Revenue Sharing Back But How Long

August 19, 2002
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GRAND RAPIDS — Though the House and Senate voted Tuesday to restore $845 million in revenue sharing funds Gov. John Engler had axed from this year’s state budget, the battle for those funds may not be over.

Significant budget cuts could be ahead if voters approve three initiatives on the November ballot.

The ballot proposals would divert $300 million a year Michigan gets from the national tobacco settlement from the Michigan Merit Award scholarship fund to health programs; would give state government unions the right to binding arbitration; would allow judges to require substance abuse treatment rather than prison sentences for some drug offenders; and would require that the state spend at least $18 million on drug rehab programs.

Compulsory binding arbitration for state employees would increase state personnel costs by $500 million over three years, and the drug treatment initiative would cost more than $120 million, according to the governor’s estimation.

Engler said passage of the proposals would cost the state more than $1 billion in new spending, as well as “allow vital state health and safety workers to strike and strip law enforcement of vital tools to catch and convict drug kingpins.”

Art Knueppel, campaign chair for Citizens for a Healthy Michigan, disagreed that the tobacco settlement amendment on the November ballot would cost taxpayers money.

“The Healthy Michigan amendment does not increase state spending or the state budget by a single penny. The Healthy Michigan amendment would simply spend the state’s tobacco settlement on smoking prevention, research and on health care for people who are sick and dying from tobacco, where the funds were supposed to go from the start,” he said. “It is dead wrong to continue falsely claiming that the Healthy Michigan amendment would somehow bust the state budget.”

The governor indicated last week that revenue sharing would remain at the top of his list for budget cuts if voters approve the ballot initiatives.

In a prepared statement Tuesday, Engler said that “while local government received a promise today that their revenue sharing monies will be available in FY 2003, that promise will not be kept if these three ballot proposals pass.

“So, I would caution local government officials to stay mobilized and join with all of us in opposition to the November ballot proposals.”

Grand Rapids City Manager Kurt Kimball said it’s clear revenue sharing is still at risk, but that the urgency has passed in terms of the “immediate fight.”

“There will be another day when we need to be concerned about the source of money to our general fund,” he said. “We dodged a big bullet here that may be aimed at us again.”

If not for the override, the city would have lost $14.2 million in revenue sharing this budget year and would now be preparing for layoffs, Kimball said.

“We will stay tuned for new developments, and recognizing the fragility of this source of revenue we need to be prepared for a need to cutback in the future.

“It remains to be seen how things will turn out with the three ballot questions. So if they all go down and none of them are approved, I think the state is still not out of the woods with its budget difficulties.”

As Walker City Manager James Hatch put it, “This ain’t over.”

Despite Tuesday’s significant victory for local government and a significant defeat for the governor by his own party, the governor has made it very clear that regardless of the outcome of the override, revenue sharing is still very much at risk, Hatch said.

Before the override, Walker stood to lose $623,000 in revenue sharing.

Walker officials had started taking aim at proposed infrastructure improvements in the city’s five-year plan to determine which ones might have to be sacrificed, Hatch said.

“Probably the biggest one was that we were about to begin pursuing a new fire station for south Walker,” he noted. “Until this matter is resolved, that is on the back burner.”

Hatch has put a freeze on spending for all departments until after November.

“I can’t do anything about fixed costs; I have to pay the staff and I have to put police cars out there. But if I was looking at a new piece of equipment for Public Works, for example, it would have to wait until after November.”

Kimball declined to speculate as to why Engler chose to target local units of government to begin with, saying he didn’t want to fan the flames of controversy.

“I’m just grateful the veto was overridden,” he said.

But Jerry Felix, executive director of the Grand Valley Metro Council, an alliance of 32 local governments, didn’t mind doing a little flame fanning.

Felix told the Business Journal he thought Engler did it either because he was vindictive against local government, or because he wanted to set up the next governor to take the fall on the budget, or because he wanted to wash his hands of the budget deficit completely.           

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