budget presentation final - print [read-only]...22 1.8% ‐7.4% 2.7% ‐51.0% ‐0.1% ‐9.8% 0.0%...

February 11, 2015Governor Rick Snyder, CPALt. Governor Brian Calley

Budget Director John Roberts

MichiganGrowing Stronger

Michigan Economy Coming Back Strong• More than 300,000 new private sector jobs since December 2010• Unemployment lowest since 2002; lowest unemployed since 2001• Home sales and values on the rise

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Creating More and Better Jobs

3

Change in Michigan Wage and Salary Employment from Previous Year (thousands of jobs)

Note: U.S. Bureau of Labor Statistics.  2014‐2017 estimates are 1/16/15 Consensus Forecast.  1/20/15.     

Avg.

Consensus Forecast

‐112.7‐76.8 ‐71.0

‐16.9 ‐9.3

‐63.2 ‐58.7‐105.7

‐291.6

‐7.2

88.5 81.5 71.228.0

54.0 54.0 51.0

Dropping Unemployment Rate

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0%

4%

8%

12%

16%

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

5.6% Dec 14

6.3% Dec 14

Source:  MI Bureau of Labor Market Information and  U.S. Bureau of Labor Statistics. (1/9/2015)

14.2%Aug 09

10.0%Oct 09

Michigan

U.S.

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Rising Personal Incomes

Michigan Personal Income Year‐Over‐Year % Change

Note: U.S. Bureau of Economic Analysis.  2014‐2017 estimates are 1/16/15 Consensus Forecast.  1/20/15.      Consensus Forecast

1.1% 0.6%

2.8%3.4%

2.6% 2.6% 2.6%1.6%

‐4.4%

2.3%

5.9%

3.9%

1.4%

4.2% 4.3% 4.4% 4.3%

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• Identify special challenges• Pay our debts• Manage our expenses

o Tightening our belto Regular expenseso Proper maintenanceo Needed improvements

• Save for the future• Return any extra resources

Budget Responsibly Like a Family

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• Changes in revenue estimateso Legacy tax credits

• May ballot proposal

Two Major Budget Challenges

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• Huge awards made in last decade; impact thru 2032• Clear lack of transparency on benefits and timing• Replaced with transparent program in 2011• Action steps: 

o Better visibilityo Understanding long‐term impact

Legacy Tax Credits

6.7%($591.7)

4.4%($407.6)

8.5%($813.6)

‐4.3%(‐$384.8)

‐3.1%(‐$297.8)

‐4.8%(‐$465.2)

3.8%($431.1) 2.5%

($274.2) 1.1%($122.0)

0.7%($82.7)

0.3%($41.1)

0.3%($30.7)

‐8.0%

‐6.0%

‐4.0%

‐2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

FY11 FY12 FY13 FY14 FY15 FY16

‐‐‐‐‐ 25.1% 50.9% 57.4% 98.1% 80.8%

($171.0) ($476.6) (‐$173.3) (‐$251.8) (‐$350.9)

General FundSchool Aid Fund

GF & SAF Revenue Estimate Error Rates($ in millions)

Negative = Actual < Estimate When Budget Enacted (FY15 & FY16:  Jan ‘15 Est. < May ‘14 Est.)Positive = Actual > Estimate When Budget Enacted (FY15 & FY16:  Jan ‘15 Est. > May ‘14 Est.)

% of Error Due to MBT

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MEGA vs Business Development Program

MEGA BDP• Averaged $1.8 billion in awards each year 

from 2008‐2010• Impact on General Fund very difficult to 

forecast• Funded via “credit card” to be paid in 

future years• Variable effectiveness: in certain years far 

fewer jobs realized than forecasted• $14,310 per job1 (job creation)• $74,661 per job1 (retention)

• Averaged less than $100 million in awards each year from 2012‐2014 

• Impact on General Fund known with certainty

• Funded via “checkbook”; appropriated and paid for up front

• Strong effectiveness: approximately 100% of jobs forecasted are realized

• $6,818 per job2 (job creation)

1. Present value at a 2% discount rate. Data set contains all MEGA liabilities from 2010‐2031.2. Data set contains all approved MBDP deals from FY2011‐FY15 (as of January 5, 2015).

