2. Introductions A little bit about my background: Michigan Native
Education
Bachelor’s from Western Michigan
Former State Representative
79th District
Chair of House Appropriations Committee

3. Budget Director Role
Oversees the development of the governors budget recommendations
Represents the governor in budget deliberations
Oversees additional state offices
Office of Financial Management
Office of Internal Audit
Center for Educational Performance and Information

4. A look at how far we’ve come
Nearly half a million private sector jobs created since December 2010,
#1 for Great Lakes States, #6 Nationally
Unemployment rate remains near its lowest in more than 15 years
Per capita personal income growing faster than the national average
#1 for Great Lakes States, #10 Nationally
Since 2010, housing values are up 44%, beating the national average
Six for six on getting responsible budgets done three months early
A reduction of $20 billion in long-term liabilities from 2012 reforms
Rainy day fund was just $2 million in 2011; now on track for $1 billion

5. State Expenditure Growth
Rank 2nd to last in country for growth in expenditures from state sources over last decade
Source: HFA calculations based on NASBO data
Source: House Fiscal Agency
2/6/2016

6. Number of State Employees
The number of state employees are currently at levels not seen since the early 1970’s.
Ben McIntire – updated regularly (Feb/July) Updated 2/15/2017
Source: Table 1-4 "Average Number of Classified Employees by Department" – Annual Workforce Reports by Civil Service Commission. Latest number based on 12/31/16 pay end date.
Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury, January 2017 consensus
Source: SBO (BM), 2/15/2017

7. Budget Process

8. General Fund Revenues
General Fund revenues support less thank 20 percent of total spending.
State taxes provide 50% of the total state revenue. The federal government supplies an additional 41%.
FY 2018 total adjusted gross: $55.6 Billion
23%
42%
Ben McIntire – updated regularly (Feb/July).
Updated 2/10/17 - Based on FY2018 Exec Rec
19%
16%
Health & Human Service: $4,461.7 (8%)
Other GF/GP: $2,605.6 (5%)
Corrections: $1,964.1 (4%)
Higher Ed/Community College: $1,293 (2%)

9. Where Revenue Comes From
Only 35% of state taxes are available for discretionary spending.

10. Dedicated Spending
Three-quarters of total spending is dedicated to education and health and human services.
FY 2018 total adjusted gross: $55.6 Billion
Ben McIntire – updated regularly (Feb/July).
Updated 2/10/17 - Based on FY2018 Exec Rec.

11. General Fund – General Purpose Revenue Remains Under $11 Billion
General Fund Revenue
General Fund – General Purpose Revenue Remains Under $11 Billion
(Graph in billions of dollars)

12. GF Spending vs. Inflation
General Fund spending is below inflation.
Ben McIntire – updated regularly (Feb/July) – updated 2/10/2017
Inflation Rate: Fiscal Year Detroit CPI-U; Jan 12, 2017 Consensus
Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury, January 2017 consensus
Fiscal years 2008 to 2016 reflect actual expenditures

13. Spending vs. Inflation Total spending has kept pace with inflation.
Ben McIntire – updated regularly (Feb/July)
Updated 2/10/2017
Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury, January 2017 consensus
Fiscal years 2008 to 2016 reflect actual expenditures

14. Funding: Ongoing/One-time
A fiscally responsible and sound budget does not rely on one-time funds for ongoing purposes
Ongoing revenues should account for the state’s ongoing expenses
Instead, a base budget is used for ongoing funding and one-time money is used for one-time investments

15. Budget Pressures
Likely budget pressures for the next 5 to 10 years include:
Health care costs will continue to increase, especially due to new high-cost specialty drugs, in all sectors (Medicaid, prison health costs, state employee and retiree health care, etc.)
Aging population will result in increased costs for long-term care/home based services
Federal policy changes will increase state Medicaid costs, especially related to actuarial rates for managed care organizations and reimbursement policies.
Education funding will continue to be a priority for both the governor and legislature
Aging infrastructure is likely to require future funding investments
Pressure to build reserves to help with future economic downturns

16. Tax Reforms
Tax reforms created a more simple, fair, and efficient tax system, while broadening the base of Michigan taxpayers.
Corporate Income Tax
Eliminated Michigan business tax and enacted a job encouraging corporate income tax
Personal Property Tax
Eliminated personal property tax on manufacturers
Expanded Homestead Property Tax Credit
$2.1 billion in tax relief already provided for Michiganders

17. Total Cost of Tax Cuts and Credits: $2.1 Billion
Homestead Property Tax Expansion
2020: $205.6 Million
Sales Tax on the Difference
2018: $54.7 Million
2019: $62.6 Million
2020: $71 Million
Health Insurance Claims Sunset
2020: $79.4 Million
Driver Responsibility Repeal
2018: $40 Million
2019: $53 Million
2020: $54 Million
Personal Property Tax Reform
2018: $410.8 Million
2019: $438 Million
2020: $465.9 Million

18. 2018 Strategic Investments
Reducing risk for our retirement systems
Education
Public safety
Health and human services
Economic growth
Communities
Infrastructure
Capital Investments
Rainy Day Fund

19. K-12 Appropriations State K-12 appropriations continue to increase
From Alex Holmden – 3/1/2017
Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury, January 2017 consensus
Source: State Budget Office/OE/BB/AH – 2/15/17

20. Per-Pupil Foundation Allowance
73 percent of state funding for public schools supports the per-pupil foundation allowance.
Total: $12.6 Billion
From Alex Holmden – 3/1/2017

21. MPSERS Contribution Rates
Projected MPSERS pensions and retiree healthcare contribution rates,
From Alex Holmden – 3/1/2017
Chart from ORS
Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury, January 2017 consensus

22. Healthy Michigan
The Healthy Michigan Plan fills the gap between current coverage and private health insurance offered on the Exchange
Medicare
Exchange
3/7/2017: Keith White said do not update at this time
Medicaid
Source: Office of Revenue and Tax Analysis, Michigan Department of Treasury, January 2017 consensus
Source: OHHS-KW 4/02/2015

23. Transportation Funding

24. Fiscal Sustainability
Michigan’s Agenda for fiscal sustainability include:
Maintain structural balance, supporting one-time spending with one-time revenue
Continue addressing long-term liabilities (other post employment benefits and school pension reforms)
Continue focus on performance-informed budgeting
Promote customer centric government
Invest for the future (education, infrastructure, technology, public safety, health and wellness
Save for the future, increasing deposits to state’s Rainy Day Fund

25. On Track to a Billion

26. Questions