CHICAGO -- Michigan Gov. Rick Snyder presented a budget Thursday that expands Medicaid, raises fuel taxes for a new infrastructure program, and includes a modest boost in bonding authority.
“This is a triple-A budget,” budget director John Nixon told reporters after officials presented the budget to legislators in the morning.
“I’ve been involved in many triple-A budgets and I’d put this budget up against any in the country,” said Nixon, who joined the Snyder administration in 2010 after serving as budget chief of triple-A rated Utah.
He said administration officials including Snyder would travel to New York soon to visit the ratings agencies. They made a similar trip in October, weeks before an election that featured several controversial constitutional amendments. Nixon said the election caused uncertainty, and that ratings analysts invited them to visit again after crafting a new budget.
“We’re poised and deserving of an upgrade, and I know it’s coming,” Nixon said. Michigan has ratings of Aa2 from Moody’s Investors Service and AA-minus from both Standard & Poor’s and Fitch Ratings, according to Michigan’s Treasury.
Snyder added that Michigan recently saw a 1.16% interest rate on a recent bond sale, referring to a November sale of triple-A rate environmental bonds.
“That’s the lowest rate we’ve ever had,” Snyder said. “That says the market is looking beyond the bond ratings to say, ‘Michigan is looking pretty good’.”
The executive budget proposal covers fiscal 2014 and includes proposals for 2015. The all-funds 2014 budget totals $50.9 billion and the general fund and school aid funds total $20.7 billion.
The largest two spending increases are $1.2 billion in new revenue for transportation infrastructure and $1.3 billion for Medicaid. The spending plan increases K-12 appropriations by 2%. It includes a $1 billion payment into the state’s other post-employment retirement system.
Snyder also proposed a $75 million deposit into the state’s rainy-day fund, boosting the account to $580 million from $2 million when Snyder took office in 2010.
The new transportation capital plan is one of the biggest items on the table. Snyder has pushed for new transportation dollars since his 2012 state of the state address. The 2014 budget would replace the current 19-cent per gallon fuel sales tax with a wholesale per-gallon tax that would translate into a 33-cent per gallon tax for the first few years. The proposal would also increase vehicle registration fees and give counties the option to raise their vehicle fees, with voter approval.
Snyder said without the investment, the state’s infrastructure will go downhill fast and require an estimated $25 billion in repairs after 10 years.
“This is the classic, you can change your oil or you can rebuild your engine,” he said.
Legislators have already introduced and started to debate a package of bills that would raise new road money. One measure would raise the state sales tax by 2 percentage points.
“We’re open to anything,” Nixon said Thursday morning as lawmakers peppered him with ideas on how to generate the money. “We’re trying to solve a $1.2 billion problem, and it’s a difficult task.”
Snyder is the second Midwestern GOP governor this week to propose expanding Medicaid. Ohio’s Gov. John Kasich Monday pushed for an expansion as part of his budget plan. Snyder said the move would cover 470,000 more residents and save the state $200 million a year during the early years when the federal government covers 100% of expansion costs. The state would save $1.2 billion through 2023.
Snyder also proposed depositing $103 million into a newly created health savings account. The budget assumes a general fund balance of $278 million at the end of 2013 and $15.7 million at the end of 2014, according to Nixon.
On the bond side, the budget calls for $100 million of bonding authority for water and sewer projects across the state. It proposes a competition in 2015 for $100 million in bonding authority to be awarded to a higher education facility that comes forward with the most competitive proposal for education and graduating engineering students. Community colleges would compete for a $50 million bond issue, Snyder said.
“We are ensuring long-term solutions,” Snyder said. “This is not the time to say, ‘Let’s go back to the bad habits.’”
The state has enjoyed steady recovery since 2010, but still faces risks, Snyder added. Among those are the state’s troubled local governments.
“We still have a number of challenged local jurisdictions and school districts that are going to require a significant amount of time and effort,” he said. “Detroit ... is an issue that could consume a significant amount of energy from people across the state, and we do need to support Detroit and help it on the path to be a great city again.”
He told reporters later that he expects a state review team that is investigating the city’s books to make a recommendation within a few weeks about whether to appoint an emergency manager.
State fiscal officials will present new revenue estimates in May that lawmakers will use to craft a final budget. The state’s fiscal year begins Oct. 1, though the Legislature has approved a final spending plan months earlier for the past few years.