Highlights From Governor Whitmer’s FY 20 Budget Proposal

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Governor’s Road funding proposal

Issue: Experts claim that Michigan is still not allocating enough resources to its transportation infrastructure, primarily roads and bridges, despite a recent gas tax and license fee increase, and $600 million more being allocated from the state’s general fund.

Proposal: Governor Whitmer proposes a 45 cent increase in gas tax – dedicated to a new fund for roads called the Fixing Michigan Roads Fund.

  • Goal: Interstates, freeways, and M-roads to 90% good or fair condition by 2029 (currently at 75%)
  • Removal of the sales tax from the pump
  • Reinstatement of the exemption on pension taxes

Alliance position: Developing a set of regional guiding principles for the impending legislative debate on road funding revenue increases.

 

Business Tax – Partnership, LLC, S-Corp changes

Before 2011, business income from partnerships, LLCs, and all corporations was taxed at the same rate. In 2011, the law was changed and reduced the rate for partnerships, LLCs, and S-Corps to 4.25%, while all other corporations were taxed at 6%.

As Michigan’s economic growth has continued to climb over the past decade, non-corporate businesses – most of Michigan’s small and mid-sized companies – have gone from contributing $400 million annually to $800 million in annual revenue to that state of Michigan. In short, it has been a win-win for Michigan small businesses and the State of Michigan.

Details on the Governor’s proposal:

◦ The proposal would tax pass-through business entities at 6% – up from 4.25%

◦ Will mean $280 million in new business taxes for partnerships, LLCs and S-Corps.

◦ The administration believes the cost to business will be much less, as business will be allowed a credit on federal taxes

◦ The proposal includes an individual income tax credit for owners to presumably avoid double taxation

◦ The administration believes this will largely cover the repeal of the tax on retiree pensions, which she has also proposed as part of the FY ’20 budget.

Alliance position: Opposed to any business tax changes at this time, especially those made in the 2011 tax reform law. Michigan went from a business tax climate grade of 49th in the nation in 2012 to consistently inside and around the Top 10 according to The Tax Foundation. We believe Michigan should continue to nurture and maintain that positive momentum.

 

2-Year Scholarships: The MI Opportunity and Reconnect skill and degree attainment program

Proposal: The Governor is recommending a two-year, tuition-free plan to ensure every Michigander has a real path to get the skills or education they need to land a good paying job. Under this plan, Michiganders will have the opportunity to improve their skills at any point in their life with two years of tuition-free postsecondary education or skills training.

The program consists of 3 components:

1) Michigan Reconnect Grant Program – tuition-free training for non-traditional students who are at least 25 years old to receive a credential, certificate, or an associate degree. (Summer 2019)

2) Michigan Opportunity Initiative – 2 years tuition-free at a community college. (Fall 2020)

3) Michigan Opportunity Initiative – 2 years of tuition assistance at a 4-year public or not-for-profit college. (Fall 2020)

Michigan Reconnect Grant Program

  • The Michigan Reconnect Program will provide credential and degree opportunities for non-traditional students. This program targets students over the age of 25 who have a high school diploma but no further education. This program is modeled after the Tennessee Reconnect program. Eligibility criteria include:
  • Age 25 or older
  • High school graduate or equivalent, without associate or bachelor’s degree
  • Michiganresidentforatleast1year
  • Eligible programs would be offered at community colleges, technical programs, and community-based organizations (as determined by the Department of Talent and Economic Development)
  • Eligible for funding for up to 2 years
  • Considered last dollar, covering remaining tuition after all other financial aid, such as federal Pell Grants.

Michigan Reconnect Cost Estimates

The Michigan Reconnect grant program is expected to cost $50 million annually and will serve an estimated 51,100 students. A total of $110 million is being recommended for this program in an FY 2019 supplemental request. Of this amount, $60 million in unspent funds designated for the Marshall Plan will be repurposed for this program, and $50 million in general fund will be deposited into the Talent Investment Fund in FY 2019 to cover the remaining amount. This is projected to cover the costs of the program through FY 2021.

Michigan Opportunity Initiative

The Michigan Opportunity Initiative will provide graduating high school students with two years of tuition-free postsecondary education at a community college or tuition assistance for the first two years at a public or private not-for-profit four-year institution. This program will be available to students beginning Fall 2020.

