Coalition to Reduce Underage Drinking

FY 13 State Budget Update

Presented by Joanne BumpMichigan League for Public Policy

June 26, 2012, Lansing, MI

Michigan LeagueFor

Public Policy

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Michigan League FOR

Human Services

Factors Impacting the Michigan’s Budget

• MI Structural Budget Gap• Shrinking Safety Net • Decade of Cuts to Budget• Revenue Options

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Human Services

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Why are things so bad?

• State budget trouble beginning in 2000 with a decade of cuts

• Structural Gap - Budget with greater needs and less money each year. The cost of programs rise faster than revenues.

• FY 2012 Gap estimated at $1.8 Billion

Michigan League FOR

Human Services

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Michigan has a long way to go

• “Detroit Three” lost market share• Michigan in longest period of job loss

ever with 895,000 jobs lost in the end• From 2009 to 2011, 140,700 new jobs• With only 28,000 new low wage jobs.

Sources: Report of the Emergency Financial Advisory Panel; Michigan Department of Labor and Economic Growth, Labor Market Information; Michigan Department of Treasury.

Michigan League FOR

Human ServicesMichigan’s Safety Net doesn’t stretch to meet today’s needs

• 2010 FIP eligibility level for a mom with two children: 43% below poverty level compared to 11% below poverty level in 1970

• Maximum AFDC grant level in 1986: $449 per month (mom with two children)

• Maximum FIP grant level in 2010: $492 per month (mom with two children) or

66% percent below the poverty level

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Michigan League FOR

Human Services

Child Poverty is increasing in MI

One in four children in Michigan lives in a family with an income below the official US poverty threshold.

Nearly 2 million people in Michigan lived in poverty in 2010, with the poverty rate jumping 20 percent since the country slid into the Great Recession,

Poverty in Michigan was 16.8 percent in 2010 and child poverty was 23.5 percent.

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Michigan League FOR

Human Services

Summary of FY 12 Budget Changes

Cut Business Taxes - $1.6 billion

Cut Spending – Nearly $1.5 billion

Raise Personal Income Taxes - $1.4 billion

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Michigan League FOR

Human Services

FY 12 - 83% Business Tax Cut

Loss of $1.6 billion in revenue in FY 13 Michigan eliminated the state’s current major

business tax and replaced it with a flat 6 percent corporate income tax, exempting all but C corporations from paying a business income tax.

95,000 businesses will not be paying a business income tax.

Eliminates most business tax credits in future but honors firm credits already awarded.

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Michigan League FOR

Human Services

FY 12 Total Budget Cuts in millions

Corrections - $51.2 Community Health - $212.6 Human Services - $109.5 Higher Education - $222.4 Statutory Revenue Sharing - $143.9 State Employee Concessions - $145 Other - $63.2 School Aid - $538.1 Totals nearly $1.5 billion

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Michigan League FOR

Human ServicesPersonal Income Tax Increase Raises taxes by $1.4 billion on individuals Cut state’s Earned Income Tax Credit for low-

income working families by 70% or $262 million Taxes some pension income costing individuals

an estimated $538 million Reduce Homestead property tax credit $270 M Eliminated many credits for such as homeless

shelters, food banks & child credit Held off on reducing the income tax rate until

2013 to keep $162 million in revenue10

Michigan League FOR

Human Services

FY 13 – General Fund Cuts Continue But Not As Large

Most FY 12 budget cuts were not restored Continued cuts for time limited cash assistance even

with court ordered reinstatement of benefits. FY 12 cut of $77.4 M Gross.

Continued cut of $470 or $452.5 million for foundation allowance per pupil

Corrections down $9.4 M Community Health cut $157.8 M Human Services lost $36.2 M

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Michigan League FOR

Human Services

FY 13 Budget Changes continued

Deposit into the state Rainy Day Fund of $140 M Public School Employees Retirement System

increase of $155 M K-12 Best Practices up $154 M MPSERS Retirement Reserve up $133 M

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Human ServicesFY 13 Tax Cuts Income tax cuts -$102 M in 4th quarter of FY 12

and has been presented to the Governor. Income tax rate roll back through FY 19 of -$3.2

Billion in GF. The state budget totals over $47 billion, but the general fund is only $9 billion in FY 13. Passed by House and now in Senate.