Paying Our Debts• 2011 Reforms

o MPSERSo SERS

• Payment plans in place• Better for:

o Our kidso Our retireeso All of us

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Reforms Result in Savings

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* When reforms passed in 2011 (SERS) and 2012 (MPSERS)

More than $20B reduction in liabilities

• Savings from reforms equals $644M or $475 per K‐12 student in FY 16

• FY 16 funding recommendation is $815M or $600 per   K‐12 student 

• These two actions translate into $1.46B or $1,075 per K‐12 student in MPSERS districts in FY 16

Reforms Result in Savings

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Paying for Our Legacy Costs – Schools

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Paying for Our Legacy Costs – Corrections

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More Efficient Government

2015 as of Jan. 3, 2015

• State workforce down more than 15,000 since 2001

Saving for a Rainy Day

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$1,264

$994

$145

$0$81

$2 $2 $2 $2 $2 $2 $2

$365

$506

$386

$498

$611

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Millions

Fiscal Year

The Budget Stabilization Fund (BSF) Peaked at $1.3 Billion in FY 2000, but Had to be Rebuilt. FY16 Deposit of $95M One‐time and $17.5 Million Ongoing.

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FY15 and FY16 Budget Recommendations

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Solving the Shortfall

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2015 Executive Order• Protects:

o Students K‐12 Higher education Community colleges

o Revenue sharing

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FY 2015 State Agency Reductions$ in millions

Community Health$51 25%

Technology, Management and 

Budget$36.8 18%

Corrections$23.7 11%

Human Services$23.5 11%

State Police$23.3 11%

Strategic Fund$22 11%

Treasury$11.1 5%

Education$9.6 5%

Quality of Life agencies

$6 3%

Other$0.3 

less than 1%

Total Agency Reductions: $207.3M

221.8%

‐7.4%2.7%

‐51.0%‐0.1%

‐9.8%0.0%

‐2.2%‐18.1%

‐2.0%‐39.6%

3.5%‐2.1%

172.7%‐1.7%

0.0%‐13.5%

‐3.4%‐3.1%

‐7.6%‐3.7%‐3.7%

‐7.7%

Treasury OperationsTreasury ‐ Michigan Strategic Fund

Treasury ‐ Debt ServiceTransportation

Technology, Management and BudgetState Police

State Building AuthorityState

Natural ResourcesMilitary and Veterans Affairs

Licensing and Regulatory AffairsLegislatureJudiciary

Insurance and Financial ServicesHuman ServicesExecutive Office

Environmental QualityEducation

CorrectionsCommunity Health

Civil RightsAttorney General

Agriculture and Rural Development

State Agency GF Spending Down 6.5% from 2015

Total Agency increases = $11.2 millionTotal Agency increases = $11.2 million

Total Agency decreases = ‐$572.6 millionTotal Agency decreases = ‐$572.6 million

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2016 Strategic Investments• Education

o Pre to 3• Skilled trades• Public safety• Health and human services

Continuing Education as a Priority

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$10.7B+   $1.2B$11.9B

* Does not include federal funding, adult education funding or preschool funding

Education: Focus on Student Growth• Foundation allowance: $108M ($75 per‐pupil)• At risk funding increase: $100M• Distressed district rehabilitation: $75M• Technology infrastructure grants: $25M• Third grade reading initiative: $25M

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Building Blocks for Success: Pre to 3

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• Previous early childhood investments are paying off• Additional investments to do more

o Create commission outside of state governmento Home visitso Parental involvemento Diagnostic testingo Teacher trainingo Measure for success

Strengthening Higher Education

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• Community collegeso Operations: $4.3M, 1.4 percent increaseo MPSERS: $17.2M increaseo Adult part‐time student grants: $6M

• Universities/student financial aido Operations: $28M, 2 percent increaseo MPSERS: $2.7M increaseo Tuition restraint at 2.8 percent

Prioritizing Skilled Trades• FY16 Investments: $35.6M, including:

o Career and Technical Education Early/Middle College programs: $17.8M

o Skilled Trades: $10M increase; $20M totalo Student outreach, career planning and dual enrollment 

enhancements: $4.3M• Existing related programs: $47.6M

Total investment: $83M

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Prioritizing Public Safety

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• $7.7M to train 75 MSP troopers• $1M to train 10 motor carrier officers• $3.4M to resolve sexual assault cases

o $1.7M to process DNAo $1.7M for prosecution

• $500,000 to help prevent                                              sexual assaults on campuses

• $1.5M related to drug policy                                    initiative 

Improving Access to Health and Human Services

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• Expand Healthy Kids Dental program to three remaining counties based on age (0–8 year olds): $21.8Mo Will cover an additional 210,000 children in Wayne, Oakland 

and Kent countieso Total coverage: 822,000 Michigan children

• Adult dental: $23Mo Increases access to dental care for all existing adult Medicaid 

recipients, pending timely rebid• Mental Health Commission recommendation for residential 

treatment for youth: $1.9M

• Enrollment in Healthy Michigan Plan (HMP) has exceeded projections in both FY14 and FY15

