EXECUTIVE BUDGET Fiscal Years 2012 and 2013: State of Michigan Rick Snyder, Governor ppt

EXECUTIVE BUDGET
Fiscal Years 2012 and 2013
State of Michigan
Rick Snyder, Governor

John E. Nixon, CPA, State Budget Director

This publication was produced and printed by the Department of Technology, Management
and Budget at a cost of $2,077.92 for printing 250 copies or $8.31 per copy. The purpose of
the publication is to inform state and local ofcials and citizens about Governor Snyder’s
recommended budget for scal year 2012 and projections for scal year 2013. This
document is required by law MCLA 18.1363 and by the Michigan Constitution,
Article V, Section 18.
FISCAL YEARS 2012 AND 2013
EXECUTIVE BUDGET

TABLE OF CONTENTS

Page

Budget Overview A 1
Department Detail B 1
Background Information C 1



Web site address for this document:

Budget Overview









February 17, 2011

My Fellow Michigan Citizens:

As I said in my State of the State address, reinventing Michigan demands that we break
the bad habits of the past and embrace opportunities for our future. State government has
been spending more than it receives for far too long. A gaping budget deficit and serious
problems have been the result. These are problems that cannot be fixed with accounting
gimmicks or a one-time infusion of federal money. These are problems that require the resolve

to make tough decisions.

I have been clear that the months ahead will not be easy. They will involve difficult but
necessary changes to bring Michigan’s budget into structural balance. There will be shared
sacrifice, but through that shared sacrifice, Michigan will emerge as a stronger and more
vibrant state. This budget will lay the foundation for economic growth, job creation and our
robust collective future and quality of life.

The budget I am recommending is submitted in conjunction with a restructuring of
Michigan’s tax system in order to make it more simple, fair and efficient. In order to stimulate
the economy and ensure that the state is open for business, my plan includes the promised
elimination of the Michigan Business Tax, to be replaced with a flat Corporate Income Tax set
at 6 percent. The scheduled reduction in the individual income tax rate from 4.35 percent
remains and will be fixed at 4.25 percent. Michigan is one of only three states in the nation that
exempt most or all of pension income from state income tax. This plan will broaden the base
of taxpayers by including all those earning private and public pensions. In addition, I am
proposing the elimination of many of the other credits for individual income tax.

This budget presents a balanced two-year plan that creates a forward-thinking
approach to keeping the state’s fiscal house in order. And for the first time, state spending will
be tied to measured outcomes through the use of performance metrics. It’s a responsible
budget that cuts $1.8 billion and tackles other necessary reductions for a long-term solution to
our problems, while providing a critical safety net for Michigan citizens in need and preserving
core, essential services. It provides the course correction that is needed to help businesses
succeed and create jobs. Simply put, we are done kicking the can down the road.

Adoption of this budget plan by May 31, 2011, will send the message that Michigan is
ready for a new, sound foundation, and it’s the necessary budget for job creation and moving
forward together. My administration stands ready to work in partnership with the members of
the Michigan House and Senate to enact the fiscal year 2012 budget.

Sincerely,


Rick Snyder
Governor

overview
Fiscal Years 2012 and 2013 Executive Budget Recommendation A-1
Foundation For michigan’s
reinvention
Fiscal Years 2012 and 2013 Executive Budget Recommendation
M
ichigan’sreinventionbeginsinearnestwithGovernorRickSnyder’sscalyears2012
and2013ExecutiveBudgetRecommendation,whichreectshisboldanddecisiveplan
toenergizeMichigan’slaggingeconomy,protectcitizensandpreservecriticalfunctions,and
reshapethedeliveryofpublicservices.Turningthepageontheoldwaysofdoingbusiness,
GovernorSnyder’sbudgetrecommendationlaysthefoundationforMichigan’sresurgencewith
taxrestructuringessentialtospurringeconomicgrowthandjobcreation,aswellasthedifcult,
butnecessaryactionsneededtorestorelong-termscalsolvencytothestate.
Budget Process Reforms
A
mongGovernorSnyder’sprioritiesisreformingthebudgetprocess,andmakingstate
governmentmoretransparentandaccountabletothecitizensofMichigan.Thebudget
presentedtodayisabalanced,two-yearspendingplanwithrecommendedscalyear2012
appropriations,aswellasanticipatedappropriationsforscalyear2013.Thisnewtwo-year
approachtobudgetingwillallowformorelong-termstrategicplanning,andifenactedbyMay
31,2011,asrequestedbyGovernorSnyder,itwillgiveschools,municipalitiesandotherlocal
serviceprovidersmoretimetomanagetheiroperations.
ThetwoExecutiveBudgetbillspresentedtodayforlegislativeintroductionarealso“omnibus”

innature,withonebillincludingalldepartmentaloperationsandtheotherbillcomprehensive
toeducation.Thetwoconsolidatedbillswillallowforgreatertransparencyingovernment
spending,makingappropriationseasiertomonitoracrossagencies.Inaddition,thebillshave
beenstreamlinedtoallowforgreaterexibilityindrivingprogramperformance.
Measuring Michigan’s Performance
G
overnorSnyder’scommitmenttogovernmenttransparencyandaccountabilityincludes
thecreationofMiDashboard,availableonlineatwww.michigan.gov/midashboard.
MiDashboardestablishesclearstatewidemeasuresintheareasofeconomicstrength,healthand
overview
A-2 Foundation for Michigan’s Reinvention
education,valueformoneygovernment,
qualityoflifeandpublicsafetythatallow
thecitizensofMichigantoeasilygauge
thestate’sprogressacrossanumberofkey
performanceindicators.
MiDashboardrepresentsanimportant
stepinmovingMichigan’sbudgetprocess
towardanewmodelofmanagingfor
results.ThespotlightcastbyMiDashboard
willrequirethatelectedofcialsandstate
leaderscontinuallyevaluatetheefciency
andeffectivenessofprogramstodetermine
iftheyaredeliveringthedesiredresults.
Further,itwillbeanhonestrepresentationof
whereMichiganstandsrelativetonational
benchmarks.Itwillidentifystrengths,but
alsoilluminateareaswhereimprovement
isneeded.
Additionalagency-specicperformancemeasuresthatcomplimentMiDashboardareavailable

