Michigan Gov. Rick Snyder and legislative leaders are planning to use a budget surplus of several hundreds of millions of dollars to boost spending on roads, fund new school safety initiatives and pay down debts or build savings.
“Now, the devil is in the details,” said House Appropriations Chairwoman Laura Cox, R-Livonia. “I think it’s really good that collectively the three legs of the stool are kind of focused on three things we want to prioritize.”
With economic growth fueling additional income and sales tax collections, state officials on Wednesday increased revenue estimates that lawmakers and the Snyder administration will use to finalize the 2019 budget.
Combined general fund revenue and school aid fund revenue will top earlier estimates by $315.4 million this fiscal year and $182.4 million next year, leaving roughly a $500 million surplus heading into the final month of 2019 budget negotiations.
“That’s potentially money we can do those three things with,” said Senate Appropriations Chairman Dave Hildenbrand, R-Lowell. While roads and school safety are priorities, the plan “isn’t just spending, it’s also potentially paying down debt and putting away money in our savings account,” he said.
The combined surpluses represent less than one percent of the total state budget but give lawmakers more wiggle room as they hope to complete the negotiations by June. It is an early deadline that Snyder has met annually and hopes to achieve again in his final year in office.
Budget officials are set to meet Thursday, Friday and Monday to discuss revenue numbers, Hildenbrand said. The House and Senate have each approved separate $56.6 billion budgets for fiscal year 2019, but the House includes $157 million less general fund spending than proposed by Snyder.
Elevated revenue projections are “good news” reflecting a stronger economy and disciplined state budgets, said Treasurer Nick Khouri. But he warned that about half of the extra money this year is “non-recurring” and should not be built into future budgets.
“Without getting too precise on the math, as we’ve always said, use one-time revenue for one-time spending, and ongoing revenue for ongoing spending,” Khouri said.
Economists also warned of looming risks that could jeopardized continued job and wage growth projections in Michigan and the nation, including President Donald Trump’s brewing trade war with China.
Snyder has routinely pushed for adding money to the Budget Stabilization Fund, the state’s rainy day savings fund, that has grown to $891.7 million under his tenure. But Snyder also wants some of the budget surplus to go toward roads, said Budget Director John Walsh.
“I’ve very confident that we’re all comfortable with that as a priority,” Walsh said.
Republican majorities in the Michigan House and Senate have each developed their own school safety plans in response to a series of fatal shootings in other parts of the country. Democrats have proposed their own school safety plan, which Senate Minority Leader Jim Ananich of Flint said could benefit from the School Aid Fund surplus.
The general fund revenue should all go to roads, Ananich said Tuesday.
“The roads plan obviously didn’t work,” he said, referencing a 2015 road funding law that raised gas taxes and registration fees but has not yet been fully phased in. “So putting any dollars towards it to fix what we can is important.”
Snyder is also urging Michigan legislators to finance his $100 million Marshall Plan for Talent. While the House budget provides $75 million in funding, the Michigan Senate Appropriations Committee on Wednesday began debating — but did not vote on — a full $100 million spending plan.
“There’s still a lot of information we need to digest and chew on,” Hildenbrand said after nearly two hours of testimony on the governor’s plan.
Funding for the talent plan would not come out of the general fund or newly identified surplus. Instead, the Senate plan would shift $100 million from the Higher Education Student Loan Authority. State service on refinanced bonds is currently less than the amount being repaid by students, creating a balance the state would tap.
The Marshall Plan, a reference to post-World War II efforts to rebuild Western Europe, is designed to help close the “talent gap” and prepare young people for high-paying, in-demand technology jobs that may not necessarily require a four-year university degree.
The proposal includes funding to provide scholarships to low-income students seeking a degree in a high-demand field, new collaborations between schools and businesses, equipment purchases and school “career navigators.”
“As we finalize spending decisions, I plan to remain focused on sustaining record investments in K-12 education, improving our roads, building up the Rainy Day Fund, and implementing the Marshall Plan for Talent,” Snyder said in a statement.