CAPITAL OUTLAY APPROPRIATIONS                                                                                                                   S.B. 78 (S-5):

                                                                                                                                                                                                      SUMMARY OF BILL

                                                                                                                                                                        REPORTED FROM COMMITTEE

Senate Bill 78 (Substitute S-5 as reported)

Sponsor:   Senator Ken Horn

Committee:   Appropriations

CONTENT

The bill would appropriate $3,500 for 35 $100 capital outlay project planning authorizations. Twelve of these planning authorizations would be for projects at universities, 18 would be for community colleges, and five would be for State agency projects. A list of these projects is provided in Table 1. If each of these projects were provided with a construction authorization as written, the total cost of the projects would be $1.2 billion, of which $671.9 million would be funded by the State through the State Building Authority (SBA), and $548.9 million would come either from matching funds from universities and community colleges, or in the case of the three veterans homes projects, Federal funds from the United States Department of Veterans Affairs.

The Governor did not recommend planning authorizations for any capital outlay project funded through the SBA in her fiscal year (FY) 2022-23 budget recommendation; however, for all but one of the university and community college projects, the projects were reviewed, scored, and ranked by the State Budget Office (SBO). The university project request that was not part of the SBO ranking process was the one for University of Michigan     Flint, which is a new request included in the bill. Three project requests (University of Michigan     Ann Arbor, Kellogg Community College, and Muskegon Community College) were not ranked as they were deemed ineligible for SBA financing as submitted. These three projects are not included in the bill.

Similarly, the Governor also did not make any recommendations for SBA-funded State agency projects in her FY 2022-23 budget recommendation. Each year, State agencies are required by statute to update a five-year capital outlay plan. The plan identifies current and anticipated capital outlay and maintenance needs. Each State agency project in the bill is identified as a current or future need in these plans.

FISCAL IMPACT

The bill contains 35 $100 planning authorization line items so, strictly speaking, the fiscal impact of the bill would be limited to $3,500, plus any planning costs incurred by universities and community colleges and the three State agencies that would receive a planning authorization under the bill. Section 242(9) of the Management and Budget Act specifies that an appropriation for a planning authorization does not represent a commitment by the Legislature to provide funds for the construction of a project, but for projects that eventually receive a construction authorization, the State will cover a portion of those planning costs. If all of the projects in the bill were given construction authorizations at their requested State share levels, the SBA would finance about $671.9 million of the total $1.2 billion cost of the projects through bonding. These additional bonds would increase SBA rent payments (debt

service) in the Department of Treasury by an estimated $45.0 million to $65.0 million annually. The actual SBA rent costs could vary significantly depending on bond market conditions if and when the projects ultimately receive final SBA financing following completion of the projects.

Table 1