CHICAGO - Michigan's plan to generate new road money with a sales tax increase could mean a surprise funding boost to school districts, Moody's Investors Service said Friday.
Gov. Rick Snyder recently signed a 10-bill legislative package that would generate up to $1.7 billion in new annual funding, the bulk of which would go to roads. The plan will take effect if voters approve the sales-tax increase to 7% from 6% in a May election.
The plan would also generate $300 million for local school districts across Michigan. That would be a credit positive for districts, Moody's said in a comment released Friday.
"While the state's latest revenue forecasts drew a shortfall in the general fund, the school aid fund is generating revenues above prior estimates," analysts said. "That outperformance, coupled with an increase in Michigan's sales tax rate should voters approve the legislative package in May, would leave the state well positioned to increase school aid funding after several years of stagnant to declining allocations."
The ratings agency noted that voters have rejected ballot proposals in 2014 and the outcome in May is uncertain.
"However, regardless of the final outcome, it's credit positive that revenue is not being diverted from schools as was the case in a previous version of the bill," Moody's said, referring to an earlier road funding measure.
Michigan State Superintendent of Education Mike Flanagan Friday said he supported the ballot initiative and said he's "actively promoting its passage."