SBAM’s Brian Calley and Kelli Saunders discussed Governor Whitmer’s recent budget proposal on the Small Business Briefing, including what items small business owners should be paying attention to. Listen here.
Gov. Gretchen Whitmer Wednesday proposed an $80.7 billion budget for Fiscal Year (FY) 2025, which comes in 1.2 percent lower than the record-setting $81.66 billion FY 2024 budget, and was called a “return to normal” by State Budget Director Jen Flood.
Flood said there have been benefits seen from a huge injection of federal dollars in the past several years, which have been invested in “responsible, one-time ways that are going to benefit our communities, our kids and our infrastructure.”
She said this budget, “is sort of a return to normal,” reflecting both a slight 3.9 percent increase in the General Fund and a loss of one-time COVID-19 pandemic funding.
In total, 10 areas of the budget were decreased in the Governor’s FY 2025 recommendation, including:
- The Department of Education budget ($162,825,100) is a $484,556,000, 74.8 percent decrease from FY 2024 and the largest cut to any state department budget this year.
- The Department of Labor and Economic Opportunity budget ($1,973,233,500) is an $894,023,000, 31.2 percent decrease.
- The Department of Agriculture and Rural Development budget ($144.2 million) is a $24,393, 14.5 percent decrease.
- The recommended budget for Michigan community colleges ($465,921) is a $78,597, 14.4 percent decrease.
- The office of the Attorney General budget ($128.5 million) is a $14.248 million, 11 percent decrease.
- The Department of Natural Resources budget ($542,770,100) is a $29,478,000, 5.2 percent decrease.
- The Department of State budget ($291,840,900) is a $12,370,000, 4.1 percent decrease.
- The School Aid budget ($20,609,973) is a $948,078, 4 percent decrease.
- The Legislature’s 2025 budget ($221,931,700) is a $163,000, 0.1 percent decrease.
- The Department of Technology, Management and Budget ($1,857,176,200) was recommended a $199,481,000, 9.7 percent decrease.
An additional 13 areas of the budget were increased this year, including:
- The Department of Military and Veterans Affairs budget ($267,052,100) is an $18,712,000, 7.5 percent increase.
- The Department of Health and Human Services budget ($37,702,293,800) was a $1,967,710,000, 5.5 percent increase.
- The Department of Environment, Great Lakes and Energy budget ($1,104,199,000) was a $52,587,000, 5 percent increase.
- The Department of Insurance and Financial Services budget ($77,771,400) was a $3,624,000, 4.9 percent increase.
- The Executive Branch budget ($9,337,000) was a $432,000, 4.8 percent increase.
- The State Police budget ($933,209,500) is a $39,867,000, 4.5 percent increase.
- The Judiciary budget ($371,816,400) was a $15,888,000, 4.5 percent increase.
- The Department of Corrections Budget ($2,144,379,000) was a $58,129,000, 2.7 percent increase.
- The Department of Transportation budget ($6,781,289,200) is a $154,739,000, 2.3 percent increase.
- The Department of Civil Rights budget recommendation ($32,320,500) was a $610,000, 1.9 percent increase.
- The Department of Licensing and Regulatory Affairs budget ($635,467,200) was a $7,526,000, 1.2 percent increase.
- The budget for Michigan universities ($2,314,197) is a $23,148, 1 percent increase.
- The Department of Treasury budget ($2,644,610,100) is a $3,542,000 0.1 percent increase.
The 2025 budget also accounts for a new state department, the Michigan Department of Lifelong Education, Advancement and Potential, which was allocated $516,985,400.
In total, the budget is a decrease from the $81.66 billion FY 2024 budget, but is still larger than pre-pandemic spending levels by about 30 percent. For reference, the 2019 budget was $56.8 billion.
House Appropriations Republican Vice Chair Sarah L. Lightner (R-Springport) said she’s not sure if the budget is truly a return to normal.
“We just got a first look, and it was really just bullet points today,” she said.
But Lightner said her initial concern – in addition to a lack of food assistance parity for parochial and homeschooled students, an increase in landfill tipping fees and a shortage in funds for housing – is the decision to redirect funding previously used to pay down debt.
Rep. Andrew Fink (R-Osseo) called Whitmer’s presentation further confirmation that the Governor is out of touch with the needs of Michiganders, “and that her true concerns are with her own future politically.
“She’s mortgaging Michigan’s future to roll out irresponsible programs that we simply can’t sustain,” he said. “The people I represent are being hit hard by inflation. They’re tightening their belts at the grocery counter and gas pump. Meanwhile, our governor is on a frivolous and unsustainable spending spree.”
Whitmer was asked about the belief by some that spending could be cut based on current numbers, and what’s the lowest she’d be willing to go if the Legislature wanted to make cuts.
She said that with every budget she’s introduced, and during her time as a legislator, “that was always one of my takeaways.
“We’re just starting the process,” Whitmer said. “Everyone’s going to dig into all the details here and the work will get started on the legislative side, but we’ve been working on this for five months.
She added: “I will always negotiate with the Legislature, regardless of whether it’s Republican control or Democratic control. That’s my job. I’ve started the process and we’ll go from there, but I’m not going to say here’s this or that right now. They haven’t even had an opportunity to read the whole budget, yet.”
When asked if the budget will be expected to decrease more before “returning to normal,” Whitmer did not say, but drew attention to the budget’s ability to address inflation while still putting Michigan in a stronger position by paying down liabilities and debt.
“That’s a big deal,” she said, “and getting this budget done, we’d be in a position where we can say we paid down $21 billion of debt.”
In response to a question about the income tax rate increasing again in 2024, Whitmer said, “We also recognize that this budget actually is smaller than last year’s budget.
“We also have amassed record resources in our rainy day fund, as well as an education fund, and paid down billions in debt,” she said. “So we’re in a strong fiscal position.”
Rep. Jasper R. Martus (D-Flushing), a member of the House Appropriations Committee, said he thinks the Governor is taking the right approach to slow down spending after record federal funds.
“I think we’re in a transitionary period right now, where we had this influx of money. We were able to pilot a lot of programs to see what would work and what doesn’t,” Martus said. “I saw in the Governor’s approach, understanding that we’re not going to have as much money as we did in years past and continuing to focus on some of those programs that have continued to work and the ones that are really popular.”
Martus added that he believes in the long term, the state is going to have to look at other forms of tax revenue if it wants to continue to have the same impact on Michiganders.
“We were able to see that this influx of federal cash (had a) transformative impact on people’s day to day lives,” he said. “I think (with) the current structure, we can still do that.
But Martus said that the influx of pandemic dollars has shown what’s possible when Michigan has “a lot more money to play with.
“Michigan is actually one of the lowest tax states in the country,” Martus said. “Obviously, each state has different ways of how they do their taxation, but we’re actually doing a lot of transformative things with a relatively low amount of dollars.
“I think there’s going to be those longer term structural changes that we’re going to need to make to stay competitive in that way,” Martus said, “And my hope would be that the influx of COVID-19 dollars showed what’s possible when we actually have more money to help people.”
Article courtesy MIRS News for SBAM’s Lansing Watchdog newsletter
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