foreachprogramareasupportedintheGovernor’sbudgetrecommendation.Thesemeasures,
alongwithanindicatorofhowperformanceistrending,arekeytotheGovernor’sfocuson
managingforresults.Themeasurespresentedaretransitional,andreecttheinitialstepsofa
workprocessthatwillculminatewiththedevelopmentofdetailedbalancedscorecardsfor
eachagency.
Michigan’s Economic & Fiscal Challenges
W
hilereformingthebudget
processandensuring
greateraccountabilityare
importantcomponentsof
GovernorSnyder’sroadmap
formovingMichiganforward,
thecentraltaskathandisjump-
startingtheeconomyandgetting
Michigan’sscalhouseinorder.
TherealityfacingMichiganisthatourstatecontinuestotrailthenationintermsofeconomic
recovery,andalthoughtherearepositivesignsrelatedtotheturnaroundoftheautoindustry,
unemploymentremainsunacceptablyhighandjobgrowthislagging.Furthercompounding
Michigan’ssituation,thenancialmodelsofourstateandlocalgovernmentsareunsustainable.
Serviceduplication,debt,publicemployeecompensationandunfundedretirementobligations
areimpactingthelong-termscalhealthofstateandlocalgovernments.GovernorSnyder
believesMichigananditspublicinstitutionsmustcorrectcourse,stopspendingmoneythey
don’thave,andimplementpragmaticsolutionstotheeconomicandscalproblemsthatexist.
“We have been spending more than we have in revenue and we
have serious problems. It’s not time to cry about it, it’s not time
to whine about it. It’s time to go to work.”

Governor Rick Snyder speaking at the Business Leaders
for Michigan Leadership Summit on January 31, 2011

overview
Fiscal Years 2012 and 2013 Executive Budget Recommendation A-3
Toaddressthesefundamentalissues,GovernorSnyder’sExecutiveBudgetRecommendation
fulllshiscommitmenttocreateamorecompetitivebusinessclimatebyeliminatingthe
onerousandcomplexMichiganBusinessTax,replacingitwithanewtaxstructurethatis
simple,fairandefcientforalltaxpayers.GovernorSnyderalsoresolvesthestructuralbudget
decitthathasplaguedMichiganforthelastdecade.
TheGovernor’sbudgetrecommendationincludesdifcultspendingcuts,changesinservice
delivery,andthesharedsacriceofmany,includingpublicemployees.Itchallengesschools
andlocalgovernmentstotacklenecessaryreforms.Itconstrainsspending,stopstheone-time
xes,andputsMichiganbackonapathtolong-termscalstability.
Inshort,thisbudgetrepresentsGovernorSnyder’sFoundationforMichigan’sReinvention:a
boldplanrequiringdecisiveactionwithacommitmenttoprovidingmeasurableresultsforthe
citizensofMichigan.

State Revenue Forecasting and Spending Limits
S
tatelawrequirestworevenueestimatingconferenceseachyear,typicallyheldinmid-
Januaryandmid-May,correspondingtokeypointsintheannualbudgetdevelopmentand
legislativeappropriationsprocess.TheJanuaryconferenceprovidestherevenueestimates
fortheGovernor’sbudgetrecommendationpresentedinFebruary,whiletheMayconference
updatestherevenueestimatespriortoconclusionoflegislativedeliberationsandtheenactment
ofappropriations.
ConfereesincludetheStateTreasurerandthedirectorsoftheSenateandHousescalagencies.
Theconfereesagreeonbaselinerevenueestimatesforthecurrentyear,andtheupcomingscal
yearforboththegeneralfundandSchoolAidFund.Forscalyear2012,theconfereesproject
combinedgeneralfundandSchoolAidFundrevenuestotaling$18.5billion,anincreaseof$281
millionor1.5percentfromscalyear2011.
Revenuessupportingthe
anticipatedappropriationsfor

scalyear2013werenotapart
oftheformalconsensusprocess,
andwereinsteaddevelopedby
theStateTreasurer.Combined
generalfundandSchoolAidFund
revenuesforscalyear2013are
estimatedtototal$18.6billion.
Baselinerevenuegrowthfrom
scalyear2012to2013is$503
millionor2.8percent,however,it
isoffsetby$410millioninenacted
taxexpenditurecommitments.
-$0.6
$0.0
$0.2
-$2.4
-$3.9
-$4.2
-$4.4
-$4.2
-$4.9
-$5.3
-$4.7
-$8.0
-$8.9
-$7.1
-$8.0
-$8.1
199
8

19
99
2
000
200
1
20
02
2
003
200
4
20
05
2
006
2007
20
08
2
009
2010
20
11
2
012
2013
State Revenues are $8 Billion Below the
Constitutional Revenue Limit
Billions

