan took parts of revenue streams currently devoted to the General Fund and made them restricted funding.
  3. State of Michigan, Department of Treasury. Executive Budget Appendix on Tax Credits, Deductions, and Exemptions: Fiscal years 2015 and 2016. 2014. Retrieved from http://www.michigan.gov/documents/treasury/ExecBudgAppenTaxCreditsDedExempts_FY_20152016_476553_7.pdf.
  4. Institute on Taxation and Economic Policy. Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, 5th edition. January 2015. Retrieved from http://www.itep.org/whopays/.
  5. David Eggert. Michigan Budget: Inadvertent Tax Break for Car Insurers Targeted for Repeal. Associated Press. February 20, 2016.
  6. Mary Ann Cleary and Kyle Jen. A Legislator’s Guide to Michigan’s Budget Process. House Fiscal Agency. October 2014.
  7. See House Fiscal Agency analyses for House Bills 6022 and 6024-6026 and Senate Bills 1065-1071 of 2012; Senate Bills 821-830 of 2014, and Ballot Proposal 1 of 2014.
  8. See Senate Fiscal Agency analyses for House Bills 4370, 4376-4378, 4614 and 4616 and Senate Bill 414 of 2015.
  9. Michigan League for Human Services. Silent and Stealthy: Michigan Gives Away $35 Billion a Year. April 2010.

 

 

 

Increase reforms and support services in Department of Corrections budget

Budget Brief JPG USE THIS ONEpdficonMichigan spends approximately $2 billion each year to house prisoners, with Department of Corrections spending accounting for 19% of the total state General Fund—more money than higher education spending. As the 2017 state budget negotiations heat up this month, sweeping reform is needed to safely reduce the prison population. The League supports evidence-based alternatives to incarceration along with reentry services that keep individuals from reoffending or violating conditions of probation and parole and successfully reintegrate prisoners and reunite families. The League’s priorities for 2017 include increased funding for mental health services, full funding for Hepatitis C drug treatment for infected prisoners, and investment in effective reentry programs that provide opportunities for education and training and connections to future employers.

BB CorrectionsSince the release of the governor’s budget proposal in February, the House and Senate have approved their own versions of the 2017 budget for the Department of Corrections (DOC). The second consensus revenue estimating conference will be held on May 17th, where state economists and budget experts will brief legislators on updated state revenue estimates and set final spending targets. It is expected that joint House/Senate conference committees will meet right after the May 17th conference to negotiate differences between the House and Senate versions and come to agreement on the final budget bill that will be voted on by both houses and ultimately approved by the governor.

This brief compares the Department of Corrections budget bills that were approved by the House and Senate with the governor’s executive budget recommendations made in February, and includes the League’s recommendations for the final budget.

Prisoner Healthcare

Hepatitis C Drug Treatment: The governor recommended $17.3 million for Hepatitis C treatment for Michigan prisoners—$3.4 million for 2017 on top of the $13.9 million already transferred into the 2016 budget to cover Hepatitis costs this year. In 2013, approximately 4,445 prisoners, or 10% of the prison population, tested positive for Hepatitis C. With approximately 1,000 prisoners released from prison each year, many prisoners with Hepatitis C will return to their communities still suffering from—and potentially spreading—the disease if not treated.

  • Senate: The Senate did not increase funding for Hepatitis C treatment.
  • House: The House agreed with the governor to provide funding, however at a lower level of $12.3 million.

The League supports the governor’s recommendation to provide adequate and humane care for prisoners, including medical treatment, along with protecting the general public from infection from untreated prisoners who return to their communities.

Mental Health Services: The governor included $2 million for 17 new employees to address waiting lists for mental health services in prisons. Approximately 1 in 5 prisoners currently receive some form of mental health treatment.

  • Senate: The Senate provided $1 million for nine new mental health employees and related services.
  • House: The House agreed with the governor to provide $2 million for 17 new employees and related services.

The League supports the governor’s funding level, which may bring the state closer to providing needed mental health services to the high proportion of mentally ill inmates. Prisons and jails house more mentally ill people than psychiatric hospitals in Michigan.

Substance Abuse Services for Probation Violators: The governor recommended $750,000 for a new 30-day program to prevent relapse and serve as an alternative to residential treatment for prisoners on probation that violate due to substance use. Approximately 250 probation violators would be treated.

  • Senate: The Senate did not include funding for this initiative.
  • House: The House agreed with the governor and provided the full recommended amount of $750,000.

The League supports the governor’s recommendation to improve rehabilitation programs for parole violators.

