COMMUNITY DISTRICT EDUCATION TRUST FUND H.B. 5383:
SUMMARY OF HOUSE-PASSED BILL
House Bill 5383 (as passed by the House)
Sponsor: Representative Amanda Price
House Committee: Appropriations
Senate Committee: Committee of the Whole
CONTENT
The bill would amend the Michigan Trust Fund Act to create the "Community District Education Trust Fund" and to earmark $72.0 million of Tobacco Settlement revenue each year, from fiscal year (FY) 2016-17 through FY 2025-26, for deposit into the Fund, with the total deposited into the Fund capped at $500.0 million. (This means that a total of $500.0 million in Tobacco Settlement revenue would be deposited into the Fund over the next seven years.)
Specifically, the bill would create the Fund within the State Treasury, and allow the State Treasurer to receive money or other assets from any source for deposit into the Fund (in addition to the Tobacco Settlement revenue). The Treasurer would be required to direct the investment of the Fund, and credit to it any interest and earnings from the Fund's investments.
Money in the Fund at the close of a fiscal year would remain in the Fund and not lapse to the General Fund. The Department of Treasury would be the administrator of the Fund for auditing purposes.
The bill would direct the Department to spend money from the Fund upon appropriation, as provided by law. In addition, the bill would restrict the appropriation to be used only for offsetting the absence of local school operating revenue in a community district in the funding of the State portion of foundation allowances under Section 22b of the State School Aid Act (which allocates amounts for discretionary nonmandated payments to districts).
The bill is tie-barred to House Bill 5384, which would create the community district.
FISCAL IMPACT
The bill would result in $72.0 million per year, for roughly seven years, being earmarked from Tobacco Settlement revenue to the proposed Community District Education Trust Fund. Under current law, Tobacco Settlement revenue not earmarked for other purposes is allocated to the Michigan Merit Award Trust Fund. If this bill were enacted, it would reduce the amount of Tobacco Settlement revenue deposited into the Merit Award Trust Fund by $500.0 million over a maximum of a 10-year period. However, with the cap of $500.0 million, the $72.0 million per year would be earmarked over a period of roughly seven years, and then revert to being deposited into the Merit Award Trust Fund.
Money in the existing Fund currently supports appropriations in the following departments, totaling $161.5 million for FY 2015-16: Health and Human Services ($98.4 million); Treasury ($49.8 million), Technology, Management, and Budget ($11.9 million); State Police ($0.8 million); and Attorney General ($0.5 million). If this bill were enacted, at least a portion of the appropriations currently supported by the Merit Award Trust Fund would need to be funded with a different revenue source, such as the State's General Fund.
Table 1 illustrates the current and projected balances in the Merit Award Trust Fund based on the Governor's recommendations for FY 2015-16 through FY 2017-18.
Table 1
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Estimates of Tobacco Settlement Revenue and Appropriations FY 2015-16 Compared to Governor's Recommendation for FYs 2016-17 and 2017-18 (Actual Dollars) |
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FY 2015-16 Year-To-Date |
FY 2016-17 Gov's Rec. |
FY 2017-18 Gov's Rec. |
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Revenue |
|
|
|
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Unreserved Balance From Prior Fiscal Year................ |
$61,187,000 |
$48,663,400 |
$0 |
|
Total Annual Payments.............................................. |
285,158,000 |
283,931,800 |
295,280,000 |
|
Assumed Withheld Payments.................................... |
(8,500,000) |
(8,500,000) |
(8,500,000) |
|
Settlement Credit to Manufacturers/Adjustments......... |
(22,778,500) |
(21,097,400) |
0 |
|
Interest Earnings....................................................... |
60,000 |
60,000 |
60,000 |
|
Total Tobacco Settlement Revenue............................ |
$315,126,500 |
$303,057,800 |
$286,840,000 |
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|
|
|
|
|
Less Transfers Out For: |
|
|
|
|
21st Century Jobs Trust Fund................................. |
($75,000,000) |
($75,000,000) |
($75,000,000) |
|
Payment to Budget Stabilization Fund (Detroit)........ |
(17,500,000) |
(17,500,000) |
(17,500,000) |
|
Detroit Public Schools/Community District Education Trust Fund................................................ |
0 |
(72,000,000) |
(72,000,000) |
|
Payment on 2006 Bond Securitization..................... |
(33,867,500) |
(33,928,200) |
(38,256,500) |
|
Payment on 2007 Bond Securitization..................... |
(27,342,800) |
(27,391,800) |
(30,886,200) |
|
Total Transfers Out.................................................... |
($153,710,300) |
($225,820,000) |
($233,642,700) |
|
Net Revenue To Merit Award Trust Fund.................. |
$161,416,200 |
$77,237,800 |
$53,197,300 |
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|
|
|
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Appropriations |
|
|
|
|
Attorney General |
|
|
|
|
Operations............................................................. |
$485,200 |
$495,700 |
$495,700 |
|
Health and Human Services |
|
|
|
|
Medicaid Base....................................................... |
64,266,000 |
40,604,100 |
16,563,600 |
|
Aging: Respite Care............................................... |
4,068,700 |
4,068,700 |
4,068,700 |
|
Family Independence Program................................ |
30,100,000 |
30,100,000 |
30,100,000 |
|
State Police |
|
|
|
|
Tobacco Tax Enforcement...................................... |
793,100 |
805,500 |
805,500 |
|
Technology, Management, and Budget |
|
|
|
|
Venture Michigan Tax Voucher Purchase................. |
11,900,000 |
0 |
0 |
|
Department of Treasury |
|
|
|
|
Student Financial Services Administration............... |
1,139,800 |
1,163,800 |
1,163,800 |
|
Detroit Public Schools Cash Flow Payment............. |
48,700,000 |
0 |
0 |
|
Total Merit Award Trust Fund Appropriations.......... |
$161,452,800 |
$77,237,800 |
$53,197,300 |
|
|
|
|
|
|
Replace Merit Award Revenue with Reserved GF/GP... |
$48,700,000 |
$0 |
$0 |
|
|
|
|
|
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Merit Award Trust Fund Year-End Balance............... |
$48,663,400 |
$0 |
$0 |
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Data Source: State Budget Office |
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Date Completed: 5-11-16 Fiscal Analyst: Kathryn Summers
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.