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Whitmer Budget Spends All But $250M Of Surplus

February 13, 2023

Article courtesy MIRS News, for SBAM’s Lansing Watchdog e-newsletter

Gov. Gretchen Whitmer’s $79 billion Fiscal Year (FY) 2024 budget proposal spends all but $250 million of the current $9.2 billion surplus over several years on numerous ongoing and one-time programs and projects while dropping at least $1.6 billion into savings or addressing long-term debt.

With the clock ticking on when a lot of the leftover federal money can be used, the governor wants to punch the accelerator on priorities like free K-12 student breakfast and lunch and infrastructure match dollars.

As for ongoing programs like universal 4-year-old preschool, higher income exemptions for retirees, and the $1.50 per hour pay raise for direct care workers, Budget Director Chris Harkins says he’s “very confident that what’s been proposed is a sustainable plan going forward.”

Democratic legislators want to double-check that everything adds up to their satisfaction, but they generally embraced the spending plan that zooms in on many of their key priorities — environmental protection, electric vehicle incentives and more money going to cities, universities and colleges.

“The way this operation is supposed to work is that the state runs a balanced budget,” said Sen. Jeff Irwin (D-Ann Arbor). “This idea that we should not spend the resources the citizens have already sent to us and leave them in the bank seems unfair to the citizens who want their roads fixed, who want their schools funded, who want their health care to be more affordable.”

Yet, Republicans are cautious about promising such things as expanding Michigan’s last-dollar community college scholarship from those 25 and older to those 21 and older if the money isn’t there in five years.

“How often does government start a subsidy and then terminate it?” asked Rep. Andrew Fink (R-Osseo). “To me, this sounds like we’re being set up for long-term debt and continued lack of growth as a state.”

To show the impact of the immediate use of one-time money, the governor’s projected $75.42 billion FY ’25 budget is 5% smaller than her $79.38 billion FY ’24 proposal and nearly 2% smaller than the current $76.82 billion budget.

The General Fund portion of the governor’s plan for next year is actually $1.3 billion smaller than it is this year. The School Aid Fund portion, however, increases from $17.6 billion to $18.6 billion. A 41% slice of the state of Michigan’s budget pie is federal funds and 15% is state restricted money.

Unlike her prior four years, when the governor laid out large spending ideas as bargaining chips for future discussion with GOP leaders, Wednesday’s budget proposal reflects more of a compromise spending document, something Whitmer would have ended with last year, as opposed to starting with.

With a slim Democratic majority in both the House and Senate, Whitmer’s proposed budget feels like a document she doesn’t want her legislative partners to have to tear apart, allowing them to advance their shared priorities while appearing fiscally prudent.

“I loved it the first time I saw it, but it’s a lot. It’s a lot,” said House Appropriations Committee Chair Angela Witwer (D-Lansing). “We have to make sure we’re being fiscally responsible because we don’t want to be four years down the road or two years down the road and find out we don’t have money to support these great programs.”

The proposed budget gives a nod to conservatives who would prefer to spend the state’s once-in-a-lifetime largess on spending down long-term debt and holing away dollar bills for a rainy day.

Whitmer is proposing to drop another $200 million into the rainy day fund, bringing up the projected balance to $2 billion. She wants to create a new $900 million rainy day fund for schools, put another $500 million into a reserve fund for the Michigan Public Schools Employee Retirement System (MPSERS) and make $577 million in additional payments into MPSERS.

However, Sen. Thomas Albert (R-Lowell) said the governor’s plan to “dangerously reduce” the state’s surplus by 97% doesn’t do enough to pay down debt and leaves the state “unprepared.”

“We cannot carelessly overspend — especially on ongoing programs — and put the state in a precarious position where cuts to essential services might be necessary if revenues come in below expectations,” he said.

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