Only $33 million would remain in the “rainy day” fund under a bill passed by the state Senate to patch up budget holes.
The legislation passed 37-0 and was sent to the House last June 5. The rainy day fund had $1.2 billion in fall 2000. The fund, officially called the Budget Stabilization Fund, is for budget emergencies.
The state will now have to build the fund back up, said Sen. Harry Gast, chairman of the Senate Appropriations Committee.
“That’s what it’s there for, I guess,” the St. Joseph Republican said.
Under the bill, the rainy day fund would provide $335 million for the current state general fund, $350 million for the current state school aid fund, and $207 million for the general fund for the next fiscal year, Gast said.
The bill hasn’t gone to the House Appropriations Committee, but could come up for discussion before the Legislature breaks, said an official from West Bloomfield Republican Rep. Marc Shulman’s office.
Some hope the bill doesn’t fare well. The plan is risky and could potentially negatively affect MSU, political science Professor Carol Weissert said.
“If the economy does continue into a recession, the university might be hurt,” she said. “They’ll either have to raise taxes or make cuts, and the Legislature hates raising taxes.”
The bill is banking on premonitions, Weissert said.
“I think we’re betting on the economy picking up, which is always risky,” she said. “If we do continue into a recession and we need those dollars, they won’t be there.”
Rep. Gretchen Whitmer, D-East Lansing, agrees the fund shouldn’t be depleted based on estimates.
“The rainy day fund is there to fix holes,” she said. “What we have here is a projected hole. That’s supposed to be our safety net.”
Rep. Paul DeWeese, R-Williamston, called the bill “poor public policy.”
“I think this sets a terrible precedent if it goes through,” he said. “Even though we are certainly in a rainy day, we shouldn’t be draining the rainy day fund down so far.”
The bill is coupled with a measure to protect a scheduled single business tax cut, which under the current law can’t take effect if the rainy day fund goes below $250 million. The measure does away with that restriction.
Both Whitmer and DeWeese are leery of depleting the rainy day fund and retaining business tax cuts.
“What the Senate has done will jeopardize health care and education - everybody’s going to suffer,” Whitmer said. “But, for some reason, we’re still preserving corporate tax breaks.”
Whitmer says the Legislature needs to look closer to home while dealing with budget issues.
“We need to look at tightening our belts first,” she said. “There’s a lot of fat still in state government.”
The legislation’s backers are misrepresenting their intentions, DeWeese said.
“People supporting this bill say they’re conservatives - they’re not being conservative at all,” he said. “You don’t eat your nest egg to pay for spending.”
The Associated Press contributed to this report.