January 2011Consensus; Administration (2013)
overview
A-4 Foundation for Michigan’s Reinvention
Michigan’sconstitutionincludesaprovisionthatlimitsrevenuegrowthfromyeartoyear.This
constitutionallimitation–commonlyknownastheHeadleeamendment–hasbeeninplace
since1978.TheHeadleeamendmentlimitsannualgrowthinstaterevenuestoalevelthat
cannotexceedtheyear-to-yeargrowthinpersonalincome.Thislimitisintendedtoensure
thatthestate’soverallrevenues,bothtaxandnon-tax,donotgrowfasterthantheincomesof
Michigan’scitizens.
Itisanticipatedthatstaterevenueswillbe$8billionbelowtheconstitutionalrevenuelimit
inscalyear2012,and$8.1billionbelowinscalyear2013.Bothestimatesincludethe
Governor’staxrestructuringproposal.
Fiscal Year 2011: Michigan’s Current Year Budget
F
iscalyear2011representsthelastyearinwhichfederalstimulusrevenuesprovidedthrough
theAmericanRecoveryandReinvestmentActareavailable.Generalfundspendinginthe
currentyearhasbeenoffsetbythesetemporaryrevenues,andwithoutthemthescalyear2011
generalfundspendingwouldhavebeen$900millionhigher.
Atpresent,boththegeneralfundandtheSchoolAidFundinscalyear2011arebalanced,and
noactionisneededatthistimetoreducethecurrentyearspendingplan.However,potential
risksrelatedtofederalMedicaiddisallowancesandcaseloadgrowth,unemploymentinsurance
loaninterestpaymentsandotherspendingpressuresarebeingcloselymonitored.Should
revenuesandexpenditureswarrantbudgetaryactioninthecurrentyear,adjustmentswillbe
recommendedtorevisethespendingplan.
Fiscal Years 2012 and 2013 Executive Recommendation
TheConsensusRevenue
EstimatingConference
heldinJanuaryprojected
revenueswillbe$7.3billion
inthegeneralfundand

$11.2billionintheSchool
AidFundforscalyear
2012,reectingacombined
totalof$18.5billion.Dueto
theendoffederalrecovery
assistance,Medicaidand
FamilyIndependence
Programcaseloadgrowth
andotherunavoidable
spendingpressures,the
scalyear2012budget
beginswithageneralfund
budgetgapof$1.4billion.
School Aid
GF/GP Fund Combined
Consensus Revenue Estimate $7,294 $11,194 $18,488
Non-Tax Revenue Adjustments $903 $11 $914
Federal Aid to Schools $0 $1,653 $1,653
Total Available Revenu
e
$8,197 $12,858 $21,055
FY 11 Current Law Spending $8,302 $13,134 $21,436
Baseline Spending Adjustments:
Replace FY 2011 One-Time Federal Stimulus Dollars $900 $0 $900
Community Health and Human Services Caseload $193 $0 $193
Employee Economics $88 $0 $88
Retiree Health Insurance Costs $17 $0 $17
Debt Service $98 $0 $98
Other Cost Adjustments $11 ($422) ($411)
Total Baseline Spending Estimate $9,609 $12,712 $22,321

Projected Funding Gap ($1,412) $146 ($1,266)
Fiscal Year 2012 Projected Budget Gap
($ in millions)
overview
Fiscal Years 2012 and 2013 Executive Budget Recommendation A-5
Inscalyear2013,projected
revenuesare$7.1billionin
thegeneralfundand$11.5
billionintheSchoolAidFund,
foracombinedtotalof$18.6
billion.Assumingenactment
oftheGovernor’sscalyear
2012plan,thescalyear2013
budgetisbalancedwitha
modestsurplusremaining.
GovernorSnyder’sbudgetrecommendationconfrontsMichigan’sunderlyingeconomicand
scalissuesinadecisivemanner.First,theGovernor’splanwillrestructurebusinesstaxesto
growtheeconomyandcreatejobsbymakingMichiganamorecompetitivestateforbusiness.
MostbusinessesinMichiganwillexperienceanettaxreductionasaresultoftheGovernor’s
plan.Hisplanfurtherrecommendsadditionaltaxrestructuringtoleveragethisneweconomy
andimprovethequalityoflifeinourstateforallcitizens.
Second,theGovernor’srecommendationresolvesthestate’sstructuralbudgetdecit,and
challengestheLegislaturetoquicklymoveforwardwithadoptionofthebudgettoavoid
delaysinimplementingcutsandreformsthatwillproducelong-termsavings.
Declaring Michigan “Open for Business”
T
hecenterpieceofGovernorSnyder’splantostimulatetheeconomyandcreatejobsisto
eliminatetheMichiganBusinessTaxandreplaceitwithaatCorporateIncomeTax.
Michigan’sreputationasastatethatisopenandfriendlytobusinesshasbeentarnishedbythe
MichiganBusinessTax,whichhasstymiedgrowthandhamperedourstate’sabilitytorebound

fromtheprolongedrecession.
Corporate Income Tax
M
ichigan’sbusinesstaxeshavetraditionallybeenverycomplex,includinganintricateweb
ofincentives,creditsanddeductionsthatunfairlyfavorsomebusinessesorindustries
overothers.GovernorSnyderbelievesthiscomplicatedtaxstructurehurtsMichigan
businessesandconstrainsjobgrowth.Heproposesasimple,fairandefcientCorporate
IncomeTaxthatwilleventheplayingeldandenableallbusinessesandindustries,largeand
small,togrowandcreatejobs.
UndertheGovernor’sproposal,generallyonlythosebusinessentitiesthatissuepublicor
privatestock,knownas“C”corporationsforfederaltaxpurposes,wouldbesubjecttothe
proposed6percenttax.Otherbusinesses,suchaspartnerships,sole-proprietorships,limited
liabilitycompaniesand“S”corporationsthatarenotclassiedas“C”corporationsforfederal
taxpurposeswouldbeexempt,resultinginsignicanttaxreliefforthesecompaniesenabling
themtoinvestandexpand.Itisestimatedover95,000companieswillnolongerhavetolea
statebusinesstaxreturn,endingapracticeofdouble-taxationforthosecompaniesthatalready
paytaxonbusinessprotsundertheindividualincometax.
“Reinventing Michigan demands that we break the bad habits of the
past and embrace opportunities for our future….working together, we
will chart a new course and measure our progress. At the end of the
day, we will be a stronger, more vibrant state.”

