Gretchen Whitmer, Republicans strike deal to plug $2.2B Michigan budget hole

Michigan leaders on Monday agreed to use federal relief funds and dip into savings to avoid massive budget cuts. (Bridge file photo)

LANSING — Michigan will spend federal coronavirus relief money, tap its own "rainy day" savings fund and make "modest" cuts to the state government under a budget deal announced Monday by Democratic Gov. Gretchen Whitmer and Republican legislative leaders. 

Officials say the plan will plug a $2.2 billion budget hole for the current fiscal year, but it does not resolve what could be an even larger budget gap for the state's next fiscal year that begins Oct. 1. 

The deal will use most of the remaining federal assistance provided through the federal Coronavirus Aid, Relief, and Economic Security Act, better known as the CARES Act, which included $3.1 billion for Michigan.

The global pandemic and forced business shutdowns have wreaked havoc on the state and national economies, depressing tax collections used to pay for government operations. 

"In this time of crisis, it is our responsibility to come together and build a budget that reflects a bipartisan commitment to the things we value most as Michiganders," Whitmer, House Speaker Lee Chatfield and Senate Majority Leader Mike Shirkey said in a joint statement. 

The agreement "provides crucial funding for Michigan families, schools, and communities grappling with costs incurred as a result of the virus," they said.  

"Our collective priority is a healthy state and a healthy economy. We are committed to working together to address the remaining shortfalls in next year’s budget and we are looking to our partners in Congress for support to help maintain the essential services relied upon by our families and small businesses.” 

While they have not yet detailed any specific spending cuts, Whitmer and GOP leaders say Michigan will save $490 million through hiring and discretionary spending freezes, layoffs and "other identified savings" in state government.  

Michigan will send $512 million in federal funding to K-12 schools, $200 million to universities and community colleges and $150 million to local governments. Another $53 million will be used to provide hazard pay for teachers willing to return to work despite public health risks from the virus.

That will offset a $256 million cut in state aid to schools, a $200 million reduction to universities and colleges and a $97 million cut to local governments.

To avoid further cuts, officials will spend $350 million from the state's $1.2 billion budget Stabilization Fund, otherwise known as the rainy day fund, which had grown considerably under former Gov. Rick Snyder.

Whitmer and GOP leaders also expect to avoid $475 million in state spending by using federal funding for various public safety expenses and $340 million because of enhanced Medicaid match dollars from the federal government. 

All told, the deal will leave Michigan with $94 million in unspent federal relief funding. It builds on an $880 million agreement Whtimer and GOP leaders finalized June 17.

"But there is remaining need," the Whitmer administration said in a budget agreement outline. 

The governor has urged the federal government to provide additional assistance to states and local governments facing budget problems because of the pandemic. 

The $2.2 billion budget hole she and GOP leaders say they need to fill is smaller than the $3.2 billion deficit officials had projected in mid-May. While state revenues are down dramatically this year, they have not fallen as sharply as once anticipated. 

As of last month, budget officials were also projecting a $3 billion gap for 2021, which will complicate efforts to balance next year's state budget by Oct. 1, as required by the Michigan Constitution. 

After last fall's combative budget cycle, which was marked by a near-government shutdown and a controversial Whitmer veto spree, the Legislature had agreed to send Whitmer a 2021 budget plan by July 1. 

They are no longer expected to meet that deadline. 

Detroit Regional Chamber Sandy Baruah praised Whitmer, Shirkey and Chatfield for "coming together to proactively and collaboratively resolve the $2.2 billion shortfall in the current fiscal year."

"The business community stands ready to help advocate for Michigan's fair share of Federal support in forthcoming aid to state and local governments," Baruah said in a statement. 

Shirkey, in a statement of his own released separately from the announcement with Chatfield and Whiter, acknowledged the "fiscal needs of our state and our country are great" given the pandemic. 

As Congress considers additional state aid, Senate Republicans are encouraging federal lawmakers "to balance fiscal responsibility with the realities of unprecedented challenges related to this insidious virus," Shirkey said.  

"We must resist the urge to default to debt and call it a plan.  The immediate needs of our country are very real. Restraint on spending will be difficult in the face of these needs, but absolutely necessary."

