Budget tinkering does both harm and good
Michigan lawmakers are busy reshaping the $56.3 billion budget Gov. Rick Snyder sent them, in some cases making it better, and in others putting key spending priorities at risk.
The state House passed its version earlier in the week, cutting roughly $283 million from the governor’s proposal. Part of that money is being set aside for future use. The Senate was expected late Thursday to pass a spending plan that trimmed $276 million from Snyder’s request, and also sets a large chunk of money aside to be spent later.
Holding back some money is not necessarily a bad decision. Both the House and Senate want to have cash on hand to revamp the teacher pension plan, which is underfunded by $26 billion and holds just 60 percent of what is needed to cover future obligations.
Republican lawmakers are pushing a plan to shift newly hired teachers out of defined benefit pensions and into 401(k)-style retirement saving plans. Doing so will require some upfront funding.
Finally moving to head off the coming public pension crisis in Michigan is a smart move. The Legislature failed to pass a reform measure in the last session, but will make another try this year.
Having the money on hand to make the legislation possible will increase its chance of passage.
But not all of the money sliced from the Snyder budget is being set aside for that purpose. Lawmakers also shifted money to some of their own agenda items.
Included on that list is an income tax cut. Lawmakers failed in an earlier attempt to cut the state’s 4.25 percent income tax, but seems determined to try again.
The benefit of a small tax cut must be weighed against the programs Michigan must slash to cover the lost revenue.
One item sacrificed in the House budget is a significant contribution to the rainy day fund.
Snyder has been faithful in building up the fund; it now contains more than $612 million. The governor wanted to add another $266 million this year to bring the fund closer to the magic billion dollar mark.
That’s a good investment for a couple of reasons. First, it will help spare Michigan from drastic spending cuts should tax revenues drop. And a healthy budget stabilization fund helps keep the state’s bond rating higher, bringing down the cost of borrowing.
Lawmakers have always had trouble saving that money, but it is just as prudent for the state government to set aside a nest egg as it is for its families to do so.
Money was added by the House and Senate to the governor’s education budget. Both chambers raised the per-pupil allowance.
But lawmakers slashed funds from the Corrections budget intended to beef up inmate training and re-entry programs. That would be money well spent, since such efforts are proven to reduce recidivism, and should be restored.
The budgets now go to conference committee to be reconciled, and the governor is likely to keep lobbying for his priorities.
Lawmakers should give much more consideration to saving the rainy day fund contribution, and to postponing an income tax cut until Michigan has met its infrastructure, education and health care needs.
— Detroit News