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Michigan Gov. Rick Snyder

(AP File Photo)

LANSING, MI -- Michigan Gov. Rick Snyder on Tuesday put the finishing touches on a plan to fill a projected budget hole, signing legislation that will reduce general fund spending by nearly $420 million in the current fiscal year.

"These bills continue our efforts to fiscal responsibility by reducing spending to help to keep Michigan's economy growing," Snyder said in a statement announcing that he had signed House Bills 4110 and 4112.

"I appreciate the partnership from the Legislature to identify reductions that make sense and protect our key priorities areas such as K-12 education, community colleges, higher education, and funding for locals. Protecting the education system was a top priority for everyone."

Democrats have criticized the cost-cutting plan because it will shift $167 million from the School Aid Fund (SAF) to cover community college operations that would have otherwise been paid out of the general fund.

The state constitution allows the fund to be used for community colleges or higher education, and the bills signed Tuesday will not impact current K-12 spending levels. But critics argue that any SAF surplus should have been spent on schools.

"I think we need to make sure that we provide increased opportunities for people in the K-12 classroom," Senate Minority Leader Jim Ananich, D-Flint, said earlier Tuesday.

"We've seen overcrowded classrooms, and more and more districts are falling into or moving towards potential receivership. Taking more money away from them is a dangerous thing to do."

The budget bills, combined with an executive order that Snyder signed in February, will cut total state spending by roughly $530 million.

State officials had slashed revenue estimates in January, citing unexpectedly large refunds for credits issued under the old Michigan Business Tax.

Michigan Economic Growth Authority credits, issued from 1995 through 2011 and often tied to job retention or creation goals, can be redeemed through 2032, creating the potential for long-term budget instability.

Outstanding MEGA credits have a potential collective value of $9.38 billion, according to recent data from the Michigan Economic Development Corporation.

HB 4110, which shifts the School Aid Fund money, will save the state another $80 million in general fund spending by eliminating an optional and extra payment to the Michigan Public School Employees' Retirement System.

HB 4112 will reduce spending targets by $196.4 million, including $100 million in savings based on a projected Medicaid caseload adjustment and a $12 million cut for the Michigan film incentive program.

Major layoffs are not expected in state government, but the Department of Community Health will lose funding for 19 full-time peer coaches and PATH coordinators, according to an analysis form the non-partisan Senate Fiscal Agency.

State Rep. Al Pscholka, chair of the House Appropriations Committee, called Tuesday's signing of the budget bills a "great accomplishment" for the state.

"We successfully once again balanced the state's checkbook, without borrowing money or reducing funding to schools or local governments," Pscholka, R-Stevensville, said in a statement. "A decade ago this would have been revolutionary. Today, it's the new normal."

Jonathan Oosting is a Capitol reporter for MLive Media Group. Email him, find him on Facebook or follow him on Twitter.