• Currently, 536,000 Michigan residents have health coverage through HMPo Helping 1 out of 20 Michiganderso Nearly 350,000 primary and preventive care visits

• Since April 2014 Michigan providers have received an additional $1.4B in federal Medicaid reimbursement

Ensuring A Healthier Michigan

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Supporting Our Local Communities

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• Constitutional revenue sharing: $23.8M increase• Ongoing statutory funding for eligible municipalities that 

meet accountability/transparency requirements• County revenue sharing and incentive programs, added two 

counties: $3.5M increase

Tackling the Tough Choices

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• Health Insurance Claims Assessment (HICA) is a tax on paid health insurance claims made by third party administrators, health insurance carriers and self‐insured entitieso Medicare and Medicaid fee‐for‐service are exempt

• HICA was enacted to ensure federal match dollars for Medicaid and was designed to produce $400M in revenue

• HICA is not producing the needed revenue to guarantee our full Medicaid match, requiring action on our part

• To ensure receipt of all federal dollars, the recommendation moves HICA from 0.75 percent to 1.3 percent

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• Technologyo $70M in IT Investment Fund Portfolioo Includes $7M to strengthen cybersecurity efforts

• State infrastructure: $31M for building maintenanceo More than $108M GF has been invested over the last three 

years for state agency facilities and the Capitol complex

Efficient State Government Saving Taxpayer Dollars

Investing in Cybersecurity

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• The cyber threat is realo Over 730,000 attacks per day

• Problem is only getting worse o Multiple states falling victim to large data breaches o Attacks increasing on a daily basis

• $7M increase recommended to proactively protect our computer systems, networks, and sensitive citizen data

Investing in Infrastructure

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• Replaced collapsed roof

• Capitol dome restoration

• HVAC upgrades• Fire suppression, 

smoke detectors, carbon monoxide detectors in hospital patient rooms

• Upgrades at various armories

Years of neglect has created a transportation safety crisis

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OF BRIDGES ARE IN NEED OF REPAIR, IMPROVEMENT OR REPLACEMENT

27%

48%

48% of major roads in Michigan's largest cities are in poor or mediocre condition

The Costs

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MEDICALCOSTS

PRODUCTIVITYCOSTS

WORKPLACECOSTS

TRAVELDELAYS

INSURANCECOSTS

LEGALCOSTS

$ 8.1 Billion

$

The Cost of Crashes

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• Michiganders pay $2.5 Billion per year in vehicle operation costs ‐ $357 per driver

• Roadway conditions are a significant factor in approximately 1/3 of traffic fatalities

The Cost of Bad Roads

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• Brutal Michigan winters• Poor approach to repair• Industry and heavy trucks• Lack of investment

How Things Got So Bad

MN$315

IL$235

OH$235 WI

$231 IN$187 MI

$174

Highway Investment Per Capita

4

Trunkline Pavement Condition Forecast

Based on Current Investment, 2015‐2027

Percent Good or Fair Condition

90%

70%

50%

30%

Statewide

National

Regional

Local

2015                 2017                    2019                  2021                  2023                  2025           2027   

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• Increasingly dangerous conditions• Massive cost of road reconstruction

Cost of Doing Nothing

• Fixes Michigan’s crumbling roads• Protects schools and local government• Provides tax relief for low income residents• Competitive fuel prices

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Ballot Proposal Impact

Sales Taxes Replenish Schools and Local Governments

All State Fuel Taxes Usedfor Transportation Purposes

+ $1.3 BFor Transportation

+ $300 MFor Schools

+ $94 MFor Local Governments

6604

2249

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1079

2938

Miles of Reconstruction

MilesRehabilitation

Ballot Proposal Impact

Reconstruction and Rehabilitation2015‐2027

ProposalCurrent

Ballot Proposal Impact on Debt Service

2015‐2027

CurrentPlanUnderProposal

$200 M

$100 M

$02015                                                                                       2027

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Video

Accelerating the Comeback

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• Ongoingo Transportation: Comprehensive funding solutiono Healthy Kids Dental o Education K‐12: School retirement system   Universities/Community Colleges/Skilled Trades

o Public safety o Local government funding

• One‐timeo Grow reserves

Ballot proposal

Expanding to three remaining counties

Funding retirement obligations Increased 

investment

Added funding for new counties

Growing to more than $600M

Running another recruit school

Questions?

Thank you.

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