Michigan lawmakers approve record $82B budget plan

Lansing — Michigan lawmakers approved an $82 billion budget Wednesday that will boost funding for K-12 schools and universities while using the state's financial surplus to spend hundreds of millions of dollars on special projects.

The plan's supporters labeled it historic on Wednesday evening, saying it will bring generational change and a record level of funding for public schools. But opponents called it irresponsible, suggesting that it would endanger the state's future. 

The new budget, which covers the fiscal year that begins on Oct. 1, marked the first spending blueprint in about four decades to be approved under full Democratic control of the state Legislature and a record level of spending. Michigan's current year budget amounted to $76 billion when it was signed into law last summer.

The House approved the $57.4 billion general budget bill in a 61-47 vote, with the support of five Republican lawmakers. That bill covers most state departments. The House voted 58-50 to adopt the education aid bill.

The Senate voted 26-10 to adopt the general budget legislation, with six Republicans joining Democrats in support. The education funding bill passed the Senate 29-8.

"We are creating a budget that is going to change the lives of so many students for a generation," said Sen. Darrin Camilleri, D-Trenton, a former teacher.

The budget will spend a record $21.4 billion on K-12 education and increase per-pupil funding for Michigan schools by $611 million. The per-student allowance will go from $9,150 to $9,608, a $458 or 5% baseline increase for all school districts. Whitmer had planned a 5% hike while the House proposed 4% and the Senate proposed 6%.

The blueprint will also provide a pool of money aimed at districts with high concentrations of low-income students in what advocacy groups called a historic first.

The House and Senate had disagreed on how to handle virtual schools going forward. In the past, under GOP control, they've been funded at 100% of the per-pupil rate of traditional students, but Democrats have called for cutting their allocations. The final funding plan would keep cyber schools funded at $9,150 per student, not providing them the increase other traditional schools would get.

Gov. Gretchen Whitmer tweeted late Wednesday afternoon that the budget deal is "going to grow our economy, deliver for families and communities and ensure anyone can ‘Make it in Michigan.'"  

House Speaker Joe Tate, D-Detroit, said the budget reflects the "priorities of the people" and said he was "perplexed" by the fact that only five Republicans voted in favor of the bill.

"Michigan has been sitting on hundreds of millions of dollars in one-time funds from the federal government, and today, we will deploy those funds to facilitate improvements all across the state of Michigan for our constituents," Tate said.

Some Republican legislators expressed reservations about the late unveiling of the $82 billion budget and said the spending plan failed to anticipate a potential downturn in the economy. The legislation included $5.4 billion in supplemental funding to provide for additional costs in the current fiscal year, amounting to a total allocation Wednesday of about $87 billion.

"I don't think it's asking too much to be able to read the bill" ahead of a vote, said Rep. Andrew Beeler, R-Port Huron. "There's billions of reasons to disagree with that budget, but we can't even have a policy debate; we can't have a priority debate if we haven't had the time to read it."

One-time money that went to pet projects or new state programs and employees instead should have been pushed toward critical water and road infrastructure, GOP critics argued.

Sen. Thomas Albert, R-Lowell, called the budget "irresponsible." And Rep. Dale Zorn, R-Ida, called it an “unsustainable spending spree” and argued that the state should have learned from past economic downturns.

“We have been here before,” Zorn said. “What did we learn?"

But Senate Majority Leader Winnie Brinks, D-Grand Rapids, said lawmakers were well aware this was a year they had dollars they could spend. They allocated one-time dollars in “transformational” ways that didn’t create long-term commitments, she said.

“We will always be responsive to the revenue that comes into our state,” Brinks said when asked about the possibility lawmakers might have to cut spending next year.

Surplus gets largely spent

The budget will largely use up the state's remaining surplus — an accumulation of higher-than-expected tax revenue and federal COVID relief and infrastructure dollars that had to be allocated to meet spending deadlines. The state entered budget negotiations with about $7 billion in surplus remaining and, after budget passage, will have about $300 million in general fund and $100 million in school aid fund dollars left unallocated, Tate spokeswoman Amber McCann said.

The budget represents an increase in many state department budgets as well as at least $750 million in specialized in-district projects, sometimes referred to as pork barrel spending.

Those district projects included plans such as $40 million for the Macomb County jail, $35 million for Grand Rapids fire stations, $50 million for downtown Pontiac, $20 million for a Greektown corridor development in Detroit and $5 million for a workforce development program run by the AFL-CIO union.

The budget makes a roughly $100 million deposit into the state's rainy day fund this year and another $100 million deposit into the fund in the next fiscal year starting Oct. 1, leaving a balance of about $1.98 billion in the budget stabilization fund. An about $35 million increase was approved to help shore up local retiree pensions and help pay for health care premium grants.

Another $46 million is included for the Department of State for the express purpose of implementing Proposals 1 and 2, voter-approved initiatives that would require financial disclosures of lawmakers and allow for a bevy of early voting rights plans.

The budget makes a $287 million deposit into the Make it in Michigan Fund, which will be used to match federal dollars for community revitalization, economic development and population growth.

New school index aid

The plan also hands out $952 million for at-risk school funding — a $205 million increase. But the new at-risk money is based around an "opportunity index" that provides higher per-pupil payments to districts with higher concentrations of poor students. Advocacy groups touted the index as a historic step for Michigan.

“This year’s school aid budget represents a giant step toward righting past wrongs and ensuring that all Michigan students have access to an excellent public school education,” said Alice Thompson, chair of the education committee for the NAACP Detroit branch and one of three chairs of the Michigan Partnership for Equity and Opportunity coalition.

In some cases, the increased spending in the new budget is less than what was initially proposed and less than officials initially requested.

The budget raises the state's overall sharing of sales tax revenue with cities, villages and townships but comes in lower than what was initially proposed by the governor, House and Senate. Local governments have complained about consistent underfunding over the last couple of decades.

Whitmer had proposed a 5% ongoing, 5% one-time increase in revenue sharing, plus another 7% one-time increase for public safety initiatives. The total increase would have amounted to $44.9 million.

But the conference report approved Wednesday gave a much smaller increase of 5% ongoing and 2% one-time for public safety initiatives. The net increase amounts to $19.6 million.

The legislation also raises operations funding for Michigan's universities by 6.4% or $99 million.

Supplemental spending

Among the budget's supplemental spending items is about $150 million to help restart the Palisades nuclear plant in southwest Michigan. The nuclear plant’s owner, Florida-based Holtec, is attempting to reverse the plant's decommissioning and had asked the state for a $300 million commitment to help with the effort.

The Palisades funding in Wednesday’s budget is contingent on federal support for the facility's restart.

The supplemental bill includes $2 million for a commission formed by the governor to address the state's population loss and $5 million to enhance security at the Capitol and enforce a planned weapons ban for the building.

The Michigan Legislature has a self-imposed July 1 deadline to send an annual financial plan to Whitmer each year. That deadline falls on Saturday this year.

Whitmer started this year's budget process in February when she unveiled a $79 billion proposal that featured $500 million for a program designed to attract economic development projects and significant funding boosts for K-12 schools and universities.

In May, state officials dropped revenue projections by about $1.8 billion because of a series of tax relief measures that were put in place earlier this year. The budget proposals that have advanced in Lansing weren't significantly impacted by the change in expectations due to the state's healthy financial surplus.

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