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State budget & taxes

State education and school aid budget, and revenue sources for schools

Budget update: Let's make a deal [with update]

Updated Wed. 5/25/11
The school aid budget was reported out of conference committee today, and sailed rapidly through the Senate. The “compromise” bill reduces the cut to K-12, but does not plow the funds into the foundation allowance.

Last week, the Governor and majority leaders of the Legislature announced a budget agreement that reduced cuts to public schools. They were able to do this because of the projected $430 million increase in State revenues for the current year. These are considered “one-time” funds, however, because a potential surplus for next year will be eaten up by the business tax cut recently passed by the Legislature.

Money, Money, Money: K-12 budget bills move to conference

House and Senate conferees will be able to negotiate virtually the entire K-12 budget from scratch, while passage of the Governor’s tax package narrows options and the revenue conference offers limited hope.

Over the next days, the members of the House and Senate conference committee on their respective versions of the School Aid budget will be hammering out a compromise, with virtually everything on the table – at least in theory. At the same time, passage last week of the Governor’s tax package – which eliminated the Michigan Business Tax and replaced it with the much smaller Corporate income tax and also increased personal income taxes on many filers – has effectively closed, for now, any options of increasing the revenue stream to school aid.

Finally, the May revenue estimation conference offered a glimmer of hope, indicating that revenues for the current fiscal year (2011) would be $132.4 million higher in the school aid fund and nearly $429 million higher in the SAF and General Fund combined. However, a potential $500 million overall surplus for next fiscal year largely evaporates with the tax package just passed, hitting the school aid fund especially hard.

State School Aid budget action alert

Update: 13 May 2011

Tax changes lock-in reduced revenues for schools and other public services

In a dramatic series of votes yesterday, the package of tax changes proposed by the Governor emerged from committee in the Senate, passed on the floor of the Senate (with a 19-19 tie broken by the Lt. Governor), was sent over to the House where it passed there as well. The Governor is expected to sign the bills shortly.

With this rapid-fire move, the legislature has essentially closed off any option of looking at new revenue to support schools, at least for the foreseeable future. Because of a spending item inserted in the bill, it will be exempt even from a statewide referendum. The bills eliminate the Michigan Business Tax and replace it with a Corporate Income Tax that brings in $1.1 billion less in revenue for next year – an effective tax cut of $1.1 billion in FY12 and $1.7 billion in FY13.

Some of this revenue loss will be made up with taxation of all pension income of new retirees, a 70% cut in the Earned Income Tax Credit, and the elimination or limitation of many other personal tax credits.

What this means is that any moderation of the cuts to schools will have to come from cuts in other areas or luck in tax collections.

State Budget action alert

Everyone who values public education in Michigan needs to speak out NOW

Dear Friends and Supporters of Education,

This is an extraordinary moment for public education in the state of Michigan. The full impact of the Great Recession, and of years of trying to ignore funding problems in education, are hitting our communities all at once. Dramatic changes are proposed, because "dire times require drastic measures." Over $1 billion would be cut from education under the Governor's proposed budget, most of that from K-12 education. These cuts would dramatically affect our schools, and limit the education we can offer to our children for years to come.

Do the changes make sense? Do they reflect the real needs and values of the people of Michigan? We're not so sure.

Budget Brief: Snyder's education budget proposal

Michigan Governor Rick Snyder presented his first budget proposals to the state legislature on 17 February. While it wasn't quite the "atomic bomb" Lt. Governor Brian Calley had promised, it produced shock waves nonetheless. By scrapping the Michigan Business Tax and replacing it with a much narrower corporate income tax, the proposed budget cuts business taxes by over $1 billion in 2011-12 and by $1.7 billion in the year after. To pay for this and still balance the budget, the governor wants to cut overall education spending by nearly $1.1 billion next year; his proposal also makes changes to the income tax that will increase revenues in large part by requiring retirees and low-income families to pay more in taxes. School districts may face overall reductions of $715 per pupil. Evidently, this is Gov. Snyder's vision for "reinventing Michigan."

Brief: Budget hangups

*Negotiations on a school aid budget for FY2011 ground to a halt as House and Senate conferees split on what to do with the projected School Aid Fund surplus.* After months of uncertainty, closure appeared near on the school aid budget for the 2010-11 fiscal year. A deal in principle was reached among House and Senate members on the conference committee reconciling the differences in "the two chambers' versions of the budget bill, SB 1163":http://legislature.mi.gov/doc.aspx?2010-SB-1163. The Senate version, passed before the "optimistic news from the May revenue estimation conference":http://www.miparentsforschools.org/node/127, had included further cuts of $118 per pupil plus larger transfers from the cash-strapped general fund. The revenue conference projections, however, allowed lawmakers to consider making no cuts at all for fiscal 2011. The news was good enough, in fact, that the School Aid Fund might emerge with a surplus when all was said and done. And that is where the trouble began.

A sliver of good news from the revenue conference

The State's key financial agencies released their consensus revenue estimate today, updating their predictions for state tax revenue for both this fiscal year and next. The consensus estimate for School Aid revenue for this year (2009-10) is now $10.75 billion, up $292 million (2.8%) from the estimates made in January. The estimate for next year (2010-11) is now $10.83 billion, up $352 million (3.4%) from the January estimates. These new projections may limit school aid cuts for next year to the $118 per pupil passed by the Senate earlier this spring, or possibly reduce it even more.

Status report: Where do we stand today? (Race to the Top)

For much of December, the Legislature was consumed with bills that lawmakers hoped would increase Michigan's chances to get a share of Federal "Race to the Top" funds. Money from this stimulus program would be awarded to states which came out on top in a competition which evaluated reform efforts, and Michigan might have qualified for as much as $400 million. In the end, Michigan was not chosen as one of the finalists for the first round of funding, but the changes to Michigan law enacted in late December are not voided as a result.

Status report: Where do we stand today? (Budget, Part I)

It has been a busy few months at both the state and local levels, and we at MIPFS have fallen behind in our reporting on state-wide issues. In an effort to remedy that, these status reports will give brief summaries of what has happened on the school funding front over the last few months. More detailed reports on each of these issues are coming in the next weeks. In these reports, we'll cover three areas: The school aid budget cuts for 2009-10, legislation that was part of Michigan's Race to the Top application, and school funding-related issues in the current 2010-11 budget debate.

A good race requires preparation

_The following action alert was sent out to MIPFS subscribers today._

Lets think clearly about the changes we make to qualify for Federal funding

Dear supporters of public education, This has been a busy fall for all of us at Michigan Parents for Schools, and you have have heard less from us than usual given the turmoil around education funding in Michigan. You will be hearing much more from us soon! But there is a fast-approaching issue which we wanted to bring to your attention today. Our main concern is that rapidly cobbled-together measures, designed to qualify Michigan to receive further Federal stimulus funding, will make permanent changes to our schools that have not received adequate consideration. We are especially concerned with the emphasis put on standardized testing as the primary measure of student achievement and the major factor in evaluating teachers, administrators and schools.


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