Business Personal Property Tax cut that will be phased in from FY 13 to an annual cut of -$506 million by FY 19. Replacement funding is not certain. Passed by House and now in Senate.

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Michigan League FOR

Human Services

Substance Abuse & Mental Health Budget Changes

DCH Actuarially Sound Capitation Payment Rate increase for Medicaid Mental Health Svs., Substance Abuse and Health Plan Services , up $75.1 M Gross and $25.3 million GF.

New requirement to evaluate the effectiveness of heroin and other treatment programs provided by coordinating agencies and service providers to reduce and prevent substance abuse.

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Michigan League FOR

Human ServicesSubstance Abuse continued

Child welfare: Out-patient mental health svs. up $4.4 M GF. New

psychotropic oversight contracts, up $1.1 M. Cut medical psychiatric evaluations by $1.4 M

Gross from implementation of statewide drug testing contract.

Cut medical subsidies for adoptive youth $1 M GF Three State Juvenile Justice Facilities were

reduced $2.0 M & $1 M.

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Michigan League FOR

Human ServicesSubstance Abuse continued

Increase drug court funding by $1.25 M. Revise the Swift and Sure Sanctions Pilot program

language to use $1 M GF from existing appropriation. New language to expand the Clean Sweep program to

include disposal of prescription drugs. A cut to the Pharmaceutical Services line was

restored by $18.7 M Gross & $6.3 M GF for FY 12 from the unrealized savings from including behavioral health drugs on the preferred drug list.

Language was included for the safe disposal of prescription drugs.

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Michigan League FOR

Human ServicesSubstance Abuse continued

Before and after school programs up $1 M Juvenile justice behavioral health study up

$500,000 Veterans programs up $434,000 GF for enrollment

in a college campus health care, help in filing disability claims and obtaining benefits.

A suspicion-based substance abuse screening and testing program for cash assistance clients was passed in the House & is in the Senate. Cut of $6 M by FY15.

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Michigan League FOR

Human ServicesRecent Tax Proposals • Oppose Super Majority Ballot Proposal

• Maintain Business Tax Collections

• Oppose Personal Property Tax Cuts

• Oppose Recently Proposed Income Tax Cuts

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Human Services

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Better Options to Keep Revenues Stable

• 6 percent Sales Tax on Services - $1.65 billion• Graduated Income Tax - $600 million• Increase Beer Tax - $100 million

Michigan League FOR

Human Services

Income Tax: It’s time for the flat tax to go

• Only seven states have a flat tax • 34 states and the District of Columbia have a

graduated tax • A graduated tax could help a majority of filers

Taxable Income: Taxable Income: Tax Bracket Single Married, Filing Jointly

3.9% $0-$20,000 $0-$40,0004.35% $20,001-$60,000 $40,001-$120,0006.9% $60,001 and above $120,001 and above

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Michigan League FOR

Human Services

Michigan’s outdated tax structure misses sales tax on services

Sources: Federation of Tax Administrators and the US. Census BureauPrepared by Michigan League for Human Services

Michigan taxes only 26 of 168 identified services, ranking it 37th in the country. Other Midwest states tax 51 services on average.

40%60%

60%40%

0%

20%

40%

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1950 2007U.S. Economy

Percent Goods

Percent Services

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Stay informed & Speak Out

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Human Services

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Michigan Leaguefor Human Services

The Michigan League for Human Services is a state-level policy organization focused on the needs of Michigan’s low-income families and individuals. The League’s activities include research, analysis, public education and advocacy. The League was founded in 1912 and is a private, nonprofit charitable organization.

1115 South Pennsylvania Avenue, Suite 202, Lansing, MI 48912-1658 (517) 487-5436Fax: (517) 371-4546 Web site: http://www.MiLHS.org

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