CHICAGO — Michigan legislators Tuesday sent Gov. Rick Snyder the final piece of a $48.2 billion all-funds fiscal 2013 budget that reflects the state’s stabilizing fiscal position.
The spending plan taps better-than-expected tax receipts to make a $130 million payment to prefund its massive teacher retiree health care liability for the first time in decades and to make a $140 million deposit into a steadily growing rainy-day fund. The budget includes no one-time revenue-raising measures or borrowing.
Separately, a key House committee Wednesday approved a $304.5 million capital bill for university and community college construction projects that have been on hold for two years.
Although the final 2013 budget includes the $130 million payment for other post-employment benefits, lawmakers continue to debate the legislation that would enable the payment as well as other sweeping changes to the state’s massive teacher retirement system. The Michigan Public School Employees’ Retirement System is the state’s largest retirement system, with a pension and OPEB liability totaling $45 billion.
Lawmakers passed the budget months ahead of the state’s fiscal year start on Oct. 1. The new spending plan lacks the drama of the current budget, which closed a $1.5 billion shortfall, eliminated the Michigan Business Tax, and imposed several new taxes on individuals.
“Certainly the magnitude of the change is not anywhere near what we were doing last year,” said Kyle Jen, deputy director of the nonpartisan House Fiscal Agency. “This year they started with a budget that was basically structurally balanced, and there was a relatively small amount of resources available above and beyond what was expected, so the discussion was mainly about how to allocate these additional funds.”
The 2013 budget, including federal funds, totals $48.2 billion. The general fund totals $7.5 billion and the school aid fund, which includes higher-education and community colleges, totals $12.84 billion. General fund appropriations are rising 2.6% over the current year and school aid spending is roughly flat.
The $140 million deposit into the rainy-day fund is the third deposit made during fiscal 2012. At the beginning of last year, the fund totaled just under $2 million and it will total more than $500 million heading into fiscal 2013. Snyder has said he wants to continue to build the fund, which once totaled $1.2 billion in 2000, when Michigan was still a triple-A rated state.
The budget did not tackle transportation funding. The Michigan Department of Transportation maintains a separate budget, and has faced big shortfalls for several years. The new 2013 budget transfers $110 million into MDOT’s coffers to ensure it has enough local matching dollars for federal transportation funds.
The transportation funding formula will likely be an important item on the Legislature’s agenda after the November House elections. Snyder has repeatedly said the state needs to overhaul the way it funds infrastructure projects to raise at least $1.2 billion in new money annually.
The governor is also reportedly close to announcing a final deal with Canada that would allow the state to move forward with a new trade bridge between the two countries. The deal is expected to include a $550 million loan from Canada that Michigan can also use as local matching funds for federal dollars.
Michigan’s economy grew by 2.3% last year, which was the sixth-best in the nation, according to the U.S. Commerce Department. That’s down from a 4.9% surge in 2010, but up from a 9% loss in 2009.
Standard & Poor’s rates Michigan’s $1.9 billion of general obligation bonds AA-minus with a stable outlook. Fitch Ratings rates the state AA-minus with a positive outlook, and Moody’s Investors Service maintains an Aa2 rating.
The state has $1.9 billion of outstanding general obligation bonds.