A Budget Surplus in Michigan?

If the numbers prove true, where will – and should – the money go in northern Michigan?

REGION – There's a rumor flitting around Lansing that – believe it or not – a budget surplus is looming. Yes, you read that right: a budget surplus, looming. In Michigan.

Though the numbers are fluctuating, and nothing will be certain until January, the Senate Fiscal Agency is projecting as much as $431 million in extra revenues, including $272.9 million for the School Aid Fund. If the rumors prove to be true, what can the region expect?

Michigan Gov. Rick Snyder has said repeatedly that he would like to bank any surplus into the state's nearly depleted rainy-day fund and put it toward paying down some of Michigan's astronomical pension debt.

But many in the region are lining up with suggestions on how to better spend it. In northwestern Michigan, where business and school leaders say cuts have a deeper impact than they do downstate, education is a top priority.

"It's just like any business," says Doug DeYoung, vice president of government relations and business advocacy for the Traverse City Area Chamber of Commerce. "You reinvest in places that bring value back to your business. The state has to do the same thing."

And, from a purely business perspective, it is clear that the answer is education, says DeYoung, who travels back and forth often between Traverse City and Lansing in pursuit of equitable funding for schools. "Education of a child is a huge reinvestment back," he said.

Other huge priorities Up North? Fixing up the roads and ensuring continued funding for Pure Michigan.

"Our roads are crumbling, they're falling apart," DeYoung says. But transportation is a longer-term problem, he says, and does not expect that to come out of the surplus.

"Transportation and infrastructure is a bigger issue that's going to take some legislation," he says. "That's not going to be solved in a surplus. That's a $1.4 billion shortfall."

And as for tourism, DeYoung says it continues to be funded out of the strategic fund; the expected surplus will likely have no impact.

Which brings us back to schools. Steve Cousins, Traverse City Area Public Schools superintendent, is hopeful, but he's not counting the money yet.

"Given the volatility of the economy and the markets, we are waiting until the Revenue Estimating Conference to see if a surplus is realized and then how it might be applied to funding solutions going forward," Cousins says. "However, the Revenue Estimating Conferences have been a bit unreliable over the last four years. Projections from January to May and then May to January have shown dramatic swings."

Another issue: If there is to be any money put back into education, it would be distributed according to what is known in Michigan as the 2X formula, which is meant to ensure that districts with a lower tax base, like TCAPS, are funded equitably in comparison with more-populous areas of southeastern Michigan.

First, a brief explanation of 2X: According to Marjorie Rich, TCAPS Board of Education president, Traverse City schools get about $7,000 per pupil from the state, while there are other districts that get up to $13,000 per pupil based on their higher tax levels. So, a few years ago, the 2X formula was put into place, which says that when there is an increase, districts at the lowest level like TCAPS will get double the amount relative to other districts.

The problem is, in times of budget shortfalls and cuts, the state reduces school funding for everybody at the same rate. So, cuts have hit TCAPS harder than they have in southeast Michigan.

"We believe that there are equitable issues in education in this state," DeYoung says. "There are school districts that are not equitably funded. We certainly would like to see – if they're going to put any money back into schools – that they do it in an equitable fashion following the 2X formula, and put that money back into the schools that are obviously underfunded."

And while Rich says she is "cautiously optimistic" that funding will come back at the 2X rate, "at this point we're not banking on it. We're moving forward as if the cuts are a permanent thing. We can't plan based on hope we'll get additional funding at this point."

One thing both Cousins and Rich say they do not want to see is school aid money going to state universities and community colleges. Last year, about $700 million was shifted out of the school aid fund and given to colleges and universities.

"That really goes against the intent of the school aid fund," Rich says. "It is, in my mind, a misinterpretation of how they're supposed to be using school aid fund dollars. So, I would certainly hope that, if there is in fact a surplus, that it goes to K-12 districts as opposed to community colleges."

Despite his advocacy for education, DeYoung says he understands, and agrees with, the Snyder Administration's opinion that "we can't just throw money at everything. We have to have better practices." And that means the three Rs of Snyder's governorship, says DeYoung: "Reform, reinvention and reinvestment."

"Without a strong education base, the state will continue to lose ground as simply a good place to live," he says. "Money for education makes sense from the standpoint of quality of life." And that, says DeYoung, makes business sense, too. BN