APNewsBreak: Mich. gov. calls for sweeping cuts

Gov. Rick Snyder is taking on everyone from senior citizens to state workers, public schools to city halls in his first budget proposal as he works to get Michigan on sound financial footing.

The new governor made good on his promise of "shared sacrifice" in his first budget proposal, a copy of which he provide to The Associated Press on Wednesday evening before presenting it to lawmakers Thursday morning.

"We're getting rid of all the special-interest kind of items," he said. "This is approaching it as a total solution."

The proposed budget for the fiscal year that starts Oct. 1 would cut spending for public schools, universities and local governments while ending many personal tax breaks, including ones exempting seniors from paying taxes on their pensions. The perk costs the state nearly $900 million a year, and Snyder said it has to go, although his plan wouldn't tax Social Security payments. Michigan has the nation's most generous tax credits for seniors.

The $45 billion proposal includes $1.2 billion in permanent spending cuts to help deal with a $1.4 billion shortfall and drastically changes the state's corporate tax structure so only large "C" corporations pay business taxes. The move would give businesses a $1.8 billion tax break, larger than the $1.5 billion Snyder originally estimated the switch would cost.

His proposal adds $1.7 billion to revenues by eliminating tax breaks for seniors and low-income workers and getting rid of many other income tax deductions, such as one for donating to public universities. Personal deductions would be phased out for individuals making at least $75,000 or couples making at least $150,000.

He also would significantly cap the amount of tax credits for companies that make movies in Michigan at $25 million. There currently is no limit.

Snyder would halt a scheduled decrease in the state income tax rate to keep the state from digging itself into a bigger hole. He would allow it to drop from 4.35 percent to 4.25 percent on Oct. 1, but would change the law that requires the rate dropping to 3.9 percent in future years. The scheduled decrease ultimately would have cost the state $700 million annually.

He proposes cutting public schools by 4 percent, or about $470 per student. School districts have barely kept up with inflation in the past eight years and were counting on getting more money because of an anticipated surplus in the school aid fund.

The state's public universities would get 15 percent less, but $83 million would be set aside to be shared with universities that kept tuition increases around 7 percent or less, according to state budget director John Nixon. Community colleges would get the same $296 million they're getting now.

"It's forcing universities to be efficient," Nixon said.

In all, $12.2 billion would go to funding public schools, while $1.4 billion would be set aside for universities.

State employees are going to be asked for $180 million in cuts, which would have to be negotiated with unions. Nixon said he expects unions will agree to increase the share of health care premiums workers pay and make other changes rather than cutting wages.

Local governments also would see their state payments decreased. Most depend on the state for much of their funding other than what they can raise in property taxes. Local governments have complained for years that revenue-sharing cuts have left them increasingly unable to provide basic services, such as police and fire protection.

Nixon said the budget assumes the closing of one state prison later this year, although no decision has been made yet on which one should go.

The plan also would eliminate some state jobs, including 300 field worker positions in the Department of Human Services, six trial court judgeships and an undetermined number of state police posts. It would privatize some state jobs, such as those of the cooks and store clerks at prisons.

The Republican-controlled Legislature will take up the proposal. Snyder plans to give lawmakers just two combined bills, rather than separate ones for each department. That could make it harder for lawmakers and special interest groups to pick apart the governor's proposals.