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Flush with money but still no Michigan budget deal: What you need to know

Michigan capitol
Negotiations over the state budget are now likely to drag on until at least August. (Shutterstock photo)

Ah, summer in Michigan, the season for barbecues, black flies, … and budget problems in Lansing.

Completing next fiscal year’s state budget should have been easier this year, with the state flush with federal dollars and the Legislature vowing to complete a deal by July 1. But that deadline is now as forgotten as COVID-era social distancing in college town bars.

What’s the hold-up? Who, if anyone, is being hurt by the delay in inking a budget deal? And what’s going to happen next?

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While the state’s budget holds vast influence over essential areas of improvement in Michigan, including education, small business aid and road and bridge repairs, the negotiations that fund these ventures can be confusing and difficult to follow. Here’s what you need to know.

Why should I care about the state budget?

At least some of the roads you’re driving on this weekend to go up north are paid for through the state budget. So is that state park you’re camping in and the public schools your kids attend. 

The annual state budget sets the amount of taxpayer money that will go to various departments and programs. To take effect, the budget must be passed by the House and Senate and signed by the governor. That’s where it can get tricky.

If the state has a surplus of federal funds, shouldn’t this be easy?

The short answer is that there are competing priorities for the funds. Michigan is flush with federal dollars, receiving $6.5 billion from the federal government’s stimulus packages that could give the state a $3.5 billion surplus for the 2021-22 fiscal year.

Even when there is a lot of money to spend, Republicans and Democrats can, and often do, disagree about how to spend it.

The governor has proposed using the influx in federal dollars for her Economic Jumpstart Plan to make Michigan’s minimum wage $15 an hour, support small businesses, and enhance childcare affordability.

GOP legislators have been wary to use one-time federal funds for programs and expenses that would continue beyond the pandemic. Senate Appropriations Committee Chair Jim Stamas, R-Midland, said in a statement that federal funds should be used “in a fiscally responsible manner” and that the state should be “guarded with new spending programs.”

When does the budget normally get approved?

While there is a drop-dead deadline of Oct. 1, the time state budgets actually get approved varies a lot from year to year. During the administration of Democratic Gov. Jennifer Granholm, budgets were routinely finalized in the fall. Under Republican Gov. Rick Snyder, they were approved in June.

Gov. Gretchen Whitmer and GOP lawmakers reached a spending agreement hours before the Oct. 1 deadline in 2019, and the governor signed a budget in September last year.

By law, budget agreements for the upcoming fiscal year must be signed by Oct. 1. If budgets are not approved by then, a government shutdown occurs, with state employees laid off and a number of state agencies and offices closed to the public until a deal is reached.

If the deadline isn’t until Oct. 1, why is there a rush?

The sooner the budget is approved, the sooner state departments can make plans for next fiscal year by providing certainty of funding levels. Getting the budget out of the way also frees up the Legislature for other priorities. Some areas of the budget, such as education or local government funding, can also be approved earlier than the entire spending agreement to give schools and cities an indication of how much money they should expect to receive from the state.

What was the Whitmer administration’s proposed budget? How did lawmakers respond?

In February, Whitmer proposed a $67.1 billion budget to fund the state’s economic recovery amid the COVID-19 pandemic. The plan, the largest in the state’s history, reflects an increase upon last year’s $62.8 billion agreement and includes an infusion of federal stimulus funds in its recommendations. Whitmer prioritized spending to improve the state’s road and bridge infrastructure, support struggling schools and education centers, and reinforce the state’s healthcare system.

GOP lawmakers, who hold control of the state House and Senate, were critical of the use of one-time funds from the federal government for long-term programs and wanted more funding to go towards ensuring schools reopen with in-person instruction.

What have negotiations looked like? Why have they taken so long?

The GOP previously declined to negotiate with Whitmer over her use of executive authority to address COVID-19 policies. The Legislature initially passed several spending bills tying the use of federal funds to limiting pandemic restrictions and the governor’s powers.

GOP lawmakers only agreed to begin negotiations in earnest in May when Whitmer announced state restrictions would be lifted in July – though restrictions ended up being lifted on June 22.

While Whitmer has negotiated a budget with the House, discussions have primarily been held up by internal spending disagreements between the House and Senate.

Last month, the House passed a $48 billion budgetary spending bill that would have provided funding for state departments, local governments, and universities. The Senate did not vote on the House’s proposal before the summer recess and passed its own narrower bill providing funding for local governments and using limited federal dollars. The House also has not voted on this Senate bill.

Is anyone hurt by not having the budget completed in July?

The groups that typically worry the most about a budget not being completed by July 1 are Michigan’s schools. That’s because schools operate on a fiscal calendar running from July 1 to June 30. When state budgets aren’t completed until October, schools are forced to guess how much funding they’ll receive, which causes havoc on decisions big and small, such as how many teachers to hire.

That’s not a problem this year. Providing better funding for education has been an area of near universal agreement. Before the House and Senate adjourned for summer recess, the Legislature approved a $17 billion bill supporting schools in the state. Whitmer is expected to sign the bill into law.

On Wednesday, Whitmer signed an earlier bill approved by lawmakers to direct $4.4 billion in federal funds towards supporting schools in the state.

What’s next for the budget?

Both the Michigan House and Senate have tentative sessions scheduled in July, but don’t hold your breath for a quick budget deal. 

House GOP spokesman Gideon D’Assandro said the House is still planning to meet next week, but it’s unclear if the House will take on additional budget bills. D’Assandro referred to the House bill agreed upon with Whitmer and said talks are continuing with the Senate to find a version that officials can support.

Senate Majority Leader Mike Shirkey, who sought to have the budget approved by July 1, said last week he does not expect the upper chamber to meet until August. Shirkey that “there was an honest attempt made,” but the boost of federal dollars made it more difficult to reach an agreement on how to spend them.

“There’s too many variations and interests, and frankly, we have too much money,” Shirkey said. “Budgets when you have less money are easier to do than budgets when you have lots of money.”

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