House,
Senate Have Different Views from Governor on Budget
The
Legislature began last week working on the 2015-16 fiscal year budgets as 15
departmental budget bills cleared Appropriations subcommittees. It became clear
throughout the negotiations that Republican majorities in the House and Senate
are moving in a much different direction than Governor Rick Snyder.
Community Health Budget
One
of the more significant differences in spending priorities came from
subcommittees in both the House and Senate that handle the Department of
Community Health budget. Both subcommittees rejected Governor Snyder’s call to
increase the tax on all health insurance claims, known as the Health Insurance
Claims Assessment (HICA), from 0.75 percent to 1.3 percent and lift the cap on
what the HICA can collect.
In
the Governor’s budget recommendation he used the increase tax to replace $180.1
million in General Fund. Based on the
legislative rejection of a HICA increase, the legislature will now have to find
General Fund monies through savings or cuts from other programs.
Opposition
to increasing HICA from 0.75 percent to 1.3 percent and removing the cap on
what it can raise was expected from the Republican led legislature as business
leader and many groups from around the state have publically voiced their
opposition. Governor Snyder proposed the
increase because the federal government is expected to disallow states from
using a use tax on the state’s Medicaid HMOs, which currently raise money for
Michigan’s Medicaid program.
As
the legislature broke for their spring recess, it was unclear how the House and
Senate will pay for putting much more General Fund into the Community Health
budget; however, both Representative Al Pscholka (R-Stevensville), House
Appropriations Chair, and Senator Dave Hildenbrand (R-Lowell), Senate
Appropriations Chair, agreed that details of an agreement would emerge as the
subcommittees continue to approve budget bills. As the process moves forward in
both the House and Senate, some tough decisions will need to be made in order to
find these General Fund reductions.
Besides
the difference on HICA, legislative resistance has developed against Governor
Snyder’s proposal to remove Medicaid pharmacy coverage from the HMOs, adult
dental, rural hospitals, and the Graduate Medical Education program.
Negotiations
have been taking place for some time between the Snyder administration and the
Michigan Association of Health Plans, which represents the state’s Medicaid
HMOs, about the pharmacy change; however, the health plans remain opposed the
proposal.
The
Michigan Association of Health Plans has offered an alternative to the
administration that would meet the administration’s policy objective of going
to one formulary and finding the same savings; however, it would keep the
program with the health plans instead of the state.
Governor
Snyder contends his change to the Medicaid Pharmacy program would produce $18.8
million in savings and create a streamlined system that gets rid of the current
inefficiency and confusion. The appropriation subcommittees in both the House
and Senate are asking the department and the health plans to work together to
develop a consensus prescription drug formulary.
Another
major difference between legislative plans is Governor Snyder’s proposal to
discontinue funding for Graduate Medical Education (GME) out of the General
Fund. The Governor has proposed increasing the tax on hospitals to replace $56
million in General Fund that had paid for the program. The House agreed to the
change, but the Senate rejected it. The
Senate will continue negotiations on this front and believes the GME has always
been an important initiative to finance.
Some
of the other DCH budget differences include:
·
Hesitancy
about Snyder’s call for $23 million in new spending ($7.9 million General Fund)
for adult dental services, starting in the fourth quarter of the 2015-16 fiscal
year. The House budget reduces the proposal to a $100 placeholder. The Senate
subcommittee cuts two-thirds of the funding, delaying the start to September 1
instead of July 1 as the Governor proposed.
· Both
the House and Senate subcommittees also restored $11 million that Snyder
recommended cutting to hospitals that qualify for special rural hospital
payments based on the amount of obstetrical and newborn care provided.
The
Senate proposed budget for the Department of Community Health is about $135
million above the Governor’s General Fund recommendation. This number comes
from the combination of the roughly $180 million from not increasing HICA,
minus $40 million in additional savings by recognizing tobacco settlement
revenue, plus another $5 million in net savings from a series of changes to the
governor’s budget recommendation.