Alliance position: Position under development

 

K-12 Per Pupil Funding = 1.5x 

The Governor proposes $235 million to increase the per-pupil foundation allowance by $120 to $180 per-pupil, distributed through a 1.5x formula at a cost of $235 million. Total state funding for the foundation allowance exceeds $9.4 billion. The minimum foundation allowance will increase to $8,051 per pupil, an increase of 2.3%; the basic foundation allowance will increase to $8,529 per pupil, an increase of 1.4%.

This reduces the gap between the minimum and maximum foundation allowance to $478 (A record low).

Alliance position: For now, we continue to support the 2x funding model. There is a strong precedent for 2x funding and we should continue that path.

 

Other Issues of Interest

  • Retains the popular Going Pro training program
  • $5 million cut to Pure Michigan
  • Expands Child Care/Great Start Readiness program

 

Want More Information?

For more information on Governor Whitmer’s FY 20-21 budget proposal, consider the following resources:

 

Washington, DC Update: Soo Locks and Trade Policy

From March 13-14, 2019, the Chamber Alliance’s Director of Government Relations Kent Wood attended the annual Washington, DC fly-in with the Great Lakes Metro Chambers Coalition. While in the nation’s capital, Kent had the chance to meet with federal officials about a number of topics important to commerce in the Great Lakes region, including two topics of importance to northern Michigan’s economy.

Soo Locks

When the President Trump’s budget was released in early March, it included a $75 million appropriation for the Soo Locks and a pleasant surprise to members of the Coalition.

“I didn’t think we’d get anything in the budget for the Soo Locks,” stated Jim Weakley, Executive Director of the Lake Carriers’ Association. Weakley felt that, while the President has openly declared his support for adding a new large freighter sized lock in northern Michigan, that we wouldn’t see any appropriation for it initially in the President’s budget. “I’m more than happy to eat that crow one small bite at a time,” he joked.

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Congressman Jack Bergman (MI – 1) continues to be a force in Congress keeping the Soo Locks project moving forward.


The new lock project has an overall price tag just shy of $1 billion. While we don’t expect all of those funds to be appropriated at one time, we hope to expect similar appropriations over the life of the project. This means that, while the project currently continues to move forward at an exciting and historic pace, it will continue to require a consistent effort by advocates for a number of years to keep funding appropriated by Congress to move the project forward in a timely manner.

Trade Policy: United States-Mexico-Canada Agreement (USMCA) and Tariffs

Ambassador C.J. Mahoney, Deputy U.S. Trade Representative, and a key negotiator on the United States-Mexico-Canada Agreement (USMCA) was blunt in his assessment that he believes the USMCA needs to happen. The Deputy ambassador was addressing members of the Coalition about the need for the USMCA’s ratification by Congress, which, despite significant priority and outreach efforts from the Administration, is uncertain at this point.

USMCA is an update of the North American Free Trade Agreement (NAFTA) deal between Canada, Mexico and the United States that dates back to the mid-1990s. The Trump Administration made waves last year when they threatened to pull out of the decades-old deal if the three sides could not reach an agreement on an update.

According to the Ambassador, the agreement is very similar to NAFTA, but includes a number of concessions from Mexico and Canada that make the deal better for the United States, including raising labor standards in Mexico, a new section on digital trade, and stronger enforcement of Intellectual Property standards.

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Chamber Director of Government Relations Kent Wood talks to White House officials about the impact of the Section 232 Steel and Aluminum tariffs on northern Michigan manufacturers.

Officials expressed they were working to remove the tariffs as soon as possible, but stopped short of giving details about a firm deadline. They shared that they realized that some U.S. businesses were feeling the pinch from the tariffs, and promised they were working as fast as possible to reach an agreement. The President felt tariffs were the best way to address steel dumping and other trade violations from China that had been going on for years. The Metro Chambers Coalition also had some time with officials from the White House economic team, which has also been hard at work educating Congress on the new USMCA trade deal. Kent shared with officials the challenge for northern Michigan’s small and mid-sized manufacturing sector with the Sec. 232 Steel and Aluminum tariffs imposed by the administration last spring and asked for a timeline on when we could expect the tariffs to be removed.

You can have an impact by contacting the White House and talking about the importance of removing tariffs as soon as possible. Here is some more background.

