(Note: The author wishes to acknowledge the exceptional work done by the Gongwer Michigan Report in describing the details of the state budget. Gongwer is a subscription‑only daily newsletter that covers state government, and its reporting on H.B. 4831 was invaluable in assembling this overview.)
The fiscal 2006 state budget proposed by Republicans in the House of Representatives departs from past practice by placing all state spending in just three appropriations bills. One bill includes the policy portions of the public elementary and secondary school budget, and a second contains capital outlays for government buildings and facilities.
The third bill, House Bill 4831, contains virtually everything else on which the state spends money. Eighty percent of this spending goes to the departments of community health (Medicaid), social services (welfare), corrections (prisons), and higher education (community colleges and four-year state universities). The house passed this bill on June 9, 2005.
All told, the three House budgets authorize $39.7 billion in gross spending — about the same as the current year, and approximately $800 million less than recommended by Gov. Jennifer Granholm. To hold overall spending at this level, the House budget proposes many changes in current policy to offset cost pressures due to general inflation, increases in health care costs and expanded demand for government assistance brought about by Michigan’s poor economy and high unemployment. Among the changes are, cutting 15,000 current recipients from state welfare rolls, eliminating Medicaid eligibility for 43,000 current beneficiaries, requiring co-pays for other Medicaid recipients, closing two Upper Peninsula prisons and cutting funding for Northern Michigan University and Wayne State University.
Gov. Granholm, in contrast, has recommended paying for higher spending levels through revenue increases, such as escalated liquor taxes, taxes on vending machine food sales, and a new tax on doctors (which would also generate higher federal Medicaid reimbursements). The House budget contains none of these revenue increases, but does generate new funding from the proposed Medicaid copays and premiums.
Here are some highlights of the House budget bills from the major spending categories:
Medicaid would no longer cover low-income 19- and 20-year-olds, the "caretaker relatives" of eligible children and a group of adults who are not quite poor enough to qualify for Medicaid without a special waiver. This change would remove some 43,000 individuals from Medicaid, which currently provides health benefits to some 1.4 million uninsured, low-income Michigan residents.
In addition, adults who are not disabled, not elderly and not mentally ill would pay a $5 monthly premium for Medicaid, as well as a $3 copay for each physician office visit. Monthly premiums would rise from $5 to $10 for the "MIChild" program, which extends Medicaid coverage to the children of working families that lack employer-sponsored health insurance.
The budget would not fund any administrative expenses at the Wayne County mental health system that exceed 3 percent of the system’s state aid. Reportedly the current amount is 7 percent, and this change would save $20 million. Other savings include $400,000 from cutting "multicultural health programs" for American Indians, Asian‑Americans and Chinese‑Americans; $510,000 from eliminating the positions of state surgeon general, drug czar and chief nurse executive; and $524,000 from eliminating a program that teaches "parenting skills" to adults in "at-risk families."
The 1996 federal welfare reform ended federal aid for welfare recipients after five years, but allowed states to use their own tax dollars to provide extended assistance to those deemed to be doing all they could to find work. These additional benefits would end under this budget, which reduces the maximum lifetime welfare eligibility period to four years, removing 10,600 from the rolls. The budget also cuts the maximum monthly welfare benefit by $50 to $409.
Currently, the state pays welfare recipients a day-care subsidy. The subsidy paid to relatives of a child is higher than the amount paid to nonrelatives. By reducing the former to same level as the latter, the budget saves $37.9 million. In addition, the budget eliminates funding for seven regional welfare offices, three of which are in Wayne County.
Two prisons in the Upper Peninsula, the Newberry Correctional Facility and Camp Manistique, would close, saving $27.5 million. Supporters of the cut contend that Newberry has the highest daily cost per prisoner of all prisons with comparable security levels. Opponents say that the higher costs are due to the prison being the largest provider of high school diploma equivalence degrees in the prison system. In addition, state spending on prisoner vocational and academic education would be reduced by 52 percent, saving $17.1 million. Contrary to the wishes of Gov. Granholm, the state would not end its lease with the privately-owned Michigan Youth Correctional Facility in Baldwin.
This budget begins shifting state university funding closer to the amounts dictated by a new funding formula proposed by House Republicans. This formula is based on the university’s enrollment, research activities and number of degrees granted. The two big losers would be Wayne State University and Northern Michigan University, which would get 5 percent less than they currently do. All other universities would get modest increases.
Other Budget Areas
The sections above describe some of the more important policy changes contained in the 700-page House Bill 4831, which is the largest of the three House budget bills. Other high profile changes include the following:
The Michigan Economic Development Corporation would see cuts of $1 million from its administration overhead costs and $6.5 million from its "job creation services";
Arts and cultural institution grants would be cut by 12 percent, to $10.3 million;
An $8.2 million state subsidy for Amtrak would be cut by $1 million;
The entire $12 million annual state grant to the Detroit "People Mover" would be eliminated.
As mentioned, one of the three House budget bills contains state aid to public schools. However, the "omnibus" H.B. 4831 contains basic school operations funding, including the $175 increase in per-pupil foundation grants proposed by Gov. Jennifer Granholm. The minimum per-pupil grant has been $6,700 for the past three years. The average grant is around $7,000.
Some Democrats contend that the school aid increase was placed in H.B. 4831 for political reasons, in order to make it more difficult for their members to vote "no" on the welfare and Medicaid cuts. Republicans deny this, but have not publicly provided a different reason.
The House budget contains literally hundreds of changes from current policies and spending levels. Detailed analysis of the budget from the nonpartisan House Fiscal Agency can be found at http://www.house.mi.gov/hfa/PDFs/hb4831summaries.pdf.
Jack McHugh is a legislative analyst for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.