Governor Rick Snyder, State of the State Address,
January 19, 2011
overview
A-6 Foundation for Michigan’s Reinvention
TheCorporateIncomeTaxwill
alsoeliminatethepracticeof
pickingwinnersandlosersvia
theoldsystemoftaxcreditsand

deductions.Michiganisprojected
toforegoalmost$2billionin
revenueforthesetaxpreferences
inscalyear2013,whichrepresent
spendingdonethroughthetax
codeandnotthemoretransparent
appropriationsprocess.Under
theCorporateIncomeTax,
businesscreditsforbrowneld
re-development,theMichigan
EconomicGrowthAuthority,Next
Energy,advancedbattery,lm,
renaissancezonesandothersare
eliminated.GovernorSnyder’s
planhonorstheexistingcommitmentsmadetobusinessesthroughsignedagreementsunder
theoldtaxstructure,whichtotal$500millioninscalyear2013,anditstopsthepracticeof
appropriatingmoneythroughthetaxsystemmovingforward.Instead,economicdevelopment
incentiveswillbeawardedthroughtheappropriationsprocessandreviewedforeffectiveness.
Inkeepingwiththisphilosophy,
theGovernorrecommendsdirect
appropriationofgeneralfund
revenuesforinvestmentincritical
businessandeconomicincentives,
including$25millionforbusiness
retentionactivitiesand$25million
forlmincentives.Thisfundingwill
augmentthe$75millioninthe21st
CenturyJobsFundandprovidethe
MichiganEconomicDevelopment
Corporationwithimportanttools

toattract,retainandgrowexisting
businessesandencourageeconomicdevelopmentinMichigan.Thebudgetalsoincludes$5
milliongeneralfundforaninnovativeQualityofPlacepartnershipthatwillprovidematching
fundsinsupportofartandculturalinitiativesinlocalcommunities.
TheeliminationoftheMichiganBusinessTaxandtheshifttoa6percentCorporateIncomeTax
willresultinanetlossofrevenuetothestateofnearly$1.8billiononafull-yearbasis.Tooffset
theimpactofthistaxrestructuringonthestatebudget,GovernorSnyderproposesadditional
taxchangesthatwillfurtherstreamlinethetaxcodeandmaketheshifttotheCorporateIncome
Taxessentiallyrevenueneutralbeginninginscalyear2013.
“As difcult as it will be in these tough economic times,
Michiganders must join the governor in thinking about
the long-term consequences of the next budget, not just
dodging as much pain as possible in the short-term.
And everyone, including taxpayers, should be prepared
to pitch in.”

Detroit Free Press editorial, February 2, 2011
Enacted Credits:* FY12 FY13 FY14 FY15
MEGA $111 $116 $245 $296
Battery** $40 $293 $317 $274
Brownfield $50 $50 $40 $32
Film $75 $25 $5 $0
Other *** $17 $16 $16 $16
Total $293 $500 $623 $618
* Estimates of when awarded certified credits will be claimed.
** Includes battery, photovoltiac and polycrystalline credits.
*** Includes renaissance zone, historic preservation, farmland
preservation, workers disability, and anchor credits.
Current Tax Expenditure Commitments
(dollars in millions)

overview
Fiscal Years 2012 and 2013 Executive Budget Recommendation A-7
Other Tax Changes Necessary to Leverage Economic Growth
G
overnorSnydersupportsataxcodethatissimple,fairandefcientforindividual
taxpayers,aswellasbusinesses.AlongwithaatCorporateIncomeTax,the
GovernorproposesthattheindividualincometaxratebereducedonOctober1,2011,
from4.35to4.25percent,ascurrentlyplanned.
Further,GovernorSnyderbelievesalltaxpayersshouldpaythesamerateregardlessoftheir
sourceofincome.Inconjunctionwiththereducedrate,theGovernorrecommendsbroadening
thebasetowhichtheindividualincometaxisappliedinordertocaptureallindividualincome
inthestateregardlessofsource.Thismoreequitableapplicationwillensurethatallincomeis
taxedatthesame4.25percentrate.
Consistentwithhissimple,fairapproachtotheCorporateIncomeTax,theGovernoralso
recommendsthatallcreditsanddeductionsrelatedtotheindividualincometax,withthe
exceptionofthepersonalexemption,theexemptionforindividualswithdisabilities,special
provisionsdealingwithmilitarypersonnelandveterans,thehomesteadpropertytaxcredit
andafewothersubtractions,beeliminated.Thesechangesaredesignedtoprovideequitable
treatmentfortaxpayers.
Thepersonalexemptionwillberetained,butphased-outforincomeinexcessof$75,000for
singlelers,and$150,000forjointlers.Similarly,thehomesteadpropertytaxcreditwillbe
retained,butthephase-outrangeisloweredto$61,000to$70,000.Thehomesteadpropertytax
creditwillalsonowequal80percentofthedifferencebetweenpropertytaxesand3.5percentof
incomeformosthomeowners.
Signicantlyimpactedbythesetaxchangeswillbethosewithprivateandpublicpension
income.Michiganisoneofonlythreestatesinthenationthatexemptmostorallofpension
incomefromstateincometax.
Givenourstate’sdeclining
populationandgrowingsenior
demographic,GovernorSnyder

