- Governor Delivers Fifth State of the State Address
- Senate Passes EITC and Pension Tax Changes
- School Aid Supplemental Passes the House
Governor Delivers Fifth State of the State Address
On Wednesday evening, Gov. Gretchen Whitmer delivered her fifth State of the State Address. She began the address by noting the “firsts” on the dais with her—the first woman Senate Majority Leader, the first black Lieutenant Governor and the first black Speaker of the House.
The Governor raised two education proposals to enact. The first is universal Pre-K to save families money on daycare and create access to quality preschool for all four-year-olds. She set a goal of reaching this by the end of her term in 2026. MASB has supported universal Pre-K as part of our legislative priorities for many years and are excited to be able to help work to accomplish it.
The second proposal was to fund the MI Kids Back on Track program that she proposed last year. This program would increase state resources to districts to help support tutoring, after-school programs, and other supports to get students one-on-one time with qualified educators and staff to help address any learning challenges. She called on the Legislature to pass and fund this program by spring break.
She also spoke to supporting law enforcement, continuing to fix the roads, addressing climate change, increasing the Earned Income Tax Credit and repealing the pension tax. You can read her entire speech here.
MASB held a Views From the Capitol webinar on Thursday to recap the speech and look ahead to issues we expect to see this year. If you missed the webinar, you can now view it on our YouTube channel.
Senate Passes EITC and Pension Tax Changes
Following the Governor’s call for tax changes in her State of the State Address, the Senate passed Senate Bill 3, which increases the Earned Income Tax Credit and Senate Bill 1, which repeals the pension tax on Thursday.
Senate Bill 3 would increase the Earned Income Tax Credit from 6% to 30%. This credit is for low- to moderate-income taxpayers to help put more money back in their pockets to support themselves and their families. The expansion is expected to cost the General Fund approximately $440 million. The bill was passed with some bipartisan support by a vote of 23-15.
Senate Bill 1 would repeal what has been called the “pension tax.” This was proposed by then-Gov. Rick Snyder in 2011 to tax all retirement incomes the same beginning and became law in the 2012 tax year. Before that, many retirement pensions were not taxed or limited on how much was taxed. SB 1 would allow seniors with pension or other retirement benefits to either continue with the current taxation formula or revert to the pre-2012 system. The bill was amended on the Senate Floor to eliminate a four-year phase in and make the change effective for the 2023 tax year. The bill passed with bipartisan support on a 27-11 vote.
When the repeal of the pension tax is fully implemented it is expected to cost the state more than $500 million annually, with almost $125 million coming from the School Aid Fund. However, included in the bill is an increase in the amount of income tax revenue dedicated to the School Aid Fund. This is designed to offset any “hit” this repeal would have on revenues for our schools.
MASB appreciates the recognition that tax policy changes affect our schools and the work to protect the School Aid Fund. We do, however, still have concerns with large tax cuts at a time when our revenues are predicted to slow. Combined these two changes will cut state revenues by more than $1 billion. Tax policy changes must be done responsibly, and the School Aid Fund must be protected not only from the cuts, but from future raids for nonschool-related items like higher education funding.
Both bills are now under consideration by the House Tax Policy Committee. We expect hearings next week.
School Aid Supplemental Passes the House
On Thursday, the House discharged Senate Bill 8, a School Aid Fund supplemental budget, from committee and passed it by a vote of 74-34 without changes. The bill makes appropriations for the last fiscal year and this one, adjusting amounts previously appropriated. It includes language that would allow MPSERS supplemental payments to be made on behalf of all participating entities and adjusts amounts needed for special education reimbursements and school breakfast. Finally, it adds $27.9 million in federal dollars for the state to establish safe and healthy learning environments.
The passage of this bill moves it one step closer to closing the books with final numbers for the 2021-2022 fiscal year. We expect it to be sent to the Governor for her consideration and approval next week.