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Comments

Kevin Grand
Tue, 06/30/2020 - 6:47am

For the umpteenth time...the federal government will NOT bail out Lansing despite how much the governor wishes for it to happen otherwise.

And the vagueness of the spending cuts only shows that the governor is clearly afraid that "peaceful protestors" will show up at her front door and burn Lansing to the ground over their displeasure with her decision.

What they need to focus on now is getting Michigan's economy back up and running at 100%.

Playing musical chairs with money from current various sources will only last for so long.

Kevin K
Tue, 06/30/2020 - 12:48pm

All this could be easily resolved by everyone wearing masks, socially distancing, but GOP won't have it.

Kevin Grand
Tue, 06/30/2020 - 7:12pm

You're posting on the wrong story.

This one is dealing with the $6-billion+ hole the governor blew into the state budget through her own overreacting.

Medical security theater "requirements", that most people will simply ignore anyways, are elsewhere.

Person
Wed, 07/01/2020 - 10:22am

Maybe we should continue to bail out banks. You know, the ones who can do as they please with tax payer money? Or how about the requirement that local, state and school districts are required to maintain a positive fund balance, or rainy day fund, yet one of the most profitable industries isn’t required to shave off a percentage of their billions per quarter, profit margins for such emergencies? No they don’t have to because because the government will bail them out with our money! It’s all about the shareholders and not about what’s happening with taxpayer money!

Bobby
Wed, 07/22/2020 - 9:26am

Are you aware that the GOP worked on this stuff too?

Mrs Smiley
Tue, 06/30/2020 - 8:57am

“To avoid further cuts, officials will spend $350 million from the state's $1.2 billion budget Stabilization Fund, otherwise known as the rainy day fund, which had grown considerably under former Gov. Rick Snyder.“
Isn’t it amazing that even during the “Great Recession” the government was responsible enough to plan for disaster which is being used by the current administration to bail out the budget.
Hopefully the bipartisan budget includes an across the board 10% cut in salaries for all government employees like the citizens who still have jobs took to keep their jobs.

Mike
Tue, 06/30/2020 - 9:04am

How wonderful. Michigan will be steeling money from the CARES Act funds that were supposed to be used directly for Covid 19 spending and shuffle it off for general budget use in defiance of the law and spirit of the bill. Meanwhile, businesses like mine are forced to remain shut down due to the Governor's orders and I can't get any grants to fill the gap from the CARE's act money because they are steeling it. My business is going bankrupt over this and the state is going on like there is no problem. Our Lansing politicians are corrupt, incompetent and in human. They all should have to give up all their pay and be benefits until the COVID 19 disaster is over.

Jim C
Tue, 06/30/2020 - 9:18am

So the Dems got the legislature to pay the MEA a bonus. For what? Going to work? One of the kids might come from a home where there might be an illness. What about the hundreds of EMS and FIRE personnel that responded to homes for those that were sick and were absolutely exposed. Oh Yeah they don't vote Dem so they don't count.

Person
Wed, 07/01/2020 - 10:15am

Uhh well despite what you may have not been told by the GOP, most of my friends who are cops DID get the same amount bonus proposed by MEA. EMS, not sure. However, most cops aren’t constantly sitting in large groups of 120 kids per day in close quarters. They are patrolling and most of the time coming in contact with one or two people at a time. Unless you count the protestors and dumb hillbilly’s protesting covid measures which trump made states decide for themselves, then knocked them for the decisions they made. Or how about conservatives saying that a baker has the right to deny service to a gay person, but then turns around and complains that their rights are being violated if a baker requires them to wear a mask.

Person
Wed, 07/01/2020 - 10:16am

Uhh well despite what you may have not been told by the GOP, most of my friends who are cops DID get the same amount bonus proposed by MEA, but as hazard pay. EMS, not sure. However, most cops aren’t constantly sitting in large groups of 120 kids per day in close quarters. They are patrolling and most of the time coming in contact with one or two people at a time. Unless you count the protestors and dumb hillbilly’s protesting covid measures which trump made states decide for themselves, then knocked them for the decisions they made. Or how about conservatives saying that a baker has the right to deny service to a gay person, but then turns around and complains that their rights are being violated if a baker requires them to wear a mask.