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Michigan Association of Counties

Michigan Association of Counties. Traverse City, September 19 th , 2011. Real and Nominal State GDP. Billions. Job Change in Michigan. 2011 - 2013 are May 2011 Consensus Estimates. Source: U.S. Bureau of Labor Statistics and May 2011 Consensus Estimates.

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Michigan Association of Counties

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  1. Michigan Association of Counties Traverse City, September 19th, 2011

  2. Real and Nominal State GDP Billions

  3. Job Change in Michigan 2011 - 2013 are May 2011 Consensus Estimates Source: U.S. Bureau of Labor Statistics and May 2011 Consensus Estimates

  4. FY 2011-12 BudgetAdjusted Gross Funding Sources Adjusted Gross = $46,717,653,400 56.2% of State Sources funding is paid to local governments

  5. FY 2011-12 GF/GP FY 2011-12 Total = $8,450,982,800* 4.5% $382 million Debt Service and SBA Rent * = Includes one-time boilerplate appropriation

  6. School AidMajor Spending Categories FY 2011-12 Total = $12,659,072,900 Foundation allowances(used for school operations)absorb over $2 out of every $3 spent Note: Does not include local revenue. June 2011 7

  7. State Tax and Fee RevenueFY 2011-12 FY 2011-12 Total = $26,921,160,300

  8. Total Base Cuts $1,583.4 Million • Corrections ($110.8 million) • Community Health ($219.9 million) • Human Services ($149.8 million) • Higher Education ($222.4 million) • Community Colleges ($12.0 million) • Statutory Revenue Sharing ($143.9 million) • State employee concessions ($145.0 million) • Other ($50.6 million) • School Aid reductions ($529.0 million)

  9. School Aid Cuts • Reduces Foundation Allowances by $470 Per Pupil • Makes the FY 2011 $170 per pupil reductions permanent by rolling the cut into the foundation allowance • Reduce all foundations by $300 per pupil, for a total foundation allowance reduction of $470 per pupil • Additional $300 per pupil cut equals a savings of $452.5 million • Certain Categorical Funding programs eliminated – totaling $76.5 million

  10. School Aid Cuts • Intermediate School District (ISD) General Operations • Reduces payments by 5% or $3.3 million • School Aid Fund (SAF) Revenue Shifts Totaling $1.0 Billion • Tax proposal reduces SAF revenue ($689.9) million • Budget proposal increases GF/GP transfer to SAF ($100.0) million • SAF revenue shifted into Community College budget ($195.9) million and Higher Education budget ($200.0) million

  11. Higher Education • Each university’s appropriation is reduced by 15% ($222.4 million GF/GP) • Tuition restraint incentive funding ($83 million) • Funds would be paid only if a university held its FY 2011-12 resident undergraduate tuition/fee increases below the prior-five-year state average • Individual incentive amounts (based on average annual tuition/fee rate increase over the last five years) ranging from 5.1% to 9.8% of proposed FY 2012 appropriation amounts

  12. Total Appropriations forState University Operations Note: Appropriations include delayed payments in FY in which funds were originally appropriated

  13. Tax Plan as Enacted • Net Revenue Reductions • Reduce total revenue $535.2 million in FY 2011-12 [GF/GP up $154.7 million, SAF down $689.9 million] • Reduce total revenue $224.0 million in FY 2012-13 [GF/GP up $438.0 million, SAF down $662.1 million] • Cut business taxes $1.64 billion (FY 2012-13) • Increase personal income tax $1.42 billion (FY 2012-13)

  14. Summary • Cut services $1.6 billion to address the budget shortfall • Provide a $1.6 billion [83%] net tax cut for business • Replace business tax revenue with $1.4 billion [23%] increased income tax revenue by freezing income tax rate and modifying the pension exemption

  15. Sales/Use Tax Share Declining Taxable Sales as a Percent of Personal Income

  16. Michigan Gasoline Tax Revenue Source: Michigan Department of Treasury, February 2011 *FY 11 Amount is an Estimate

  17. Impact ofTax Exemptions/Credits/Deductions Revenue $6.8 Billion HIGHER Billions Revenue $10.6 Billion LOWER FY 2011 (000) Consumption $14,275,574 Individual Income 8,645,147 Property 8,035,690 Business Privilege 2,639,180 Other 215,826

  18. Tax expenditures are an alternative to direct spending. They can be used to effectively continue to spend tax dollars on policy initiatives while the budget is being reduced. They're "off-budget" for all practical purposes. Transparency and government accountability demand they be reported and evaluated. Why Consider Tax Expenditures?

  19. Fewer People Pay Income Tax 2000 2009 All Filers Tax Liability < $0 19.5% 29.3% Tax Liability = $0 8.0% 8.5% Tax Liability Between $0 and $1006.1%4.7% Tax Liability < $100 33.6% 42.5%

  20. Property Value Growth Slowing

  21. Constitutional Revenue Limit Average growth of Michigan personal income = 2.0% per year from 2000 through 2012 Average increase of Michigan revenue = 0.4% per year from 2000 through 2012 FYs 10 - 13 are May 2011 Consensus Estimates Billions of Dollars

  22. Mitch Bean: Great Lakes Economics Consulting Greatlakeseconomics.com beanmitch@gmail.com

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