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Bridge Michigan
Michigan’s nonpartisan, nonprofit news source

Michigan, we have a budget deal. But no tax relief yet, despite surplus

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Michigan lawmakers are expected to vote Thursday evening on a budget deal that will finalize spending plans for more than $70 billion. (Shutterstock)

LANSING — The Michigan House and Senate voted early Friday morning to approve a major $76.9 billion state budget deal after Republican leaders reached an agreement with Democratic Gov. Gretchen Whitmer.

The deal includes new money for school safety and teacher recruitment programs, local government debt relief, blight removal and more than $1 billion so-called pork funding for local projects. But it does not include any major tax cuts or rebates, despite a nearly $9 billion state surplus.

The budget, Whitmer said in a statement, “will grow Michigan’s economy and workforce, make record investments in every student and classroom, protect public health and public safety, expand mental health resources, and empower working families and communities.”

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Whitmer and GOP lawmakers had both proposed competing tax relief proposals but have not yet reached a deal on that front. Instead, officials said they are leaving $5 billion and $7 billion in the state coffers to pay for any tax cuts they might agree to later in the year.

"We all agreed that we wanted to make sure we got the budget out on a timely basis," Senate Appropriations Chairman Jim Stamas, R-Midland, told Bridge Michigan on Thursday, as lawmakers finalized the deal. 

Still flush with cash from federal stimulus packages and unexpectedly high tax collections, Whitmer, Senate Majority Leader Mike Shirkey and House Speaker Jason Wentworth are “going to continue to talk” about tax cuts “and have the dollars to do it” in the future, Stamas said. 

The Michigan Legislature approved the budget bills around 2 a.m. Friday, completing a marathon session that began at 10 a.m. Thursday. The education budget passed the Senate in a 35-2 vote and the House 99-7. The general government bill passed the Senate unanimously after a 97-9 vote in the House.

What’s in the budget?

The fiscal year 2023 deal includes a $22.1 billion education budget that will support a $450 per-pupil funding increase for traditional public and charter schools, along with $210 million for school safety initiatives following fatal Oxford High shooting and $300 million for school mental health programs.  

The plan also includes $575 million to help schools retain and recruit teachers, including a $305 million scholarship program for students in public and private teacher preparation programs. Recipients must live and work in Michigan for at least three years after graduation.

The state will spend another $54.8 billion on a general budget to fund all other aspects of state government next year, including road repairs and payments to local governments. That’s up from the $50.7 billion initially approved for the current year.

As part of the deal, the state will spend $750 million on a new grant program to help local governments address legacy debt and unfunded liabilities.  Another $75 million will be spent on blight removal initiatives, including competitive grants for local communities. 

The state will continue to spend $40 million on its Pure Michigan tourism campaign, $55 million on the Michigan Reconnect program for free community collect and $15 million on the Going Pro program to promote careers in the skilled trades. Lawmakers will also deposit $180 million into the budget stabilization fund, a so-called "rainy day" account.

The budget includes more than $1 billion in pork funding to pay for specific projects in lawmaker districts:

  • $205 million for 100 individual "enhancement grants," including $40 million for the Joe Louis Greenway, a planned 29-mile biking and walking trail in Detroit, $11 million for the Grand Rapids Public Museum, $10 million for a US-23 Thompson Road project in Genesee County and $8.5 million for the Michigan Fitness Foundation in Lansing, which provides grants to health and fitness businesses across the state. 
  • $251 million for 28 individual economic development and workforce projects, including $30 million for the Grand Rapids amphitheater, $20 million for a Holland Township pipeline and $28 million for business incubators in Oakland and Ottawa counties.
  • $213 million in grants for 17 separate infrastructure projects, including $35 million for Mackinac Island upgrades, $32 million for Mound Road in Macomb County, $25 million to improve Macomb County health department facilities and $2 million to purchase and renovate a building for a Traverse City Curling Club. 
  • $212 million "special grants" for four specific projects: $100 million for an academic research building at the Detroit Center for Innovation, $100 million for a Cancer Institute project at Wayne State University in Detroit, $130 million for an electric vehicle teaching training and development center at the University of Michigan and $1 million for a sea wall project in Muskegon

Asked about the unusual number of local project grants, House Appropriations Chair Thomas Albert told reporters the funding helped the budget pass.

"It's divided government, and we had to get the votes," Albert, R-Lowell, said early Friday morning, according to The Detroit News. "We had to get something to the governor's desk that she would sign."

Republicans who control both chambers of the Legislature also included $6.7 million to fund programs, nonprofits and “pregnancy resource centers” that promote childbirth and alternatives to abortion. 

Whitmer used her line-item veto power to reject similar funding last year, but Albert argued the money is “even more urgent now that the U.S. Supreme Court has overturned Roe v. Wade.”

In a statement, Albert also claimed the budget includes $750,000 to help the Legislature defend Michigan’s 1931 abortion ban, which would criminalize abortion providers but was temporarily suspended last year. That funding does not appear to be specifically referenced in the bills approved Friday, however.

Tax cut talks to continue

The Michigan Constitution requires the Legislature and governor to agree on a balanced budget by the time the new fiscal year begins on Oct. 1. 

The early deal means lawmakers will meet their own self-imposed summer deadline for the first time since establishing it in 2019 following a major budget feud with Whitmer that nearly prompted a state government shutdown.

Finalizing spending plans before summer break will help schools and local governments develop their own budgets, and it will help state departments implement programs that lawmakers have decided to fund, Stamas said. 

Whitmer has called for tax relief negotiations but vetoed three separate GOP proposals, including bills to create a six-month fuel tax holiday and a massive $2.7 billion plan to cut the personal income tax rate, expanded the Earned Income Tax Credit, created a $500 child tax credit and expanded exemptions for seniors and disabled military veterans.

The governor, who is up for re-election this fall, has proposed immediately sending one-time $500 rebate checks to “working families.” 

She also wants to expand the Earned Income Tax Credit for lower-wage workers and reverse 2011 tax code changes that created the so-called pension tax.

In a statement celebrating the new budget, Whitmer urged the Legislature to “continue in this spirit of collaboration” and use billions in additional surplus funds to “offer real relief to families right now, especially as they face rising prices on groceries, gas, and other everyday expenses.”

Republicans, however, continued to criticize Whitmer for vetoing earlier tax cut bills they had sent her without negotiations. 

Whitmer and legislative Democrats “stood in the way of our every attempt to lower taxes, leaving Michiganders on their own for a long, painful summer,” Sen. Aric Nesbitt, R-Lawton, tweeted Thursday while awaiting budget votes. 

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Senate Minority Leader Jim Ananich, D-Flint, told Bridge he believes officials can still find common ground on a tax relief plan but agreed to set aside those talks in order to finalize the budget first. 

"We want to get something that can actually get signed," he said. "Everyone's got different ideas on (taxes)."

Ananich said he is particularly proud that the budget includes $750 million in funding for local governments to address unfunded liabilities, with the goal of ensuring they can pay for at least 60 percent of their long-term obligations.

"This is a one-time deal," Ananich said of the new debt relief grant program. "We're helping people get off in the right direction, then they got to stick with it. But it'll do a lot for local governments."

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