Lansing Update: October 2, 2009

In this week’s Lansing Update:

1. MCC Advocacy Priorities Protected in State Budget Stalemate
2. Action Alert! Phone Calls Needed to Protect Tax Credit for the Working Poor

MCC Advocacy Priorities Protected in State Budget Stalemate

Despite painful budget cuts that will likely span the breadth of state departmental spending, two critical programs aiding Michigan’s poorest population were preserved this week following intense advocacy by MCC staff. Michigan has a constitutional obligation to balance its fiscal year budget by October 1 each year, but the state’s 2010 $2.8 billion deficit has plagued legislators for several months.

Michigan was forced to shut down some government operations this week because legislators and the governor’s office were unable to agree upon a spending plan for the fiscal year that began October 1. The Republican Senate Majority Leader and Democratic Speaker of the House had agreed upon a plan to cut some $1.3 billion out of state government spending and utilize federal stimulus dollars to cover the remaining gap. But both Democrats and Republicans were uncomfortable with the deal because of the detrimental effect the deep cuts would have on local communities, physicians and schools.

After the September 30^th midnight deadline to have in place a balanced spending plan came and went, the state partially shut down for approximately two hours until legislators agreed to send a continuation budget to the governor, which allowed for existing state spending to continue through October. Legislators have passed all but the state’s school aid budget, yet have held back on sending the bills to the governor out of fear they will be vetoed. A proposed cut of $218 per pupil to balance the school aid fund was deemed too harsh by legislators.

Among the programs that were preserved in this week’s flurry of budget activity were the Family Independence Grant and the children’s clothing allowance program in the Department of Human Services budget. The FIP grant provides cash assistance to the state’s poorest population and the clothing allowance assists those families with buying clothes for children prior to the start of the school year.

In the face of an 11 percent cut in local revenue sharing dollars in the state’s General Government budget, the elimination of the Michigan Promise Grant, which helps students pay for college, harsh cuts to the per pupil foundation allowance, and a four percent cut to reimbursement rates for Medicaid providers, funding for programs assisting the poorest population was maintained.

While the state is currently operating on a short-term continuation budget, lawmakers next week are expected to address revenue enhancements that would compensate for deep cuts to the programs mentioned above. Should the governor veto any spending plans sent to her by the legislature, both the Senate and House of Representative will be tasked to regroup and send a differing balanced spending plan before the continuation budget expires.

Action Alert! Phone Calls Needed to Protect Tax Credit for the Working Poor

In 2006 the Michigan Legislature voted overwhelmingly in a bipartisan fashion to create a state Earned Income Tax Credit. This tax policy has proven to lift more families and children out of poverty than any other federal or state tax policy. At least 35 other states in the country provide such a credit for their citizens who are working but pay disproportionate payroll taxes.

According to the Michigan law passed three years ago, working individuals who qualify for the federal EITC that have a median yearly income of $10,000 to $15,000 began claiming ten percent of the federal credit at the state level last year, with an additional ten percent slated to go into effect this year.

Unfortunately, because of the state of Michigan’s economy, some lawmakers have expressed an interest in either freezing or dramatically scaling back the second half of the state credit. Michigan Catholic Conference is asking for phone calls to be made to state legislators and the governor urging opposition to any measure that seeks to freeze or reduce full implementation of the state EITC. Numerous studies have proven that this tax credit not only lifts families out of poverty, but also generates millions for local economies as those who receive the credit spend the dollars locally.

Phone calls are being requested because this important issue is time sensitive. You may find your State Representative and his or her telephone number here [Link no longer available —Ed.], and your State Senator here [Link no longer available —Ed.]. The governor’s office may be contacted at (517) 335-7858.

Please kindly tell your legislators and the governor that you oppose any measure that halts full implementation of the state earned income tax credit, and thank them for their time.