 

Flint and beyond: Cities in crisis need more funding from the state

Budget Brief JPG USE THIS ONEpdficonAs the Legislature rushes to finalize the state’s budget, the League continues to prioritize funding for municipalities that are struggling because of a long economic downturn and inadequate state support. The League supports the emergency services provided to Flint, as well as ongoing and long-term state efforts to help identify and treat developmental delays in children and other related health issues for all residents. To prevent future crises, the League also supports full funding of statutory and county revenue sharing, and urges lawmakers to evaluate and reform Michigan’s tax system to ensure that there are adequate resources to keep children and families healthy and safe.

The recent Detroit bankruptcy, the problems facing Detroit Public Schools and the ongoing water crisis in the city of Flint have drawn national attention, but municipal finance problems are not unique to Detroit and Flint and are not even unique to Michigan’s urban centers. Falling property values during the Great Recession resulted in decreased property tax revenue, compounded by state government’s continual cutting and underfunding of statutory revenue sharing. While lawmakers do need to urgently help resolve the Flint water crisis and take care of the kids and people it harmed, they must also think of the state as a whole to ensure that other municipalities do not fall victim to similar problems.

BB Flint and Beyond graphic 1The House and the Senate have both voted out their separate 2017 Treasury budget bills which include revenue sharing, and the Senate has approved a current year budget supplemental to provide $128 million for some additional services to the city of Flint that is awaiting House action. On Tuesday, May 17th, the May Consensus Revenue Estimating Conference will be held to allow state budget experts and economists to reassess expected state revenues. From there, the budget is on a fast track, with legislative and administration leadership setting departmental spending targets and House/Senate conference committees meeting right after the conference to reconcile the differences in their budget bills.
This report outlines the League’s continued support for Flint and our priorities in the 2017 budget to ensure that other municipalities have the funding they need in order to avoid a future financial—and public health—crisis.

Flint Water Crisis

Just before our current budget year began (October 1, 2015), the state was mired in a crisis. High blood lead levels had been found in an increased number of Flint children, caused by high lead levels pouring from the faucets in their houses. The exposure of the residents of an entire city to lead toxins is a disaster that was preventable and compounded by state government’s denial and delayed response. This crisis now calls for an aggressive and long-term state response, and current year and future budget considerations are being made to address it.

Enacted 2016 Supplemental Budget Funding

Enacted Emergency Provisions: After the water crisis became too severe to be ignored, Michigan lawmakers did come to Flint’s aid, enacting a number of emergency funding provisions totaling $67.4 million ($59.8 million state funding). Much of this early aid focused on getting much-needed water-related resources to Flint residents, including bottled water, lead-removing water filters, funding to reconnect to the Detroit Water and Sewerage Department, and a partial credit to residents on bills for the water they are unable to use. Also included in some of these early budget supplementals was funding for additional school nurses, Early On service coordinators, testing for lead in both blood and water, and nutrition services through the WIC (Women, Infants and Children Special Supplemental Nutrition) program.

Proposed 2016 Supplemental Budget Funding Awaiting Action

Educational Services: The governor recommended $25.6 million ($6 million state funding) for half-day child care services for children up to age 3 regardless of income to help mitigate developmental delays; intervention services for children with lead-associated developmental delays; and nutrition programs to ensure access to healthy fruits and vegetables. An additional $9.2 million (all state funds) was recommended by the governor for Early On services to children under 5 years old who did not participate in the Great Start Readiness Program.

  • Senate: The Senate agreed with the governor on both the $25.6 million for child development and nutrition services and $9.2 million for early intervention services through Early On.
  • House: The House only supported the governor’s recommendation of $9.2 million for Early On and has not yet considered $25.6 million for child development and nutrition, indicating that it would consider Flint assistance during its deliberations on the 2017 budget.

Health and Human Services: The governor proposed $8.3 million ($2.2 million state funding) for food bank resources including use of mobile food banks, evidence-based home visitation programs to provide parenting resources and identify developmental delays, and intensive services for children.

  • Senate: The Senate agreed with the governor’s recommendation of $8.3 million for these resources and also provided $321,000 for the increased costs of department-contracted private child welfare agencies providing increased care and supervision of foster care children.
  • House: The House has not yet approved funding for these services, indicating that it would consider Flint assistance during its deliberations on the 2017 budget.

The state has also received approval from the federal government to expand Medicaid services in Flint to children up to 21 years old and pregnant women who were served by the Flint water system since April 2014, and who have income of up to 400% of the federal poverty level ($80,360 for a family of three). The federal waiver was approved May 3, 2016, and enrollment began on May 9, 2016, after the necessary state funding was found within the existing budget.

