CHICAGO — Michigan Gov. Rick Snyder unveiled a $52.1 billion, all-funds spending plan for 2015 Wednesday that features major boosts in spending for local governments and school districts, especially troubled ones.
The budget taps a $975 million surplus for a $120 million deposit into the rainy day fund and finances $200 million of tax cuts. In addition to a major increase in local government aid, the spending plan calls for a 6% increase for higher education and 3% increase for K-12.
"This is more than just a budget," Snyder said in a statement released after he delivered his budget proposal to a joint legislative session. "It's the story of Michigan's comeback."
The proposed general fund budget totals $10 billion and the school aid fund $11.9 billion
The budget sets aside $17.5 million as the first installment of a $350 million contribution to help shore up Detroit's pension funds as the city moves through Chapter 9 bankruptcy.
Snyder is pushing lawmakers to approve the full $350 million appropriation as part of a high-stakes plan to garner $820 million in private and public donations for the city's pensions in exchange for protecting its prized art collection from being sold.
"This is for settling the Detroit bankruptcy. The parties are coming together," Snyder told lawmakers. "It's really up to the unions, retirees, employees to decide, and your support."
Snyder proposed a $100 million bond issue for universities, with proceeds going toward those facilities that develop strong engineering programs. He also pitched a $50 million bond issue for community colleges.
One of the biggest changes in Snyder's budget -- his fourth since taking office -- is to the state's revenue sharing programs for local governments. The executive budget significantly increases local aid, with one program growing by 3% and another by 15%. The increase is an attempt to offset local aid cuts enacted since the recession, Snyder said.
The state would also change how it allocates the money under the governor's proposal, a move that could mean more aid for troubled communities.
The new formula would distribute state aid based on population, with other local governments eligible to win increases if they meet certain criteria.
Cities that implement best practices could see a 10% increase in state aid. Communities with an unemployment rate that is in the top 25% of the state would also see a boost, as would those with violent crime rates in the top 10%.
Communities that have a deficit elimination plan in place could see increased aid for a period of two years under the new formula.
"Let's recognize the best [communities] and recognize unique challenges that they can't always control," Snyder said.
Counties would get an additional $65 million in state funds.
Snyder also proposed the state set up a $10 million fund for deficit-ridden school districts. Michigan has faced a major increase in troubled school districts over the last several years amid population losses and property tax drops.
Snyder said several districts faced going broke last year.
"It's a crisis when it happens, but it's also a budget crisis," he said. Districts that tap the funds would also be required to undergo "dramatic reorganization, and most likely dissolution," Snyder added. "This would be a fairly dramatic step that hopefully we won't see happen but if it does, we'll be prepared."
He proposed lawmakers set aside $7.3 million to finance an early-warning system for distressed school districts before they go broke. State-led efforts would include hiring staff and consulting, Snyder said.
The 3% increase in general K-12 funding would also be weighted so that lower-income school districts would see more per-pupil aid.
For the third year in a row, Snyder urged lawmakers to pass new legislation that would drum up at least $1 billion in new revenue for roads and highways. Legislative leaders have failed to support the move for the past several years, and Snyder has had to rely on one-time funds. The new budget proposal sets aside $256 million as one-time transportation funds.
"We do need to solve this problem at some point in the future," Snyder said. "It's not going to go away."
Snyder urged lawmakers to put $120 million in the state's budget stabilization, or rainy day, fund. That would bring it up to $700 million. He proposed setting aside another $122 million into a new health savings account.
Neither Snyder nor his finance team spent much time talking about the state's largest city as it works its way through a historic bankruptcy.
Budget Director John Nixon told lawmakers after Snyder's presentation that he would not provide details of Snyder's proposed Detroit pension legislation until it was ready to be introduced.
