RESTORE SCHOOL AID FUND EARMARK

House Bill 4125 (proposed substitute H-1)

Sponsor:  Rep. Scott VanSingel

Committee:  Tax Policy

Revised 9-17-19

SUMMARY:

House Bill 4125 would amend the Income Tax Act to adjust the School Aid Fund (SAF) earmark from .954% to 1.012%.

2018 PA 588 reduced the SAF earmark in order to put more revenue in the state’s general fund, an increase which saw $69.0 million earmarked for the Renew Michigan Fund and distributions sent to the Michigan Transportation Fund (MTF).

HB 4125 would return the SAF earmark to its pre-2018 levels after the 2018-19 fiscal year. The bill would retain the distributions for the MTF and keep the dollar amounts directed to the fund at $264.0 million for 2018-19 and $468.0 million for 2019-20, unless the minimum foundation allowance falls below a certain level as determined under the School Aid Act. The bill would retain $69.0 million in funding for the Renew Michigan Fund.

MCL 206.51 and 206.51d

FISCAL IMPACT:

As written, the bill would increase the SAF earmark from about 22.4% of gross income tax revenue (income tax revenue before refunds are subtracted) to roughly 23.8% of gross income tax revenue. As a result, SAF revenue is expected to increase (and therefore reduce GF/GP revenue) by about $172 million in FY 2019-20 and $177 million in FY 2020-21.

                                                                                        Legislative Analyst:   Nick Kelly

                                                                                               Fiscal Analysts:   Jim Stansell

                                                                                                                           Ben Gielczyk

■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their deliberations and does not constitute an official statement of legislative intent.