Feb 9 The governor of Michigan, slammed by
the recent recession, on Thursday proposed setting
aside $130 million in reserves in case another economic crisis
The state is expecting a budget surplus of more than $600
million in the fiscal year starting in October.
During a special statehouse meeting, Governor Rick Snyder
said more than three-fourths of the $48.2 billion spending and
tax proposal he presented to Michigan lawmakers was devoted to
health and education.
The budget also included an increase in the amount of
revenues expected to come in during the fiscal year starting in
October, identifying a $622.8 million surplus.
"When I took office the rainy day fund had been depleted
down to about 30 minutes of running state government. That's not
acceptable," Snyder said in a video posted on YouTube before the
statehouse meeting. "So last year we made a good deposit into
the rainy day fund, about $255 million."
Snyder noted the state's emergency reserves had once
surpassed $1 billion. He said the state will have to continue
"putting some dollars aside so when we have other economic
challenges and downturns, we'll be prepared."
Even though Detroit, the state's largest city, and the rest
of Michigan are on the mend, the state is still wary of
returning to hard times.
A combination of crisis in the automotive industry, the
housing bust and the 2007-09 economic recession pushed the
state's unemployment rate up and its revenues down.
Michigan's jobless rate surpassed 10 percent in December
2008, and it stayed there for nearly three years, peaking at
14.1 percent. The rate fell to 9.3 percent in December 2011,
according to the U.S. Labor Department.
In his recent State of the State address, Snyder said he
would turn his attention to crime, investments in healthcare and
infrastructure, improving trade and creating jobs in the energy
and environment sectors.
On Thursday, he proposed more spending on public safety,
adding $47 million for Michigan State Police, a 16 percent
increase, and another $15 million toward helping cover public
safety costs in distressed cities. The proposal comes after
Detroit announced plans to close police stations 16 hours a day.
Four Michigan cities, including Pontiac and Flint, are
currently run by a state-appointed emergency manager to reduce
debt. Detroit is in danger of being taken over in coming weeks.
"Last year, we faced a massive deficit - $1.5 billion. And
we... were able to structurally balance the budget and make some
payments down on long-term liabilities," Snyder said in another
YouTube video on Thursday.
During the recession, many states faced similar economic
emergencies and cut spending, hiked taxes, borrowed and spent
reserves. As revenues fell, many governments pulled back dollars
for cities and counties. Many states have cut education funding
as the primary source of school district revenues, -- property
taxes -- crumble.
"The state is recovering nicely, but as a practical matter,
because of how real estate property taxes work in our state, our
schools and local jurisdictions could still have another rough
couple of years," Snyder told state legislators.
He proposed spending $15 million from the general fund to
support economic development in Michigan's distressed cities and
increasing funding for education by $113 million.
The state would raise revenue-sharing payments to cities,
villages and townships by 2 percent to $711.1 million and also
boost to $25 million from $5 million a competitive grant program
that Snyder said proved popular among cities, villages,
townships and counties.
Democratic State Senator Glenn Anderson said he was worried
that local communities would continue to be hurt by depressed
property tax revenues and said Snyder's proposal was akin to
"trying to fill a barrel with an eye dropper."