believesMichigancannolonger
affordtoexemptanysegmentof
thepopulationfromsupporting
anequitableshareofpublic
services.Underthetaxplan
pensionincomewillbetaxed,
butsocialsecuritybenetswill
continuetobeexemptfromstate
incometax.
Michigan's Senior Population Projected to Increase
From 12.8% to 19.5% Over Next 20 Years
12%
13%
14%
15%
16%
17%
18%
19%
20%
2010 2012 2014 2016 2018 2020 2022
2024 2026 2028 2030
Percent of Total Population
Source: U.S. Census Bureau, Interim Projections of Population by State and Age, 2004-2030 (released April,
2005).
overview
A-8 Foundation for Michigan’s Reinvention
Theprojectednetrevenueimpact
oftheseindividualincometax
changesis$1.7billiononafull-

yearbasis.Withaneffectivedate
ofJanuary1,2012,thetotalnet
impactofboththeshifttothe
CorporateIncomeTaxandthe
individualincometaxchangesisa
$254millionreductioninscalyear
2012,whichisoffsetinscalyear
2013.Inaddition,afeeandtax
reformreservefundwillbecreated
tocapturerevenuegeneratedfrom
freezingthepersonalincometax
rateat4.25percent.Michigan’s
personalincometaxrateisalready
verycompetitive.Revenuesin
thereservefundwillbeusedto
provideadditionalongoingtax
reliefinareaswherethestateis
currentlyuncompetitive.
ThesetaxchangesrepresentthesharedsacriceneededtomoveMichiganforward.Jump-
startingtheMichiganeconomyrequiresallcitizenstoplayaroleinthereinvention.Witha
$1.4billiongeneralfundshortfallinscalyear2012,GovernorSnyder’staxrestructuringplan
doesnotaddtotheexistingproblem.Instead,theGovernor’splanisrevenueneutralbeginning
inscalyear2013,andcarefullybalancesthenecessarytaxadjustmentswiththeequally
challengingtaskofeliminatingthestate’sstructuralbudgetdecit.
Restoring Michigan’s Fiscal House to Order
G
overnorSnyder’sbudgetrecommendationeliminatestheprojected$1.4billiongeneral
fundfundinggapinscalyear2012,with$1.5billioninspendingreductionsandstructural
reforms.Further,thesavingsgeneratedinscalyear2012arecarriedforwardonanongoing
basistoeffectivelyprovidesolutionsforbothscalyears.

Inscalyear2012,the$1.5billionin
combinedsolutionsincludes$1.2billion
inpermanentspendingreductions,$324
millioninstructuralreforms,and$10
millionininvestmentsthatencourage
economicactivityandproducelong-
termsavings.Fiscalyear2012also
recognizesashiftineducationcostsof
$896millionfromthegeneralfundto
theSchoolAidFund.
“The time has come for Michigan’s leaders to look at
all of the state’s earmarked revenues and rethink them
as they set new budget priorities. Everything must
be on the table and nothing, including the School Aid
Fund, should be untouchable.”

The Detroit News editorial, January 17, 2011
Tax Restructuring Plan
(dollars in millions)
Revenue Adjustments: FY 2012 FY 2013
Current Law:
Michigan Business Tax (MBT) $2,170.0 $2,024.4
Proposed Reforms:
MBT (Repealed 12/31/11) $900.2 $0.0
Corporation Income Tax (Effective 1/1/12) $460.1 $748.8
Financial Institutions Tax $27.7 $43.9
Certified Credits Already Awarded ($293.0) ($500.0)
Net Business Tax Revenue After Credits $1,095.0 $292.7
Individual Income Tax Changes $820.9 $1,863.8
Reserved for Future Tax Cuts ($100.0)

Net Impact: Proposed Tax Changes $1,915.9 $2,056.5
Net Change from Current Law ($254.1) $32.1
Prepared By: Office of Revenue and Tax Analysis, Michigan Department of Treasury
overview
Fiscal Years 2012 and 2013 Executive Budget Recommendation A-9
Education: Early Childhood Through Higher Education
T
heGovernor’sbudgetrecommendsthecreationofanewStateEducationFundingActthat
utilizesSchoolAidFundrevenueaswellasavailablegeneralfunddollarstosupportthe
state’seducationsystematalllevelsfromearlychildhoodtohighereducation.TheExecutive
Budgetforeducationtotals$13.8billion,including$12.2billioninfundingforK-12school
districts,$1.4billionforhighereducationand$296millionforcommunitycolleges.Nearly53
percentofstateresourcesintheGovernor’sbudgetaredevotedtoeducation.
AmixofstatefundssupportsallthreecomponentsofMichigan’seducationsystemin
GovernorSnyder’sbudgetrecommendation.Statefundsof$10.5billion($413milliongeneral
fund)supporttheK-12schooldistricts.Communitycollegesaresupportedbyamixof$100
millioningeneralfundand$196millionfromtheSchoolAidFund.Highereducationstate
fundstotalnearly$1.3billion,ofwhich$564millionisgeneralfundand$700millionisfrom
theSchoolAidFund.
Nearly$8.8billionisprovidedforK-12basicschooloperations-$8.7billionforperpupil
foundationallowancepaymentsand$62.1millionforintermediateschooldistrictoperations.
Inordertolivewithinavailablestatefunds,foundationallowanceshavebeenreduced4.1
percent,or$300perpupilinadditiontothecurrentlybudgeted$170perpupilreduction,fora
savingsof$452.5million.Intermediateschooldistrictoperationshavebeenreducedby
5percent.
Earlychildhoodeducationprograms,serving28,000children,aremaintainedatnearly$110
million.Specialeducationisfundedat$1.4billion,including$975millionofstatefunds.Other
majorcoreacademicprogramsmaintainedintheGovernor’sbudgettotal$1.2billion,including
$309millionstatefundingforacademicallyat-riskstudents,$36millionforcareerand
vocationaleducation,and$22millionforadulteducation.Categoricalprogramsanddistrict-

