The governor and State Budget Director Robert L. Emerson today presented the 2011 executive budget recommendation that invests in our state’s most important priorities: creating jobs, educating children and protecting citizens while building on the steps the governor has taken over the past seven years to address the fiscal challenges caused by the national recession and struggles in the auto industry.
The fiscal year 2011 budget recommendation continues the governor’s commitment to reforming state and local government to make it less costly, more flexible and better able to serve the needs of citizens. The budget includes savings from reforms the governor outlined in January, including changes to the state employee retirement system that are expected to result in the retirement of more than 6,000 employees, a lower-cost health care plan for new state employees, and sentencing reforms that will further reduce the prison population.
In addition, the governor is proposing spending cuts that impact every state department. Altogether, the budget recommends more than $566 million in general fund spending reductions.
The overall budget totals $47.1 billion. It includes $7.9 billion in general fund spending and $11 billion from the School Aid Fund, and recognizes $20.1 billion in federal revenues. Highlights of the governor’s budget include:
• Funding for public schools, community colleges, universities and early childhood education are all maintained at current levels.
• The Michigan Promise scholarship is restored as a $4,000 tax credit available to any student who completes a degree and works for one year in Michigan.
• The 21st Century Jobs Fund is maintained at $75 million.
• Additional federal funding will allow for the expansion of the No Worker Left Behind, Michigan Nursing Corps and JET Plus programs which provide job-training.
• Additional federal funding will provide for the increasing number of citizens eligible for the food assistance program.
• A permanent funding source is created for tourism promotion, including the successful Pure Michigan advertising campaign, through a rental car fee.
• Revenue sharing payments to cities, villages and townships are maintained at current levels, and additional funding will restore revenue sharing payments to 38 eligible counties.
• Funding is provided to maintain the current level of Michigan State Police troopers.
The governor’s budget recommendation proposes restructuring the state’s tax system to fuel job creation and economic diversification, and prevent deep cuts for public schools until savings from long-term reforms are in place.
The tax proposal lowers the existing sales and use tax rates from 6 percent to 5.5 percent, expands the base of the sales and use taxes to include other services, eliminates the Michigan Business Tax (MBT) surcharge over two years, and reduces the gross receipts portion of the MBT over two years. Together, these changes provide $554 million in additional funding to the School Aid Fund in fiscal year 2011, but are revenue neutral by the end of the 2013 fiscal year.
When combined, the spending reductions, structural reforms and tax restructuring eliminate a projected $1.5 billion budget shortfall for the year that begins October 1, 2010.
In addition to submitting a balanced budget, which is required by the state constitution, the governor called on the legislature to pass a budget by July 1 to allow cities, schools, universities and other organizations to move forward with their spending plans which are dependent on state revenues.
• This budget reflects the critical changes we must make in state government: cut spending, attack the state’s structural deficit, reform government and restructure our tax system. These changes are essential if we are to maintain our critical investments in job creation and education, and provide the services citizens need during this time of economic transition.
• Spending cuts alone cannot create the economic growth and jobs that Michigan needs. We must continue to invest in things most critical to attracting business investment, and this budget makes those important investments.
• The tax changes — lowering the sales tax rate, expanding the base of the sales and use taxes to include other services, and eliminating the business surcharge — have been recommended by job providers across Michigan and suggested by almost every economist and expert who has reviewed Michigan’s tax structure.
• The changes to the tax system will help all Michigan businesses — large and small — grow and create jobs.
