I spent this evening at a panel discussion at Washtenaw Community College hosted by Michigan State Senator Rebekah Warren (D-Ann Arbor). The event was called, “What Does Governor Snyder’s Budget Mean to You?”, and joining the Senator were Ypsilanti Mayor Paul Schrieber, Superintendent of Ypsilanti Public Schools Dedrick Martin, Eastern Michigan University Professor and Chair of the American Association of University Professors Collective Bargaining Congress Howard Bunsis, and Audrey Dowell from the Michigan League for Human Services. What follow are my very rough notes on the opening comments, followed by video of the Q&A session. I don’t doubt that I got a few things wrong, but, as I saw a number of MM.com readers in the audience, I’m hopeful that someone will step in and correct me if necessary.
• Senator Warren started by acknowledging that the State had a $1.8 billion structural deficit. This, as we would learn later, was not terribly bad compared to other states. In fact, I believe it was said that were were among the bottom 25% when it came to debt. Governor Snyder, Warren reminded us, was compelled by the state constitution to submit a balanced budget, which he has done. His budget, however, has yet to be voted on by the House and Senate, and it’s possible that changes could still be made in certain areas. I’d argue, given the Republican majorities in both the House and Senate, that it’s unlikely that any concessions will be made, but I liked the fact that Warren tried to position this as a dialogue in which our voices, should we choose to use them, may have some impact.
• Warren began by focusing on the revenue side of the equation, outlining where, according to Governor Snyder’s plan, he hoped to find the additional tax dollars necessary to fund his tax breaks for the corporate class. The majority of the money he hoped to bring in, we were told, would come from taxing the pensions of retirees. (I’m a bit fuzzy on the numbers, but I believe she said that, while the pensions of public employees have never been taxed in Michigan, that the pensions of those working for private companies presently are, when they exceeded something like $45,000 a year. Under Snyder’s proposal, both would be taxed, and there would be no lower limit.) This would bring in an estimated $900 million a year. In addition, the Governor’s plan would see the Earned Income Tax Credit eliminated. This act alone, it’s estimated, would throw an additional 25,000 working poor into poverty. (The Earned Income Tax Credit was instituted to give some tax relief to our most vulnerable citizens. On average, it returns a little over $400 a year to those tax payers who make the least in our economy.) These new revenue streams would be used, according to Snyder’s proposed budget, to offset the costs associated with the elimination of the Michigan Business Tax.
• Audrey Dowell from the Michigan League for Human Services was introduced at this point to discuss how the Snyder budget would negatively impact the working poor. She stated that the Michigan Earned Income Tax Credit had been enacted in 2006 in recognition of the fact that our state has an extremely regressive tax structure, under which a disproportionate amount of the burden is shouldered by those tax payers earning the least. According to her numbers, the average recipient of this credit had $432 of their tax dollars returned to them. Last year, approximately 17,000 in Washtenaw County qualified for this credit, which she referred to as a “proven and effective anti-poverty tool.” Without this credit, we were told, another 14,000 children in Washtenaw County would fall below the poverty line. Hearing this, Rebekah Warren reminded the audience that we wouldn’t likely save anything by eliminating these tax credits, as these children would, as a result of Snyder’s change, qualify for other state programs serving the poor. “The costs,” she said, “would not go away.” All we’d be doing is making thousands of additional people, who had previously been able to support themselves, dependent on the government. It’s also worth noting that all the studies show that dollars returned to these individuals living near the poverty line are more likely to find their way back into local economies. In other words, when these people get their $432, they spend it, and local businesses benefit.
• Warren talked about the limited ways in which cities in Michigan can collect revenues. For the most part, they do this in three ways. First, they collect property tax. Second, they collect what is called personal property tax, which is essentially a tax on heavy equipment and industrial machinery. And, third, they share in income tax revenue collected by the state. This last mechanism, referred to as state revenue sharing, was instituted decades ago so that each municipality didn’t institute its own tax system. Under this model, the state collects income tax from individuals state-wide, and then redistributes those funds to cities, towns and townships according to population and other considerations. According to the most conservative estimates, Snyder’s budget could decrease the amount of state revenue sharing dollars sent to the City of Ypsilanti by as much as 44.3%, or $1,176,142.
• Today, Rick Snyder, in a speech delivered in Grand Rapids, explained that some of the revenue sharing dollars would be preserved, and that cities could compete for these funds. To be eligible, according to Warren, cities would have to, among other things, show that, going forward, pensions would be replaced by employee contribution-based retirement accounts, and that city employees were paying at least 20% of their own health care costs. Furthermore, cities would be favored that consolidated services under “metropolitan authorities,” which would supersede county commissions. (More on this in a post tomorrow.)