specicfundingof$85.6millionareeliminated.
Fundingforcommunitycollegesismaintainedatthescalyear2011levelof$296million.
Communitycollegeenrollmentcontinuestoclimbtoover480,000,whilelocalrevenueshave
droppedduetolowertaxablevalues.
RecognizingMichigan’seconomicrealities,universityoperationsfundingisreducedby15
percentor$222millionto$1.2billion.Toprotectstudents,GovernorSnydersetsaside$83
milliontorewardthoseuniversitiesthatcontaintuitionandfeeincreasesbelowthehistorical
ve-yearannualsystemaverage.Inaddition,theGovernormaintainsstudentnancial
aidfundingat$51.5millionforneedystudents,butmergesexistingprogramsintoasingle
PathwaytoHigherEducationprogramtostreamlineadministration.
GovernorSnyderchallengesMichigan’spublicuniversitiesandlocalschooldistrictsto
implementreformsthatwillkeeptuitionincheckandrestrainspending.TheGovernor
encouragespublicuniversitiesandlocalschooldistrictstoinstitutebestpractices,including
competitivelybiddingnon-instructionalservices,andcollaborationswithotherinstitutionsor
serviceproviders.Atthelocaldistrictlevel,studiesindicatethatjusta10percentsavingsin
non-instructionalserviceswouldyield$300millionsavingsstatewide.
overview
A-10 Foundation for Michigan’s Reinvention
Forscalyear2013,theGovernorsetsaside$300millionfromdiscretionaryfundingand,at
aminimum,makesitavailabletoeligibleschooldistrictswhoseemployees’shareofhealth
insurancecostsiscomparabletothatofstateemployees.Programdetailswillbeincludedin
GovernorSnyder’sApril2011specialmessageoneducationreform.
Revenue Sharing: Incentive-Based Reforms
T
heGovernor’sbudgetrecommendationincreasesconstitutionalrevenuesharingpayments
tocities,villagesandtownshipsby$25.5millionor4percentinscalyear2012,basedon
estimatedsalestaxcollections.
TheGovernor’sbudgetalsoeliminatesstatutoryrevenuesharingpaymentsforcities,villages
andtownshipsinscalyear2012,leadingtoanetsavingsof$92.1million.Thisreductionwill
impact509localunitsofgovernment;currently,lessthan30percentofalllocalunitsreceive

statutoryrevenuesharingpayments.
Toencouragenecessaryreforms,theGovernor’sbudgetincludes$200millionforanew
incentive-basedrevenuesharingprogramavailabletocities,villagesandtownshipsthat
meetspecicstandardsandadoptbestpractices.Programcomponentswillbeprovidedin
GovernorSnyder’sMarch2011specialmessageongovernmentreform.
Staterevenuesharingpaymentstocountiesarereducedby$51.8millioninscalyear2012.
Michigan’s Families: Health Care and Human Services
T
hroughitspartnershipwiththefederalgovernment,Michigan’sMedicaidprogram
providesbasicphysicalandmentalhealthservicestolow-incomecitizens,seniors,
andpeoplewithdisabilities.GovernorSnyder’sMedicaidbudgetisfundedat$12billion,
reectingtheinstitutionofanew1percenthealthcareinsuranceclaimsassessmentonallpaid
healthcareinsuranceclaims.
Inanticipationoffederalaction
thatwillrequirethephase-out
ofthecurrent6percenttaxon
healthmaintenanceorganizations,
theGovernorrecommendsa
broad-basedclaimsassessment.
Bybroadeningthebasetoall
insuranceclaims,theratecanbe
reducedto1percentandgenerate
thesameamountofrevenues.
GovernorSnydersupportsthis
continuedinvestmentinour
healthcaresystemeveninthe
faceofdifcultbudgetcuts,as
itwillkeepover$780million
Medicaid Caseload is Projected to Grow Over 31% From
FY2006 to FY2013, Reaching Nearly 2 Million Citizens

1,400,000
1,500,000
1,600,000
1,700,000
1,800,000
1,900,000
2,000,000
2006 2007 2008 2009 2010 2011 est. 2012 est. 2013 est.
Fiscal Year
overview
Fiscal Years 2012 and 2013 Executive Budget Recommendation A-11
offederaldollarsowingtomaintainexistingMedicaidreimbursementratestoMichigan’s
healthcareproviders,includinghospitals,healthmaintenanceorganizations,nursinghomes
andphysicians.Medicaideligibilityismaintainedandproviderreimbursementratesare
supportedwithoutreductions.
Tobetterprovidemoreefcientmedicalcaretoseniorsandpeoplewithdisabilities,
individualseligibleforbothMedicareandMedicaidwillbeintegratedintoamanagedcare
servicedeliverymodel.Thischangeinprovidingmedicalserviceswillsave$10million
generalfund.TheGovernor’sbudgetalsoproposesefcienciesintheadulthomehelp
programthatwillsave$6milliongeneralfund,whilemaintainingbasicservicesthatassist
seniorsandpeoplewithdisabilitieslivingathome.
AdditionalbudgetreductionsintheDepartmentofCommunityHealthtotaling$41.5million
generalfundincludereducedgraduatemedicaleducationpayments,aswellasreductionsin
otherdepartmentprograms,andsavingsfromaddingbehavioralhealthmedicationstothe
preferreddruglist.
WhileGovernorSnyder’sbudgetsupportscontinuedinvestmentinhealthcare,italso
recognizesthatwithourlimitedresources,publicassistancemustbeabridgetofamily
independence.TheGovernor’sbudgetincludesalifetimelimitof48monthswithexemptions
forincapacityandhardship,forfamiliesreceivingcashassistancethroughtheDepartmentof
HumanServices’FamilyIndependenceProgram,saving$77.4million($65million

