Record Budget Focuses On Paying Down Debt; Not Tax Cuts . . . Yet

A record-breaking $76 billion state budget, with $15.3 billion coming from the General Fund, rolled out of a House-Senate conference committee early Friday morning and through both chambers of the Legislature – fueled by leftover emergency federal dollars and better-than-expected income and sales tax revenues. 

Around $7 billion ($3.8 General Fund, $3.2 billion School Aid) is being left on the balance sheet, according to Budget Director Chris Harkins. The House wants an income tax cut. The Senate wants a gas tax holiday. The Governor wants targeted tax cuts for seniors and the low income folks, but she’d also like more money put into the new economic development fund. 

Those discussions are slated to continue later this summer, but could stretch through Lame Duck.

“This is a big deal. This is a big day for the state of Michigan. A lot went into this. I’m really proud of where we’re at,” said House Appropriations Committee Chair Thomas Albert (R-Lowell) shortly before HB 5783 moved out of a joint House-Senate conference committee at 12:26 a.m.

HB 5783 passed unanimously in the Senate at 2:21 a.m. Afterward, Senate Appropriations Chair Jim Stamas (R-Midland) told the media that the most challenging part of trying to manage a historic amount of money was “the historic amount of money” itself. 

For example, the Legislature acquired more than $150 billion worth of requests for this Fiscal Year 2023 budget.

When asked if a colossal budget lacking tax relief keynotes will have a negative impact on Republican candidates in the 2022 elections, term-limited Stamas said the budget offers a record-number of debt that will be paid down in a single time. He said Michigan is well-positioned. 

“I think the bigger discussion will be where do we go on the tax policy? And based on that, how do we make any additional investments? But there is concern of the recession coming forward,” he said. “I think my biggest personal accomplishment is the balance of it, looking at not only the amount of paying down debt, but how we’re making investments in our kids and making an investment in Michigan’s future – setting our budget and setting our revenues in a path that puts Michigan on the right path to continue to provide the services Michigan families expect.” 

A $2.65 billion chunk is being put into the public employee pension system to reduce long-term debt. It’s less than the $4 billion the House wanted, but still a win for chamber leadership, that made the subject a top priority.

Of this pot of money, $1 billion is going to the Michigan Public School Employees’ Retirement System (MPSERS) and $425 million to offset MSPERS costs by accelerating the reduction in the payroll growth assumption rate. 

The higher education MPSERS fund is getting $300 million. Another $750 million will go toward local government grant programs and $100 million for the State Police Pension system.

Governor Gretchen Whitmer suggested in February that $52 million be put into the state’s $1.382 billion rainy day fund. Instead, another $180 million will be deposited into the fund, boosting the total to $1.64 billion, which is 5% of the General Fund and the School Aid fund.

The budget also includes a record slice of pork – $1 billion in special projects – broken down in the Department of Labor and Economic Growth (LEO) budget. The biggest pieces are $130 million for the Electric Vehicle Teaching, Training and Development Center at the University of Michigan, $100 million for an Academic Research Building for the Detroit Center for Innovation and $100 million for the Cancer Institute Project at Wayne State Medical School.

Exactly 100 smaller special projects are broken down as part of Michigan Enhancement Grants, ranging from purchasing a vacant Sterling Heights elementary school for a recreation center to $500,000 for a Downtown Boxing Gym to $2 million for Lansing’s Potter Park Zoo. Another $262 million is going to 28 larger projects like $30 million for the Grand Rapids Amphitheater and $20 million for a Holland Township pipeline.

The final piece is 17 Michigan Infrastructure Grants, such as $35 million for Mackinac Island upgrades, $2 million for the Traverse City Curling Club and $14 million for a passenger ferry to Beaver Island.

Cities, counties and local governments are seeing a 5% on-going funding increase in their revenue sharing payments, including an additional 1% one-time bump.

Universities are also receiving 5% more on-going, plus additional floor funding to get each university to a minimum of $4,500 per first-year experience programs.

Community colleges are getting 5% more, as well.

The Senate’s student scholarship proposal is getting $250 million put behind it, but details still need to be negotiated over the summer.

Overall, the Governor and the Legislature celebrated the extra money that greased the wheels on negotiations, giving officials the ability to sink money into schools, communities, public health, public safety and infrastructure.

The House passed the bill, 97-9. The no votes were Reps. Julie Alexander (R-Hanover), Ryan Berman (R-Commerce Twp.), Steve Carra (R-Three Rivers), Michele Hoitenga (R-Manton), Steven Johnson (R-Wayland Twp.), Matt Maddock (R-Milford), John Reilly (R-Oakland), Daire Rendon (R-Lake City) and Scott VanSingel (R-Grant).