• Paul Schreiber at this point talked about our state’s regressive tax structure, and how, proportionately speaking, the poor pay more of their income to the state than the wealthy do. Schreiber pointed out that this wasn’t just the case for individuals, but for cities as well. To illustrate this, this he referenced the fact that Ypsilanti’s revenue sharing payment was, according to Snyder’s plan, to be cut by at least 44%, whereas towns like Ann Arbor were being cut as little as 18%. The decrease in Ypsilanti’s revenue sharing would, according to Schreiber, amount to 10% of our annual budget. He also said that, if we were lucky, we might be able to get $600,000 from the new, competitive revenue sharing pot. (The size of that pot will, according to Snyder’s plan, shrinks from $300 million to $200 million.)
• Ypsilanti, according to Schreiber, has $9 million in reserve, which should buy us three-quarters of a year. He anticipates, with dropping property tax revenues, and the Snyder changes to revenue sharing, running out of money by 2014, unless something changes. (Half of all general fund expenditures at this point, according to Schreiber, are for police and fire protection.) Even if the economy suddenly turns around, he says, we won’t be able to take in the revenue necessary to run the city due to provisions in the Headlee amendment.
• Schreiber also points out, as we’ve discussed here, that the Snyder budget encourages urban sprawl and the further destruction of green spaces by eliminating brownfield redevelopment credits and other tax incentive programs commonly utilized for urban redevelopment.
• Schreiber suggests that we raise the state income tax 1% and reinstitute state revenue sharing, which would wipe out the deficit and allow well run cities like Ypsilanti to survive intact.
• After referring to public education as “the great equalizer” in our country, Warren introduces Dedrick Martin, the Superintendent of Ypsilanti Public Schools. He says that 65% of his students are at or near poverty. He says that of those, at least 100 are homeless, and that this number is growing. In the last 18 months, he says, the Ypsi school system has closed two buildings, let many employees go, consolidated transit operations with nearby school systems, and negotiated significant pay and benefit concessions from teachers and other employees. And, according to their Deficit Elimination Plan, which was recently submitted to the state, they will soon be cutting an additional $4 million from their budget. In a 24-month, according to Martin, they will have decreased their budget of $50 million by 23% to $38.5 million. And, all the while, he says, the state is demanding higher academic standards. (He later says that the state board of education is too short-staffed to even process the reports that are constantly being demanded of his office.) He says Ypsi schools are presently approaching 30 kids in a classroom, at least at the elementary level, and that that number is rising. Soon, he says, art programs, athletics and after school activities will need to be cut. (It’s estimated, according to the numbers provided by Warren, that the Snyder budget would cut $1,814,645 from Ypsi schools.)
• EMU’s Howard Bunsis reports that Snyder is calling for a 15% cut to higher education funding, which will undoubtedly lead to higher tuition costs at the state’s 15 public universities. (There are presently 259,000 students enrolled across these 15 institutions.) He also says that some Republicans in Lansing are of the opinion that 15 state schools are too many, and that some should be merged. As it is, says Bunsis, EMU is practically a private school already, as only 9% of its operating budget comes from the state. According to Bunsis, Michigan already has the 4th highest tuition in the country. And, we’re 48th when it comes to per capita appropriations from our state governments. (These two facts, as he says, go hand in hand.) And, Snyder is suggesting at 15% cut on top of that. As a vast majority of EMU students are working their way through school, and already barely making it as it is, Bunsis fears that the increased tuition might keep them from seeking higher education.
• Bunsis says that college enrollment in Michigan is the highest that it’s been in 20 years. He also says that the number of prisoners in the state is lower now than it has been over that same period of time. In spite of that, however, he says that we’re increasing corrections expenditures while cutting our support of colleges. “What we apparently want,” he says, “is more prisoners and fewer college students.” (In the Q&A portion, Warren goes into some ideas for saving money by cutting down on prison time for non-violent offenders, etc.)
• “Michigan is not a high tax state,” says Bunsis, who, if I’m not mistaken, is a professor of Accounting. He advocates a switch to a progressive income tax. “We cannot raise taxes on people making $15,000 a year,” he says emphatically.
• Right now, the state income tax rate is a flat 4.35%. In October, according to Snyder’s plan, it’s scheduled to drop to 4.25%. Warren has offered legislation that would stop this drop, at least temporarily. She’s also in favor of a graduated income tax, like a majority of other states have, where a disproportionate burden isn’t put on the poor and middle class. The Michigan constitution, however, according to Warren, doesn’t make that possible. For this reason, she’s pushing for a constitutional amendment, which we, the people of Michigan, would be able to vote on during the next election. This, of course, would have to be supported by her Republican colleagues, which doesn’t seem likely at this point.
OK, that, I believe, is most of what we covered during the first part of the evening. As I mentioned, I shot video of the panel discussion that followed it. Unfortunately, the video, which I had to break into six parts, is still uploading to YouTube, so I don’t have it all right now. If all goes well, though, I should be able to get the rest up tomorrow morning, so please check back. It really is worth watching.