generalfund).
TheGovernor’sbudgetreducesthehourlyratespaidbytheDepartmentofHumanServices
tounlicensedaidesandrelativesinthechilddaycareprogramsaving$13.9million,while
continuingtoprovideassistancewithchildcareexpensesforlow-incomefamilies.
TherecommendationalsoprovidesfortheclosureoftheShawonoCenterinGraylinganda20-
bedreductionincapacityattheMaxeyTrainingSchoolinWhitmoreLake,bothdetentionand
treatmentfacilitiesformaleyouthoperatedbytheDepartmentofHumanServices,resulting
in$787,000ingeneralfundsavings.OtherreductionsintheDepartmentofHumanServices
includetheeliminationof300eldworkerpositions,before-andafter-schoolprograms,and
otherprogrammaticsavingstotaling$26.1milliongeneralfund.
Other Service Delivery Transformations and Spending Reductions
P
artofaddressingthestructuraldecitinvolvesrecognizingthatstategovernmentcan
nolongercontinuewithbusinessasusual.GovernorSnyder’sbudgetrecommendation
includesinnovativenewpublic-privatepartnerships,andacknowledgesthatsomeservicescan
nolongerbesustainedorcontinuedinthesamemannerwiththelimitedresourcesavailable.
Keyspendingreductionsinclude:
• Ongoingdeclinesintheprisonpopulationwillallowfortheclosureofonefacilitylate
inscalyear2011,providingfull-yearsavingsof$18.9milliongeneralfund.Other
administrativeefciencies,supplychaintransformations,eliminationofthepublic
worksprogram,andcompetitivebiddingoffoodserviceandprisonstoresinthe
DepartmentofCorrectionswillsave$32.3milliongeneralfund.
overview
A-12 Foundation for Michigan’s Reinvention
• FieldservicesrestructuringintheMichiganStatePolicewillreducethenumberof
postssaving$3.2milliongeneralfund.Thedualmissionofthedepartmentwillremain
highwaypatroland9-1-1responsetocriminalcomplaints.Otherreductions,including
consolidationofregionaldispatchcentersandanincreaseinngerprintrevenues,will
providesavingsof$17.5milliongeneralfund.
• ThebudgetrecommendsthatresidentcareaideservicesprovidedattheGrand

RapidsVeterans’Homebecompetitivelybid,saving$4.2milliongeneralfundinthe
DepartmentofMilitaryandVeteransAffairs.
• TheSeniorCitizensCooperativeHousingTaxExemptionprogramisreducedby$2.5
milliongeneralfundtoreectactualspendinglevelsintheDepartmentofTreasury,
andadditionalefcienciesprovidetotalsavingsof$4milliongeneralfund.
• AseriesofrevenueadjustmentsandadministrativeefcienciesintheDepartmentof
EnvironmentalQualityseektomaketheseprogramsself-supportingrelativetothecost
ofregulation,andfacilitatethesavingof$3.8milliongeneralfund.
• AdministrativeefcienciesandcontractreductionsintheDepartmentofTechnology,
ManagementandBudgetprovidesavingsof$3.8milliongeneralfund.
• Paymentinlieuoftaxes(PILT)paymentsintheDepartmentofTreasuryandinthe
SchoolAidbudget,andreprotectiongrantsintheDepartmentofEnergy,Laborand
EconomicGrowtharereducedby15percentreectingdecliningpropertyvaluations,
savingatotalof$3.7million.
• ThedairyfarminspectionprogramiseliminatedintheDepartmentofAgricultureand
RuralDevelopmentbudget,saving$600,000generalfund.Inspectionresponsibility
willbeturnedovertoindustryeldrepresentativescertiedbythedepartment.Other
reductionsandregulatorysupportmeasuresinthedepartmentprovideadditional
savingsof$2.4milliongeneralfund.
• ShiftingsupportfortheMackinacIslandStateParkCommissiontorestrictedfunds
intheDepartmentofNaturalResourceswillsave$1.6milliongeneralfund.The
department’srecommendedbudgetalsosavesanadditional$838,100generalfund
throughotherprogramandadministrativereductions.
• AlongwithadministrativeefcienciesintheDepartmentofEnergy,Laborand
EconomicGrowth,thebudgeteliminatestheWorker’sCompensationAppellate
Commission,savingatotalof$2.3milliongeneralfund.

• Thebudgeteliminatesseveralstateeducationalreformactivitiesimplementedin
conjunctionwithMichigan’sunsuccessfulRacetotheTopapplication,saving$1.9
milliongeneralfund.StateaidtolibrariesintheDepartmentofEducationbudget