Among the bigger spending items are:

A new big new item is a $305 million scholarship program for students in public and private teacher preparation programs to earn teaching certificates, which is designed to address the state’s teacher shortage.

Legislature Obtaining $215M For More Capitol Historic, Chamber Operations Spending 

State lawmakers boosted their own budget by more than $1.5 million, with a $215 million appropriation for the new Fiscal Year. The budget featured no changes in full-time equated positions, as well as: 

Additionally, the Senate-House Conference agreed to spend $3.13 million in General Fund dollars for a 6.2% spike in Senate spending, as well as more than $4.2 million on a 6% light in House spending. 

The Legislative Council will also see a 6.8% increase in spending with a $1.3 million General Fund investment agreed upon by the Conference. 

Department of Health and Human Services

Department of Corrections

The $2.1 billion budget is only a 2.9% increase from the current year. The final agreement included $15 million for a communications system upgrade, but it didn’t include the live tracking prisoner movement idea the Governor suggested. It did include: 

Agricultural Budget Focuses On CWD Study, Food Processing, Office Of Rural Development 

Agricultural and rural development in Michigan will receive more than a $155 million gross budget, with $97 million coming from the General Fund. Investments will feature a 20.6% jump in full-time equated workers, and a $26 million boost in total state spending. 

The Governor, Senate and House agreed to spend $500,000 in federal money to implement a biological study zooming in on chronic wasting disease. 

The House-Senate Conference also agreed to spend $50 million in General Fund dollars on Michigan’s food processing and agriculture industry, which focuses on the supply chain, infrastructure and minimizing the environmental shortfalls of food processing. 

This investment will additionally consist of $12 million going directly into the Eastern Market. 

Furthermore, the Office of Rural Development would gain a $3 million one-time General Fund investment, the approval for three new temporary full-time equivalent workers and $500,000 in General Fund dollars for an ongoing, expanded expenditure into the office. 

The House-Senate Conference also devoted $5.4 million in federal money for reforestation efforts in 16,100 acres of land in Michigan’s northern Lower Peninsula. 

New Conference Judicial Budget Sees Nearly 51% Boost 

The Judiciary budget acquired a 50.9% lift in its budget with a gross overall investment of $483.5 million for the new Fiscal Year, with 13 new full-time equated positions being funded. 

The Senate-House Conference agreed to spend $1.05 million in General Fund money on the Justice for All Self-Help Center Expansion, concurring with the Governor’s proposal to spike up funding by $750,000 for legal self-help to rural communities. 

Additionally, the Conference agreed with the Governor to: 

LARA Budget Funds New Nursing Home Surveyors In $539.8M Budget 

The new Licensing and Regulatory Affairs (LARA) budget agreed upon by the conference includes $1.58 million for state nursing home surveyors with 10 full-time equivalent positions for the operation. 

The $539.8 million budget, which is .4% smaller than what it was for the Fiscal Year of 2022, would also feature $2.3 million in restricted funds to modify the Corporations Online Filing system, as well as: 

LEO Budget More Than A Quarter Smaller, Funds Grant Programs, Research Centers 

The budget covering the state’s department of Labor and Economic Opportunity (LEO) saw a 35% drop in funding from the ending Fiscal Year, totaling at more than $2.86 billion and removing an array of COVID-19 supplementals. 

Under the new LEO budget, the Senate-House conference agreed to: 

Department of Environment, Great Lakes And Energy (EGLE)

EGLE gets a $728 million budget with $98 million in General Fund money. Highlights included:

Department of Natural Resources (DNR)

DNR is a $535 million budget with $94.4 million in General Fund money. Highlights included:

Department of Treasury

Treasury is a $1.58 billion budget with $1.036 billion in General Fund money. Highlights included:

Department of Transportation (MDOT)

MDOT is a $6.1 billion budget with $71 million in General Fund money. Highlights included:

It didn’t include the $150 million the Governor wanted for critical roads and bridges.

Department of Technology, Management & Budget (DTMB)

DTMB is a $1.8 billion budget with $642 million in General Fund money. Highlights included:

Michigan State Police (MSP)

MSP is an $823 million budget with $552.7 million in General Fund money. Highlights included:

Civil Rights Department Earns 21.1% Budget Boost, New Cap For Accepting Local, Private Funds 

The state’s Civil Rights budget earned a 21.1% boost in gross funding in comparison to the concluding Fiscal Year, with $21.6 million allocated into its pocket for a $500,000 one-time, General Fund-backed Indian boarding school study. 

The Senate-House conference additionally lifted the cap for the amount of local and private funds the department is authorized to accept from $85,000 to $200,000. 

Capital Outlay

The following four projects were part of the budget: