News Column

Gov. Snyder's budget plan calls for 6.1% hike for universities, more in Rainy Day Fund

February 5, 2014

By Paul Egan and Kathleen Gray, Detroit Free Press

Feb. 05 -- LANSING -- Gov. Rick Snyder will recommend increasing state funding to universities by 6.1% and adding $120 million to the state's Rainy Day Fund when he unveils his 2014-15 budget today, bringing the saving fund's total to $700 million , officials told the Free Press . Snyder will propose a hike in university funding of $80.3 million , bringing total state support to $1.33 billion , said Bill Rustem , Snyder's director of strategy. But extra funding will be tied to limiting tuition increases to 3.2%, he said. Michael Boulus , executive director of the Presidents Council , State Universities of Michigan , said he's "very pleased" with the proposed university increase. "It's double what K-12 and community colleges are receiving," Boulus said. "I think it recognizes the importance of strategic investment in public universities." Snyder will also put an additional $120 million into a subsidiary reserve fund to cover extra Medicaid costs in case the federal government reduces payments under the Affordable Care Act, Budget Director John Nixon said. And he will propose a 3% hike for Michigan's community colleges, Rustem said. The Free Press reported earlier that Snyder's budget is expected to include retroactive tax relief, with tens of thousands of lower and moderate income residents receiving checks this year, and a 2.8% boost in K-12 school funding, with more than 80% of the $322-million increase going to pay increased school retirement costs. The Rainy Day Fund , formally known as the Budget Stabilization Fund , was drained to near zero when Snyder took office in 2011, at the tail end of a lengthy recession. Snyder's proposal would bring the fund to its highest balance since 2001, when it contained $994 million . If a recession hits, "that money goes really quickly," Nixon told the Free Press . "The question is, do you want to be in crisis management ... or do you want to have some money there?" The amounts Snyder has added to the fund have been controversial with both liberals and conservatives. Snyder's recommendation today to increase the size of the Rainy Day Fund is sure to be controversial as well. Many on the left say it's still raining for many as Michigan emerges from the recession, and that the state should be spending more on education and social programs, not socking it away. Many on the right say the Rainy Day Fund is the product of excess taxation, and while it is OK to keep a certain amount of money in reserve, much of what Michigan has banked should be returned to taxpayers. The current balance is about $580 million . Nixon said having $820 million in the Rainy Day Fund and Medicaid sub-fund combined will bring the size of the fund close to 8% of the state's general fund, a move he said will help Michigan make the case for improved bond ratings with the New York rating agencies. The idea of the Medicaid reserve fund is to take some of the general fund dollars the state is saving under the Affordable Care Act and banking them in case federal funding is reduced. Snyder recommended $103 million for the Medicaid reserve fund last year, but the Legislature , which resisted expanding Medicaid eligibility under the ACA, rejected the recommendation. Democrats launched an advance attack on Snyder's budget for the 2004-15 fiscal year on Tuesday, saying budget decisions made in the past three years have hurt Michiganders in a variety of ways, including bigger class sizes and more financial struggles for vulnerable Michiganders. House Minority Leader Tim Greimel , D- Auburn Hills , called for a rollback of increased taxes on pension income that Snyder and the Republican-controlled Legislature imposed in 2011. Mark Schauer , the Democratic candidate for governor, said Monday that education should be the state's highest funding priority. Greimel said Snyder's past budget decisions have increased risks to public safety, citing the Sunday night escape of a convict serving a life sentence for four murders. "I don't know if the escape was the direct result of budget cuts," Greimel said. "But the governor's most important job is to keep Michiganders safe. And cutting guards does not protect the safety of Michigan residents." Russ Marlan , spokesman for the Michigan Department of Corrections , said it was too early to be pointing fingers at budget cuts as contributor to the escape. "We've already started a complete and thorough investigation. We're going to be looking at everything," he said. "It's a little premature to say had something been different in one specific area that this wouldn't have occurred." Michael David Elliot escaped from the Ionia Correctional Facility on Sunday evening after putting on a white kitchen uniform and cutting a hole in the prison's fence. He was recaptured Monday after taking a woman hostage, who managed to break free and call police. He is being lodged in the LaPorte County Jail in Indiana and is fighting extradition back to Michigan . The MDOC is securing a governor's warrant from Snyder to get Elliot brought back to Michigan , which could take two to three weeks. Marlan said it took about an hour for Elliot to get through two sets of fences and that a security vehicle passed within 20 feet of him twice during his escape. He also was caught on video that is supposed to be monitored by prison guards. "The director (MDOC Director Dan Heyns ) has a lot of questions that need to be answered," he added. Ari Adler , spokesman for Speaker of the House Jase Bolger, R- Marshall , said no escapes occurred in budget years 2010 and 2011 when the Corrections budget dropped significantly. Snyder will also recommend adding $50 million to a Michigan School Employees Retirement System reserve fund. ___ (c)2014 the Detroit Free Press Visit the Detroit Free Press at www.freep.com Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Detroit Free Press (MI)


Story Tools