There
is also some savings from various programs being delayed – among them, the
expansion of Healthy Kids Dental to Kent, Oakland and Wayne Counties. By
delaying the program until July 1, 2016, the Senate contends saving about $5.6
million General Fund, but then the Senate expands the program to all children
(instead of those 0 through 8 as the Governor proposed) in those counties on
July 1, 2016 at a cost of about $3.7 million, for a net savings of $1.9
million.
The
Senate also proposed an increase of about $208 million in the Medicaid adult
dental reimbursement portion of the budget, a reduction from the roughly $223.3
million the Governor has proposed.
Senate
budget subcommittee highlights include:
· Restore
the “Be the Match” bone marrow registry, an Alzheimer’s pilot program, and
restoring room and board funding for hospices;
·
Delay
mental health Hawthorn project to July 1, 2016;
· Keep
jail diversion funding at FY 2014-15 level and reduce Wayne State Psych DSH
payment by $605,900; and
·
Remove
funding for new drug policy initiatives program
K-12 Budget
Differences have also emerged
between Governor Snyder and the House on K-12 spending, where the House prefers
to put money into the foundation grant for operations instead of allocating
increases through categoricals.
A number of the categorical spending
lines in the proposed 2015-16 School Aid Fund budget, including the Governor’s
third grade reading initiative, would disappear under the House plan. The
foundation allowance would see a substantial increase under the budget reported
last week from the House Appropriations School Aid Subcommittee.
House
Bill 4089, a $13.909 billion budget, is roughly a $50 million cut
from the executive recommendation. Both the House and Governor’s budget
proposals provide the same General Fund spending at $45.9 million. The big
difference between the two is increasing funds toward the foundation allowance
by $296.4 million, compared to the $22 million increase Governor Rick Snyder
had proposed.
The House budget plan provides a
foundation grant increase between $137 and $274 per student using the formula
that provides twice the increase to the lower-spending districts, plus an extra
$25 per student to those districts below the basic grant.
Another $14 million included in the
School Aid Fund, covers the $5 per pupil added in 2013-14 and ensures all
districts see at least a $25 per pupil increase for the coming fiscal
year. The governor’s plan provides a $75
per student increase to all districts.
Additional funds for local districts
in the House budget plan came from 15 different programs either being
eliminated or the increased funding recommendations by the Governor not
accepted. The House has moved those
funds into the foundation allowance.
A few of the programs dropped under
the House approved budget plan was the $75 million the Governor had proposed
for distressed districts and $18.4 million for third grade reading. The budget
also strikes the $100 million increase the Governor had proposed for at-risk
programs and essentially designates the remaining $309 million for schools
using multi-tiered systems of support.
During negotiations, the House
Democrats tried unsuccessfully to pass amendments that would have restored the
$50 million cut from the MPSERS cost offset, the $3.23 million state funding
for math and science centers, $22 million for adult education and $1.2 million
for bilingual education.
The budget did include some program
increases, including $5 million for private schools to cover the costs of various
state non-instructional mandates. Career
and technical education programs would increase $16 million to $42.6 million
and the $330,000 for teacher professional development in science, technology,
engineering and mathematics (STEM), intended as one-time funding in the current
year, would be retained in the House budget. The proposal also increases the
First Robotics program to $3 million but expands the program to add elementary
schools. Currently, $2 million is set aside and covers only grades 7-12.
In addition to the overall funding
changes, the House subcommittee took on snow days by reducing the number but
also allowing for more flexibility to local districts. The six days in current
law would remain, but the supplemental days would be cut in half. In exchange
for only three extra days, the bill would allow them to be used any time of
year instead of being limited to after April 1. These potential changes would
still have to be approved by the State Superintendent.
Community Colleges Budget
During
negotiations last week on funding for Michigan’s Community Colleges, the House
Appropriations Community Colleges Subcommittee passed a bill that would give
the state’s community colleges a 2 percent increase in operations grants. This funding is more than the 1.4 percent
Governor Rick Snyder recommended.
Further,
Governor Snyder recommended the grant program which provides assistance to
adult part-time students, be funded at $6 million. Under HB 4113, approved unanimously by the
Subcommittee, this grant would decrease by $3.1 million.
Governor
Snyder also recommended a revised performance funding formula for revenue
allocation; however, the House proposal distributes the funds under the current
formula.
