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Record Budget Focuses On Paying Down Debt; Not Tax Cuts . . . Yet

July 5, 2022

A record-breaking $76 billion state budget, with $15.3 billion coming from the General Fund, rolled out of a House-Senate conference committee early Friday morning and through both chambers of the Legislature – fueled by leftover emergency federal dollars and better-than-expected income and sales tax revenues. 

Around $7 billion ($3.8 General Fund, $3.2 billion School Aid) is being left on the balance sheet, according to Budget Director Chris Harkins. The House wants an income tax cut. The Senate wants a gas tax holiday. The Governor wants targeted tax cuts for seniors and the low income folks, but she’d also like more money put into the new economic development fund. 

Those discussions are slated to continue later this summer, but could stretch through Lame Duck.

“This is a big deal. This is a big day for the state of Michigan. A lot went into this. I’m really proud of where we’re at,” said House Appropriations Committee Chair Thomas Albert (R-Lowell) shortly before HB 5783 moved out of a joint House-Senate conference committee at 12:26 a.m.

HB 5783 passed unanimously in the Senate at 2:21 a.m. Afterward, Senate Appropriations Chair Jim Stamas (R-Midland) told the media that the most challenging part of trying to manage a historic amount of money was “the historic amount of money” itself. 

For example, the Legislature acquired more than $150 billion worth of requests for this Fiscal Year 2023 budget.

When asked if a colossal budget lacking tax relief keynotes will have a negative impact on Republican candidates in the 2022 elections, term-limited Stamas said the budget offers a record-number of debt that will be paid down in a single time. He said Michigan is well-positioned. 

“I think the bigger discussion will be where do we go on the tax policy? And based on that, how do we make any additional investments? But there is concern of the recession coming forward,” he said. “I think my biggest personal accomplishment is the balance of it, looking at not only the amount of paying down debt, but how we’re making investments in our kids and making an investment in Michigan’s future – setting our budget and setting our revenues in a path that puts Michigan on the right path to continue to provide the services Michigan families expect.” 

A $2.65 billion chunk is being put into the public employee pension system to reduce long-term debt. It’s less than the $4 billion the House wanted, but still a win for chamber leadership, that made the subject a top priority.

Of this pot of money, $1 billion is going to the Michigan Public School Employees’ Retirement System (MPSERS) and $425 million to offset MSPERS costs by accelerating the reduction in the payroll growth assumption rate. 

The higher education MPSERS fund is getting $300 million. Another $750 million will go toward local government grant programs and $100 million for the State Police Pension system.

Governor Gretchen Whitmer suggested in February that $52 million be put into the state’s $1.382 billion rainy day fund. Instead, another $180 million will be deposited into the fund, boosting the total to $1.64 billion, which is 5% of the General Fund and the School Aid fund.

The budget also includes a record slice of pork – $1 billion in special projects – broken down in the Department of Labor and Economic Growth (LEO) budget. The biggest pieces are $130 million for the Electric Vehicle Teaching, Training and Development Center at the University of Michigan, $100 million for an Academic Research Building for the Detroit Center for Innovation and $100 million for the Cancer Institute Project at Wayne State Medical School.

Exactly 100 smaller special projects are broken down as part of Michigan Enhancement Grants, ranging from purchasing a vacant Sterling Heights elementary school for a recreation center to $500,000 for a Downtown Boxing Gym to $2 million for Lansing’s Potter Park Zoo. Another $262 million is going to 28 larger projects like $30 million for the Grand Rapids Amphitheater and $20 million for a Holland Township pipeline.

The final piece is 17 Michigan Infrastructure Grants, such as $35 million for Mackinac Island upgrades, $2 million for the Traverse City Curling Club and $14 million for a passenger ferry to Beaver Island.

Cities, counties and local governments are seeing a 5% on-going funding increase in their revenue sharing payments, including an additional 1% one-time bump.

Universities are also receiving 5% more on-going, plus additional floor funding to get each university to a minimum of $4,500 per first-year experience programs.

