DALLAS -- The Flint water contamination crisis and Detroit's public school restructuring took center stage Wednesday as Michigan Gov. Rick Snyder unveiled his fiscal 2017 budget.
Snyder is recommending a total budget of $54.9 billion, up 0.8 % from the current budget, that includes a $10.2 billion general fund, which would be up 1.5 % from last year. The fiscal year begins Oct. 1.
"I'm committed to providing critical investments needed for the Flint water crisis and Detroit Public Schools while maintaining the long-term focus on the key priorities of education, job creation, health and human services, public safety and fiscal responsibility," the Republican governor said in his budget speech.
The governor is asking lawmakers for an additional $195 million to help restore safe drinking water to Flint. The funding would come on top of $37 million already approved from a supplemental budget action, bringing total state funding for Flint to $232 million.
Snyder said that the appropriation includes the $37 million to help with water infrastructure; $15 million for food and nutrition; $63 million for the health and well-being of Flint children and other vulnerable residents; and $30 million to provide water bill payment relief for Flint.
He also proposed that $50 million be set aside in a reserve fund for legislative oversight of the Flint programs after a six-to nine-month period. Lawmakers would have the opportunity to assess where the resources can be deployed most effectively with good accountability, efficiency and result, he said.
"This is a prudent measure give that this is not a traditional situation," Snyder said.
Flint Mayor Karen Weaver said Tuesday that a plan to remove and replace all lead water pipes in city homes carries a $55 million price tag.
Snyder said that so far only $5 million of federal money has been pledged directly to the Flint water crisis under a federal emergency declaration. In the budget he presented to Congress on Tuesday, President Barack Obama proposed a boost in funding that could be used to deal with the water crisis in Flint by increasing funding for the Environmental Protection Agency's state drinking water fund by $157 million, according to a Detroit Free Press article. Several congressional members have floated $400 million of aid.
Flint's water crisis began after the city, under oversight of an emergency manager, broke off from the Detroit Water and Sewerage System in 2014 to save money when its contract to receive Detroit-supplied water ended. The city began pulling water from the Flint River and intended to use it until later this year when it will get its water from a new pipeline being built by the partially bond-financed Karegnondi Water Authority. The Flint River water wasn't property treated and corroded pipes throughout the system.
The city with state financial help reconnected to Detroit's system last year but it did not solve the city's problems because the delivery system's pipes had been contaminated with lead.
Snyder's budget recommendation also asks for funding to be appropriated to statewide water infrastructure improvement. He introduced the creation of a commission to look at 21st century water infrastructure in his state of the state address earlier this year.
"We will be forming that commission and as part of that we are going to need resources," he said. "Instead of doing a deposit to rainy day fund we determined that $165 million could be put in the statewide infrastructure fund."
Snyder's request for additional Flint aid and statewide water infrastructure improvement could compete with his request to provide funding for Detroit Public Schools restructuring.
Snyder has proposed $715 million in state help for the restructuring.
"The action plan here is to devote resources, not from the school aid fund, but instead use tobacco settlement proceeds at the rate of $72 million a year for 10 years to deal with the $515 million deficit and $200 million for additional investment."
The Gov. also requested an additional $50 million to help with DPS current debt situation that, he said, is already reserved in the state's 2016 budget supplemental.
Snyder wants lawmakers to prioritize the restructuring of the struggling school district which could run out of money by this summer.
"We need to act now," Snyder said. "If we don't, this is an issue that will be resolved in the court system where the outcomes can be much more devastating to the citizens of Michigan and other school districts in the state. The clock is ticking and action is required".
Senate Bills 710 and 711, sponsored by Sen. Goeff Hansen, R-Hart, which would pave the way for the restructuring are currently in their second week of legislative hearings. The bills propose to split the current DPS into two entities. Under the plan, the current school district -- Detroit Public Schools -- would be left intact only to levy taxes and repay all of the district's existing bond debts. A new Detroit Community School District would own assets and operate the schools.
DPS's debt includes $1.5 billion of unlimited-tax general obligation bonds, $199 million in borrowing from the state's School Loan Revolving Fund, and $259 million in limited-tax GO debt paid by district operating revenues. Unpaid pension and retirement obligations as well as proposed transitional operating costs, not to exceed 3% of the taxable value of district, would also go to the old district, according to Sen. Hansen. He said that totals about $200 million.
On Tuesday, hearings on the SB 710 and 711 continued into their second week. The Democratic minority wants to see a faster return to local control than initially proposed, and members want charter school oversight to be part of the final product. The bills call for a state appointed board for a one-year term that would eventually return to an elected school board.
DPS has been under emergency management since 2009, during which operating deficits for the district ballooned, the district suffered four credit rating downgrades and enrollment dropped by over 50%. The district is set to get its fifth emergency manager following the resignation of the current emergency manager, Darnell Earley.
In other budget details, Snyder said a deposit in the current fiscal year would bring the balance of the state's rainy day fund up to $611 million. Education related pension payments would total $1 billion which Snyder said would provide relief to schools.
Eligible counties will receive a combination of revenue sharing payments and incentive-based payments totaling $215.2 million. Revenue sharing payments for cities, villages, and townships would rise by 3.9 % to $781.5 million based on estimated sales tax collections.
The budget proposes $533.3 million in new dedicated transportation revenue, including $189.2 million for the state trunk-line fund, $283 million for local road agencies and $61.4 million for rail and public transit, for maintenance and improvement of transportation infrastructure across the state.
The budget also allocates an additional $150 million for kindergarten through 12th grade funding bringing the total appropriation to $12.1 billion.
Snyder addressed lawmakers on Wednesday amid loud protests happening right outside the Senate hearing with calls for his resignation. The Board of State Canvassers on Monday approved a recall petition to force Snyder out of office, and a statewide vote could come as early as Aug. 2 if the required signatures are collected in time.
The petition aims to recall Snyder for moving the state School Reform Office to a department under the governor's control. Nine other petitions involving the Flint water crisis were rejected because of technical errors like misspelled or omitted words.
Snyder is also facing litigation woes on the Flint water crisis. According to Great Lakes Law, lawsuits have been filed on three fronts: "class action citizen suits filed by environmental groups, class action and torts, coupled with constitutional claims against the governor, government investigations both state and federal, that may result in civil and criminal enforcement actions."
Special legal protections make it difficult to hold governments liable for damages such as the ones being filed by Flint residents. However one lawsuit filed on Feb. 2, targets McLaren Regional Medical Center, a hospital located in Flint. The $100 million lawsuit alleges that the hospital, and the state, did nothing to combat an outbreak of Legionnaires' disease that killed at least one person during the Flint water crisis.
Standard & Poor's rates Michigan's general obligation bonds at AA-minus with a positive outlook. Moody's Investors Service rates the bonds Aa1 with a stable outlook. Fitch Ratings rates the bonds AA with a stable outlook.