In
total, the House proposal for the community college budget is $392.6 million,
about $1.2 million less than the Governor’s plan with most of the decrease
coming from the General Fund.
The
House subcommittee and the Governor did agree on many other budget items,
including increasing funding for renaissance zone reimbursements by $1.6
million and a $17.2 million increase for the state’s share of Michigan Public
School Employees’ Retirement System payments.
Higher Education
When
it comes to funding higher education the House budget has decreased the
Governor’s recommendation for the universities by $14.7 million and increased
the cap on how much universities can raise tuition.
The
increased cap allows Michigan's four-year universities to raise tuition rates
by 4 percent from the 3.2 percent currently in law. Governor Snyder had
proposed a tuition cap of 2.8 percent with a 2 percent increase in the base
appropriations. The subcommittee approved HB 4103 with a 1 percent increase in
university operations funding, which is estimated to be a nearly $13.7 million
from the executive recommendation.
The
House plan also reduces $700,000 from the Governor's recommended increase for
AgBioResearch, enabling those funds to be redirected to the Department of
Agriculture and Rural Development for fruit tree research
The
House bill concurs with the Executive recommendation on the other items within
the budget. In total, the House bill is $1.53 billion ($1.22 billion General
Fund), a 0.7 percent increase from current year (0.9 percent General Fund). The
Governor's recommendation and Senate budget bill total $1.54 billion ($1.24
billion General Fund).
In
the other chamber, the Senate Appropriations Higher Education Subcommittee also
met late last week and approved a budget unanimously. SB 123 mirrored Governor Snyder's
recommendation which includes a 2 percent increase for university operations
funded by the General Fund and maintains the increased ongoing appropriations
from $2.45 million to $5.16 million for the Michigan Public School Employees
Retirement System rate cap.
LARA Budget
In
Governor Snyder’s recommendation for the Department of Licensing and Regulatory
Affairs (LARA), a 50% fee increase was proposed for liquor licenses. If the House Appropriations Subcommittee on
LARA gets its way, there will be no change in fees. The budget reported early
last week presumes no change to the fees. In fact, half the fee increases,
under Governor Snyder’s proposal, have been eliminated starting with the
2019-20 fiscal year.
The Michigan Liquor Control
Commission (LCC) contends that it has been short of the needed revenues to run
its various programs. Many House leaders
agree with the LCC; however, the
money collected from liquor fees goes to local law enforcement and other causes
so the LCC would not see the increase. As an alternative, the budget would
shift $1.5 million to the LCC from revenue generated by the liquor tax.
The
other change difference between the Subcommittee and the Governor is the House
cut $530,000 General Fund from the inspection of freestanding surgical
outpatient facilities, given that the Subcommittee assumes an increase in fees
on those facilities to help pay for those inspections.
Other
than the two differences the budget sticks to Governor
Snyder’s recommendation. It contains $539.3 million, a 0.6 percent decrease
from the current year. Nearly all of the decrease is due to the state no longer
having to make a payment to address workers’ compensation costs related to
Delphi.
General Government Budget
Both
Governor Snyder and the House General Government Appropriations Subcommittee
agree that Detroit would see $5.8 million less in statutory revenue sharing
from the State than it currently receives, under the general government budget
approved Wednesday by a House Subcommittee.
The
Governor, however, called for a $5.8 million reduction in revenue sharing, by
eliminating the $5.8 million in funding added to the current year budget to
bring a substantial number of townships back into the statutory revenue sharing
system after years of receiving nothing.
The
budget approved by the House General Government Subcommittee, would instead
assure all those communities that received funding for the current year out of
that $5.8 million would receive that funding for the upcoming fiscal year
although the current year budget labeled the funding as one time only. Over 100
Michigan communities, nearly all townships, benefitted from that $5.8 million
in the current year.
Many
on the House Subcommittee believe Detroit has received a significant amount of
financial help from the state and is improving. Because of this improvement, it
makes sense to remove the $5.8 million and instead aid the many local
governments that returned to statutory revenue sharing for the first time in
years for the current fiscal year.