Community colleges are getting 5% more, as well.

The Senate’s student scholarship proposal is getting $250 million put behind it, but details still need to be negotiated over the summer.

Overall, the Governor and the Legislature celebrated the extra money that greased the wheels on negotiations, giving officials the ability to sink money into schools, communities, public health, public safety and infrastructure.

The House passed the bill, 97-9. The no votes were Reps. Julie Alexander (R-Hanover), Ryan Berman (R-Commerce Twp.), Steve Carra (R-Three Rivers), Michele Hoitenga (R-Manton), Steven Johnson (R-Wayland Twp.), Matt Maddock (R-Milford), John Reilly (R-Oakland), Daire Rendon (R-Lake City) and Scott VanSingel (R-Grant).

Among the bigger spending items are:

  • $6 billion to rebuild local roads, bridges, airports and transit systems.

A new big new item is a $305 million scholarship program for students in public and private teacher preparation programs to earn teaching certificates, which is designed to address the state’s teacher shortage.

  • $625 million for mental health services, including $300 million in the schools
  • $250 million for state laboratories
  • $300 million for economic and community development
  • $130 million is going into public safety and community policing resources. The Governor suggested adding $75 million to policing while the House had added $562 million to the State Police budget for officer recruitment, among other programs
  • With this money, the goal is to bring in 50 new Michigan State Police troopers and 800 new corrections officers while offering $30 million for EMS training grants
  • $100 million ($40 million General Fund) to modernize National Guard armories
  • $75 million for blight removal grants for communities
  • $55 million to assist in training workers through the Going Pro Program, which is grants to businesses, community colleges, and other employee training programs
  • $56 million for a program that gives community college students an easier and reasonably-priced avenue to move from their community college program to a four-year program at a university
  • $30 million for contaminated site cleanup for legacy sites and another $10 million for rapid response
  • The Pure Michigan tourism advertising program stays at $40 million
  • $6 million for the Michigan Reconnect program for non-traditional students looking to train for needed careers
  • $2.5 million more for healthcare for foster children
  • $1.5 million for a new state Veterans Cemetery in Crawford County
  • Licensing and Regulatory Affairs (LARA) employees will need to go through two hours of customer service and business ethics training under the LARA budget. This was suggested by Rep. Jeff Yaroch (R-Richmond) after he expressed  concerns that a LARA official was not truthful to him during a committee hearing.

Legislature Obtaining $215M For More Capitol Historic, Chamber Operations Spending 

State lawmakers boosted their own budget by more than $1.5 million, with a $215 million appropriation for the new Fiscal Year. The budget featured no changes in full-time equated positions, as well as: 

  • $502,900 gross spending to advance funding for the state Capitol Historic Site
  • A 5.5% overall increase for the Legislative Retirement System
  • A 5.5% expansion in spending for the Legislature’s Auditor General
  • As the state’s Independent Citizens Redistricting Commission is situated to conclude operations in the new Fiscal Year, the Legislature will no longer be funding the map-drawing commission with $3.1 million. 

Additionally, the Senate-House Conference agreed to spend $3.13 million in General Fund dollars for a 6.2% spike in Senate spending, as well as more than $4.2 million on a 6% light in House spending. 

The Legislative Council will also see a 6.8% increase in spending with a $1.3 million General Fund investment agreed upon by the Conference. 

Department of Health and Human Services

  • $165.5 million for various pediatric and psychiatric hospitals and programs
  • $85.1 million to increase adult fee-for-service reimbursements on dental work
  • $40 million for one-time projects like $10 million for the Mackinac Straits healthy system
  • $25 million for child and adolescent health care and centers
  • $6 million for housing for the homeless
  • $2 million for adoptive parents tax credits

Department of Corrections

The $2.1 billion budget is only a 2.9% increase from the current year. The final agreement included $15 million for a communications system upgrade, but it didn’t include the live tracking prisoner movement idea the Governor suggested. It did include: 

  • $100,000 to defend the state in court against lawsuits related to prohibition against using state funding for sex change surgeries or therapies
  • $4.5 million for drug detection body scanners at all correctional facilities
  • $500,000 to move correctional officer uniforms from a button-down style to a polo style.