You can continue to follow the work of the Great Lakes Metro Chambers Coalition here.

The Busiest Week In Alliance History?

On February 12, 2019, hours before Michigan’s 49th Governor Gretchen Whitmer was set to give her first State of the State address, hearty members of the Northern Michigan Chamber Alliance braved a treacherous winter drive to Lansing to host the Governor’s executive office staff for lunch before the big speech.

Around 60 members of Governor Whitmer and Lt. Gov. Garlin Gilchrist’s team took part in the 5th annual Staff Appreciation Luncheon on State of the State day in Lansing hosted by the Northern Michigan Chamber Alliance.

2019 luncheon group shot
(From L to R) Stacie Bytwork, Manistee Area Chamber; David Miller, Cadillac Area Chamber; Jackie Krawczak, Alpena Area Chamber; Whitney Waara, Traverse City Area Chamber; Sarah Hagen, Charlevoix Area Chamber; Carla Gribbs, DTE Energy; Carlin Smith, Petoskey Area Chamber; (kneeling) Kent Wood, Director of Government Relations

A big thank you to Carla Gribbs, Rodney Cole, and DTE Energy’s government affairs team for helping us to sponsor and support this annual event.

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Governor Gretchen Whitmer address the media after speaking with Grand Traverse business leaders at TentCraft in Traverse City.

For partners of the Chamber Alliance, luncheon is an opportunity to meet or reacquaint with members of the Governor and Lt. Governor’s team. For executive office staff, it’s an opportunity to get a good midday meal on a long, stressful day.

This year’s appreciation luncheon was also a time to talk business. As in planning four events in northern Michigan over the coming week. Stops in Marquette, Manistee, Traverse City, and Alpena.

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Michigan Governor Gretchen Whitmer addresses attendees at the Lake Superior Community Partnership’s legislative reception before the UP 200 race in Marquette.

Each stop for the Governor meant a different series of challenges, details, logistics, and guests for Chamber staff to work through. Alliance partners are committed to giving their members these opportunities – it’s what being part of the Chamber Alliance is about – and delivered four unique opportunities for businesses and the community to be introduced to and personally hear from Governor Whitmer.  

In Marquette, Whitmer was on hand for events surrounding the annual UP 200 dog sled race.

She was a candidate the last time she was up for the races, and this time brought members of her new administration – including Lt. Governor Garlin Gilchrist and DEQ Director Liesel Clark.

In Manistee, the Governor toured West Shore Community College’s Career & Technical Education programs and the Nursing & Allied Health Unit, and spoke with students participating in those programs.

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Gov. Whitmer tours the Career and Technical Education program at West Shore Community College in Manistee.

At the end of her visit she addressed college faculty, community leaders, and students about the importance of postsecondary education and closing the skills gap.

She spoke about the goal she set in her State of the State address of increasing the number of Michiganders with postsecondary credentials from 44 percent to 60 percent by 2030.

 

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Gov. Whitmer address Manistee at West Shore Community College.

At her other northern Michigan stops, the Governor spoke about the workforce demands around the state, and her desire to continue momentum in providing the education and skills necessary for Michigan’s labor force, and her desire to work with Republican legislative leaders to realize her campaign promise to “fix the damn roads.”

She told business leaders at TentCraft in Traverse City that they can expect to see her priorities represented, along with how to fund them, when she releases her first budget proposal on March 5.

 

While in Lansing together for the State of the State address, Alliance partners were able to meet with northern Michigan lawmakers for the first time together in the new session to start talking about ways to work together to advance our region’s business interests. A key part of that was finding common areas of interest with the new Governor and administration.

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Senator Ed McBroom (38th District) gives his thoughts on Gov. Gretchen Whitmer’s State of the State address from the night before at the Alliance’s annual post-address legislative breakfast.

It was a wild week for many associated with the Chamber Alliance. But the week was well worth it. Opportunities like this to be in front of so many state leaders at once and to hear from them and share our solutions for moving regional economies in northern Michigan forward is why the Chamber Alliance was formed, and why we continue to push a collective agenda.

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(L to R) Amy Clickner, CEO, Lake Superior Community Partnership; Governor Gretchen Whitmer; Mary VanTilburg, LSCP

Thanks again to DTE Energy for sponsoring this year’s annual Executive Staff Appreciation Luncheon

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