isalsoreducedby$2.3milliongeneralfund,with$950,000directedtotheMichigan
eLibrary,resultinginnetgeneralfundsavingsof$1.4million.
overview
Fiscal Years 2012 and 2013 Executive Budget Recommendation A-13
• TheDepartmentofStatebudgetsaves$2.1milliongeneralfundbycontinuingthe
integrationandexpansionofself-serviceoptions.
• EliminationofsixtrialcourtjudgeshipsintheJudiciarybudgetsaves$942,100
generalfundconsistentwithanticipatedcaseloadreductions.
State Employee Concessions and Structural Reforms
W
hilethenumberofstateemployeeshasdeclinedby12,900or21percentoverthe
lastdecade,totalemployeecompensationhasincreasedby38percent.Thesecosts
areincreasingatanunsustainablepace,andarearesultofemployeeandretireebenets
thatareconsideredout-of-stepwiththeprivatesector.Inaddition,anumberofwork
rulesornegotiatedissuesthatpresentuniquechallengesandaddsubstantialcostsforthe
operationof24-hourinstitutionsmustbefurtherexamined.GovernorSnyder’sbudget
includessavingsof$180milliongeneralfundforemployeeconcessionstobenegotiated
withrepresentedemployeeorganizations.Theseconcessionsreectthenecessary,long-
termreformsneededtobringstateemployeecompensationin-linewithcurrent
scalrealities.
Oneofthemostsignicantdriversoflong-termemployeecompensationcostsarepost-
employmentbenetsprovidedtostateretirees,principallyforhealthcare.Unlike
pensionobligations,whichareactuariallydeterminedandpre-funded,thestatepaysfor
retireehealthcareonacurrentorcashbasis.Atthecloseofscalyear2010,thelong-
termliabilityofthisbenettotaled$14.5billion.TheGovernor’sbudgetincludes$200
milliongeneralfundtobegintoaddressthisgrowingscalobligationtoactuariallyfund
therequiredcontribution,settinganexampleforMichigan’slocalunitsofgovernment
tolikewiseconfrontthisliability.Inaddition,theGovernorisrecommendingstatutory
changestoreducethestate’slong-termpostretirementexposure.
GovernorSnyder’sbudgetalsoincludesaninvestmentof$5millionintheDepartmentof

Technology,ManagementandBudgettoincentivizestateagencyreformsthroughanew
InformationTechnologyInnovationsFund.Thisfundwillbeusedtocompetitivelyselect
andinvestinhigh-priority,low-coststateagencyinnovationprojectsthatdemonstrate
signicantreturnoninvestment.
Protecting Citizens and Preserving Critical Services
W
hilesignicantreductionsareneededtorestorescalsolvency,theGovernor’s
budgetrecommendationcarefullyprioritizesremainingresourcestoprotect
citizensandpreservecriticalservices.TheGovernor’sbudgetprovidestotal
spendingof$46billion,balancingtheneedsofourcitizenswhilemeetingMichigan’s
long-termobligations.

overview
A-14 Foundation for Michigan’s Reinvention
OtherkeyspendingrecommendedintheGovernor’sbudget:
• $13.8billionforeducationinK-12schools,universitiesandcommunitycolleges,
providingtheessentialfoundationforMichigan’sworkersoftomorrow;
• $12billionsupportinghealthcarefornearlytwomillionadultsandchildren,
representingoneinve
Michiganresidents;
• $3.6billioninFood
AssistanceProgram
benetsforovertwo
millionMichiganresidents;
• $2.9billionforroadand
bridgeconstructionand
maintenanceandpublic
transportationprograms
supportingthemovement
ofpeopleandgoods;

• $1.8billiontomaintain
publicsafetybymanagingthecustodyandcarefor44,000prisonersand
supervisionof80,000felonyprobationersandparolees;
• $670millionforworkforcetraininganddevelopmentprograms;
• $659millionforconstitutionalrevenuesharingpaymentstolocalunitsof
government;
• $340millionforregulatoryandconsumerprotection;
• $250millionforstateparks,recreationandnaturalresourcestewardship
programs;
• $245millionforenvironmentalprotection,pollutionpreventionandresponse
programs;
• $75millionforthe21stCenturyJobsFundtopromoteeconomicdevelopment;
• $30millionfortheprotectionofMichigan’sfoodsuppliesrangingfrominspections
todetectingandpreventingdiseaseinourlivestock.
Over 75% of Total FY 2012 Spending Devoted to
Health, Human Services and Education
Health and Human
Services
46%
Public Safety
6%
Education
30%
Government Services
5%
Economic Strength
11%
Quality of Life
2%
Total Spending: $45.9 billion

overview
Fiscal Years 2012 and 2013 Executive Budget Recommendation A-15
Conclusion
T
hechallengethatthisbudgetpresentscannotbeunderstated.Itseekstoinvigorate
Michigan’seconomywithaboldplantospurgrowthandjobcreation.Itproposes
anewtaxstructurethatissimple,fairandefcient,andasksallofourcitizenstohelp
leverageourstate’seconomicrevitalizationthroughsharedsacrice.Itrecommends
difcultspendingreductions.Itdemandsthatwethinkaboutourpublicinstitutions
andgovernmentservicesinnewandalternativeways.Itchallengesschoolsandlocal
governmentstoenactnecessaryreforms,anditrequiresadditionalconcessionsofour
publicemployees.
Whilethetaskathandmaybedifcult,GovernorSnyderbelieveswecannolongerpush
ourbudgetproblemstothefuture.Inordertoturnthepageonthepastdecadeand
startanewwithrelentlesspositiveaction,ourleadersmusthavethecouragetotackle
ourstate’seconomicandscalproblems,anddosoinatimelyandpragmaticmanner.
Thetwo-yearbudgetpresentedbyGovernorSnyderprovidesthelong-termscal
solvencyneeded,anditpositionsMichigantoagainbealeaderineconomicgrowthand
jobcreation.AdoptionofthisbudgetplanbyMay31,2011,willsendastrongmessage
tobusinesseslookingtoinvest,andcitizensofthisgreatstate,thatthisistheright
foundationforMichigan’sreinvention.


Department Detail


Agriculture and Rural Development B 1
Attorney General B 5
Civil Rights B 9

Community Colleges B 13
Community Health B 17
Corrections B 23
Education B 27
Energy, Labor and Economic Growth B 31
Environmental Quality B 35
Executive Office B 39
Higher Education B 41
Human Services B 45
Judiciary B 51
Legislature B 55
Military and Veterans Affairs B 57
Natural Resources B 61
Revenue Sharing B 65
School Aid B 67
State B 71
State Police B 75
Technology, Management & Budget B 79
Transportation B 83
Treasury B 87