Agricultural Budget Focuses On CWD Study, Food Processing, Office Of Rural Development 

Agricultural and rural development in Michigan will receive more than a $155 million gross budget, with $97 million coming from the General Fund. Investments will feature a 20.6% jump in full-time equated workers, and a $26 million boost in total state spending. 

The Governor, Senate and House agreed to spend $500,000 in federal money to implement a biological study zooming in on chronic wasting disease. 

The House-Senate Conference also agreed to spend $50 million in General Fund dollars on Michigan’s food processing and agriculture industry, which focuses on the supply chain, infrastructure and minimizing the environmental shortfalls of food processing. 

This investment will additionally consist of $12 million going directly into the Eastern Market. 

Furthermore, the Office of Rural Development would gain a $3 million one-time General Fund investment, the approval for three new temporary full-time equivalent workers and $500,000 in General Fund dollars for an ongoing, expanded expenditure into the office. 

The House-Senate Conference also devoted $5.4 million in federal money for reforestation efforts in 16,100 acres of land in Michigan’s northern Lower Peninsula. 

New Conference Judicial Budget Sees Nearly 51% Boost 

The Judiciary budget acquired a 50.9% lift in its budget with a gross overall investment of $483.5 million for the new Fiscal Year, with 13 new full-time equated positions being funded. 

The Senate-House Conference agreed to spend $1.05 million in General Fund money on the Justice for All Self-Help Center Expansion, concurring with the Governor’s proposal to spike up funding by $750,000 for legal self-help to rural communities. 

Additionally, the Conference agreed with the Governor to: 

  • Spend $467,300 in General Fund dollars and to finance three new positions to back the implementation of new continuing legal education mandates for judges. 
  • Making a $807,000 increase in General Fund spending and the backing of two new positions to handle the judicial investigation backlog within the state’s Judicial Tenure Commission. 
  • Fund a one-time statewide judicial case management system project with $150 million from the General Fund to assist with the computer management systems for State trial courts within a several-year period.

LARA Budget Funds New Nursing Home Surveyors In $539.8M Budget 

The new Licensing and Regulatory Affairs (LARA) budget agreed upon by the conference includes $1.58 million for state nursing home surveyors with 10 full-time equivalent positions for the operation. 

The $539.8 million budget, which is .4% smaller than what it was for the Fiscal Year of 2022, would also feature $2.3 million in restricted funds to modify the Corporations Online Filing system, as well as: 

  • Removing a $20 million appropriation for research related to the use of marijuana as treatment for veterans’ medical conditions. This piece of the budget is no longer mandated after the passage of Proposal 1 in 2018, which legalized recreational marijuana. 
  • $1.57 million in restricted funds for 10 new full-time equivalent positions and funding for the Marijuana Regulatory Agency. 
  • $600,000 in restricted funds for Liquor Control Commission Staffing. 
  • $1 million in General Fund revenue for financing smoke detectors through the state’s Bureau of Fire Services, as well as $1 million for Urban Search and Rescue services.
  • $1 million in State Restricted funds to implement a task force on foreign-trained medical professional licensing. 

LEO Budget More Than A Quarter Smaller, Funds Grant Programs, Research Centers 

The budget covering the state’s department of Labor and Economic Opportunity (LEO) saw a 35% drop in funding from the ending Fiscal Year, totaling at more than $2.86 billion and removing an array of COVID-19 supplementals. 