Infrastructure Updates: The governor proposed $25 million (all state funds) to begin replacing lead service lines in high-risk, high-hazard Flint homes.

  • Senate: The Senate agreed with the governor’s $25 million recommendation for lead service line replacement.
  • House: The House has not yet approved funding for these services, indicating that it would consider Flint assistance during its deliberations on the 2017 budget.

The League has supported the emergency services provided to Flint, but also recognizes the need for ongoing and long-term services to help identify and treat developmental delays in kids and health issues related to the Flint water crisis. The Flint water crisis is a canary in a coal mine, and infrastructure problems like Flint’s exist in municipalities statewide. Michigan must evaluate and reform its tax system to ensure that the state has adequate resources to fix the problems in Flint as well as prevent future crises statewide.

Funding for Michigan Cities and Local Governments in the 2017 State Budget

Constitutional Revenue Sharing: The governor recommended $781.5 million for constitutional revenue sharing, which appears to be a $2.4 million reduction from current year appropriated amounts but is actually a 3.9% increase above the January 2016 Consensus Revenue Estimating Conference (CREC) estimate for the current year. Under Michigan’s Constitution, 15% of the sales tax levied at the rate of 4% is distributed to all Michigan cities, villages and townships (CVTs) on a per capita basis. This is an automatic, mandatory payment and is not subject to annual appropriations. Adjustments are made based on the January and May CREC estimates, and the amounts appropriated are based on these estimates. However, actual payments will be based on the amount of sales tax collected.

  • The House and the Senate agreed with the governor’s recommendation.

Cities, Villages and Townships Revenue Sharing: The governor proposed eliminating $5.8 million in one-time restricted sales tax revenue and removing the per capita distribution component. By doing so, 101 cities, villages and townships (CVTs) that were included in the current year distribution would not receive a payment next year, and CVTs that were eligible for a higher per capita payment would be reduced to the previous appropriation level.

Michigan’s statutory revenue sharing program has a long history. In the late 1990s, the statute was amended to implement a new distribution formula. However, since budget year 2002, actual appropriations have been routinely well below the full funding guideline, and changes in the formula have completely eliminated statutory revenue sharing for 1,033 CVTs. Actual statutory revenue sharing was last used in budget year 2011. Currently, all allocations and distribution formulas are provided for in the annual appropriations bill, and 587 CVTs are eligible for a total of $248.8 million in revenue sharing in the current budget year.

  • The Senate reduced funding by 1.5% but maintains eligibility for all local units that are eligible for a payment in the current year.
  • The House retained current year funding levels to ensure that all CVTs eligible for a payment in the current year will be eligible for 100% of that amount in the next budget year.

County Revenue Sharing and County Incentive Program: The governor proposed increasing county payments by $467,500 in 2017 to accommodate two new counties (Alcona and Charlevoix) returning to state revenue sharing, as well as maintain full funding. In an agreement to balance the budget, county revenue sharing was suspended in the 2005 budget year. Counties created reserve funds with their own revenues from which they were allowed to draw an annual amount. Once their reserve funds were exhausted, the counties would be eligible for state revenue sharing payments equal to their final authorized withdrawal amount. In the current year, about 76 counties receive state revenue sharing payments, and seven counties still draw from their reserve funds.

  • Senate: The Senate provides funding for the newly eligible counties and increases payments to all eligible counties by 2%.
  • House: The House agreed with the governor.

Financially Distressed Cities, Villages and Townships: The governor recommended level funding of $5 million for a program that provides grants of up to $2 million for cities, villages and townships with signs of fiscal distress for projects that move the municipality toward financial stability.

  • The Senate and House agreed with the governor.

The League supports full funding of statutory and county revenue sharing. For too long lawmakers have shortchanged our struggling municipalities and counties, and it should come as no shock that many of them have fallen on financial hard times. The infrastructure and financial problems in Flint and Detroit are due in part to continued state disinvestment. While an immediate influx of state support in statutory revenue sharing is likely impossible, the state should at least maintain what has been provided in the current year and should start making strides to provide the increases that these municipalities require.

Budget funding for adult education, training will help workers and boost economy

Budget Brief JPG USE THIS ONEpdficonWith the 2017 state budget expected to be wrapped up by the end of May, the League continues to push for a strong postsecondary education system that enables lowpaid workers to increase their marketable skills while working and taking care of their families. The League supports financial aid for low-paid workers with families who are trying to acquire occupational skills and have been out of high school for more than 10 years, stronger tuition restraints for public universities coupled with additional funding, and increased investments in adult education (School Aid budget). Inadequate access to adult education negatively affects community colleges, because many students needing remediation will be required to take developmental education at the colleges rather than beginning their occupational training programs college-ready.