Under the new LEO budget, the Senate-House conference agreed to: 

  • Spend $162.9 million on Michigan Enhancement Grants, $196.8 million in Michigan Infrastructure Grants and $275 million in Economic Development and Workforce Grants. 
  • $130 million in General Fund dollars on an electric vehicle teaching, training and development center to be operated by the University of Michigan. 
  • $100 million in General Fund revenue on the Cancer Institute Project within Wayne State University and $100 million to assist the creation of a new Detroit Center for Innovation to be managed by the University of Michigan in Downtown Detroit. 
  • $75 million in General Fund revenue for a Blight Elimination Program across Michigan. 
  • $50 million in federal money for nonprofit relief grants. 

Department of Environment, Great Lakes And Energy (EGLE)

EGLE gets a $728 million budget with $98 million in General Fund money. Highlights included:

  • $35.5 million to increase funding for reducing air permit application wait times and improve air quality monitoring programs
  • $48 million for lead line replacement initiative
  • $19 million for legacy contamination cleanup
  • $10 million for emergency contaminated site cleanup
  • $22 million for an energy efficiency initiative
  • $5 million for private well testing
  • $500,000 for a special program to address PFAS in firefighter foam

Department of Natural Resources (DNR)

DNR is a $535 million budget with $94.4 million in General Fund money. Highlights included:

  • $30 million for state fish hatchery upgrades and improvements
  • The $934,000 continuation of the Michigan Conservation Corps
  • $10.7 million increase in fish production 
  • $4 million for the replacement of the Great Lakes Research Vessel
  • $47.2 million increase for more DNR conservation officers
  • $600,000 on-going and $400,000 one time for body cameras for conservation officers
  • $751,900 increase in wildfire protection programs.

Department of Treasury

Treasury is a $1.58 billion budget with $1.036 billion in General Fund money. Highlights included:

  • $35 million for the City of Flint as part of a settlement payment with the Department of Labor and Economic Opportunity
  • $20.5 million in recreational marijuana grants

Department of Transportation (MDOT)

MDOT is a $6.1 billion budget with $71 million in General Fund money. Highlights included:

  • The budget is a 7.4% increase from the year before with comparatively little controversy. Everyone agreed to the $56 million increase to county road commissions, $31.3 million in more money for cities and $33.9 million for airport safety improvement programs.

It didn’t include the $150 million the Governor wanted for critical roads and bridges.

Department of Technology, Management & Budget (DTMB)

DTMB is a $1.8 billion budget with $642 million in General Fund money. Highlights included:

  • $70 million in special maintenance to state buildings, structures and facilities
  • $3.1 million and 19 full-time employees to support cybersecurity staffing
  • $1.85 million for a new Data Analytics Center
  • The deletion of boilerplate that would have allowed paid advertising on state websites
  • $750,000 million for software purchasing efficiency and data security

Michigan State Police (MSP)

MSP is an $823 million budget with $552.7 million in General Fund money. Highlights included:

  • An agreement on a 50 trooper school with another 120 troopers anticipated to be hired and trained using existing attrition savings
  • $1.13 million Cyber Crime Unit
  • $1 million to recruit officers to broaden the racial, ethnic and gender makeup of the Department
  • $3.1 million for contractual services with a $300,000 earmark for traffic control support for the Michigan International Speedway
  • $1 million for bottle bill law enforcement

Civil Rights Department Earns 21.1% Budget Boost, New Cap For Accepting Local, Private Funds 

The state’s Civil Rights budget earned a 21.1% boost in gross funding in comparison to the concluding Fiscal Year, with $21.6 million allocated into its pocket for a $500,000 one-time, General Fund-backed Indian boarding school study. 

The Senate-House conference additionally lifted the cap for the amount of local and private funds the department is authorized to accept from $85,000 to $200,000. 

Capital Outlay

The following four projects were part of the budget:

  • Michigan State University is getting $53 million from the General Fund to expand and renovate its greenhouse complex and dairy facilities.
  • Saginaw Valley State University is getting $21.8 million from the General Fund to renovate the Brown Hall.
  • The new Marquette Veterans Affairs Home is getting $34.2 million from the General Fund for a $97 million project
  • $315 million in federal funds are being used for the new State Psychiatric Hospital Complex.
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