BB Budget funding for adult educationVersions of the 2017 Community Colleges and Higher Education budgets have already been passed separately by the House and Senate. At the Consensus Revenue Estimating Conference on May 17th, lawmakers will get an update from state budget experts and economists on state revenues that will inform the final budget spending targets. The Legislature is looking to complete the 2017 budget and send it to the governor by the end of May. Differences between the House and Senate budgets will be negotiated in joint conference committees, which will begin meeting soon after the May 17th conference.

This report examines the differences in postsecondary education and training in the budgets that were approved by the House and Senate and the primary decisions that will need to be made before the budget is finalized.

Financial Aid

Tuition Incentive Program: The governor’s Higher Education budget recommended $2 million in new funding for the Tuition Incentive Program (TIP), which serves students from households that are eligible for Medicaid, bringing the total funding for the program to $50.5 million.

  • Both the House and Senate agreed with the governor’s recommendation to add $2 million for the TIP.

The League supports the increase in funding for the TIP, as it is specifically targeted to students from low-income households.

Part-Time Independent Student Grant: Neither the Community Colleges budget nor the Higher Education budget proposed by the governor for 2017 included funding for the Part-Time Independent Student Grant, which serves individuals who have been out of high school for more than 10 years and/or are over 30 years of age. This grant had been included in the 2016 Community Colleges budget, but was cut from the final budget in conference committee. The failure to include funding for the grant in 2017 means that the upcoming school year will be the seventh year in a row that there is no state financial aid to help this population attend a community college or public university.

  • Neither the House nor the Senate added funding for the Part-Time Independent Student Grant.

The League supports funding for the Part-Time Independent Student Grant to help older students in either the Community Colleges or Higher Education budget.

Other Financial Aid Programs: There are two other grant programs in the Higher Education budget, both of which are means-tested based on the amount a family needs to meet tuition levels rather than on the family’s income. The Michigan Tuition Grant helps students attend private not-for-profit institutions and the Student Competitive Scholarship is based on both merit and need. The governor did not recommend increases for either of these grants.

  • Senate: The Senate added $404,000 for the State Competitive Scholarship and $748,800 for the Michigan Tuition Grant.
  • House: The House agreed with the governor’s recommendation to not add funding for the State Competitive Scholarship and adds $1,157,200 for the Michigan Tuition Grant.

The League supports keeping these two financial aid programs strong, as they are accessible to students from low-income families in addition to those from financially secure families.

Tuition Restraint

Tuition restraint is a limit on the amount a university may increase tuition and fees annually and still receive full funding from the state. The governor recommended increasing the cap from 3.2% to 4.8%, enabling universities to increase tuition and fees by a higher percentage than has been allowable in the past several years.

  • Senate: The Senate agreed with the governor’s recommendation to increase the cap from 3.2% to 4.8%, and added language that universities that exceed the cap will also not receive capital outlay funds (for school construction projects) in the 2018 or 2019 budget years.
  • House: The House agreed with the governor’s recommendation to increase the cap from 3.2% to 4.8% and added “or $500, whichever is greater” to the bill language.

The League supports tuition restraint as an attempt to keep tuition from rising too quickly, but prefers that Michigan undertake other strategies to actually bring tuition down and reduce student debt. Because much of the cost burden of supporting public universities has been shifted from the state to students, reducing tuition can only be done if the state restores the university funding that has been cut over the past decade.

 

 

Children of Michigan immigrants are waiting for an answer

Approximately 43,000 immigrant children in Michigan are currently living in fear of their parents being deported and their families being torn apart. President Barack Obama’s executive orders Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA) and Deferred Action for Childhood Arrivals (DACA) were positive steps taken to address the large number of immigrants stuck in limbo in Michigan and around the country. (more…)

Quit spreading misinformation: Michigan is NOT a high tax state

Around the state, a drum is constantly beating for tax cuts. We hear that tax cuts will make Michigan more competitive, that we will entice people to live here and businesses to move here. However, the idea that Michigan is a high tax state simply is not true.

A recent memorandum by the Citizens Research Council shows that Michigan’s tax incidence, or the general amount taxpayers pay, for 2013 is not really that high. The report used Census data and compared states in terms of tax revenue as a percent of personal income and tax revenue per capita. Using both of these methodologies, in terms of overall tax collections, Michigan ranked below the national average and at the bottom of all Great Lakes states. In fact, in terms of overall tax collections, Michigan’s per capita collection of $3,750 is 18% below the U.S. average, and where Michigan’s tax collections grew by $537 in three decades, the U.S. average grew by $1,715 in the same time period. (more…)

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