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Whitmer Moves Off Roads With $61.9B Budget

February 12, 2020

Gov. Gretchen Whitmer Thursday abandoned a major revenue increase in her proposed Fiscal Year (FY) 2021 budget request to the Legislature, but if the Republican-led House and Senate have ideas for one, she’s all ears.

Frustrated her 45-cent-a-gallon gas tax increase “got no traction” in the Legislature last year, the Governor is sticking with her $3.5 billion bonding plan to fix state highways and freeways. Any different ideas for new money to fix local roads, however, didn’t make the document.

“Until the Legislature is ready to throw an alternative on the table, I’ve got to do the best I can by prioritizing the resources that we have,” she said. “I don’t tilt at windmills. I am realistic. I put a solution on the table last year. I’m moving forward and I’m delivering on a lot of these fundamentals that I think are important to Michigan.”

Those “other things” include more attention to K-12 education, skilled trades, public health and addressing damage caused by higher water levels.

All of the aforementioned subjects received significant attention in her proposed budget, even if legislative Republicans didn’t like the perceived stiff arm to the driveway-to-highway roads during Budget Director Chris Kolb’s presentation.

“Did we talk about roads this morning?” asked Rep. Matt Maddock (R-Milford). “No. The 800-pound gorilla in the room was ignored. I’m fed up with this. Instead, we talked about all the new money she’s going to spend.”

Whitmer’s $61.9 billion budget made $600 million in reductions to put money into extended health care for new moms, a new tuition repayment program, expanded child care and pre-K education, among other things.

Her proposal calls for only two tax increases, a hospital tax that the hospitals want so they can draw down more federal Medicaid dollars and a 20% fee increase on X-rays to cover state inspections on the machines.

The budget drew rave reviews from legislative Democrats who liked the emphasis on more education money for at-risk and special education students, lead paint remediation for older homes and teacher reimbursements for classroom supplies they buy out of their own pocket. 

“I’m a big fan of this budget,” said Sen. Curtis Hertel Jr. (D-East Lansing). “These are the issues that Michiganders care about.”

Tackling the new spending plan may be slow going, though. 

House Speaker Lee Chatfield (R-Levering) wants to address $75 million in “vindictive” line-item vetoes left over from Whitmer’s signing of the current year FY ’20 plan. Money for the Pure Michigan tourism campaign and the Going Pro grants to businesses that train workers in needed careers are among the items he’d like to fund this year.

“We should clean up the mess from last year’s budget fight before we get into this year’s budget battle.”

The Budget Office has been reluctant to give a number of how much they’re willing to spend on another mid-year FY ’20 plan other than to say there’s not a lot. 

Whitmer and budget officials are keeping an eye on potential settlements with Unemployment Insurance Agency (UIA) fraud victims, Flint water crisis victims and former prison inmates among other things. 

Also, the FY ’21 budget represents the full $600 million in General Fund (GF) spending on road improvements that came with the 2015 road funding plan. A new $200 million homestead exemption tax break is there, too.

The Governor’s office stressed, too, that the General Fund spending proposed is “roughly” at the same level it was 20 years ago and that it’s under “great strain due to nearly $2 billion in tax cuts for businesses put in place in 2011.”

“We are focused on looking forward, not looking backward,” said Budget spokesperson Kurt Weiss. “As Budget Director Kolb said Thursday in his presentation, he’s open and hopeful for a budget discussion on bipartisan solutions and he wants to work together with the Legislature on key investments that were laid out today, knowing that they will also bring ideas to the table.”

No additional appropriation is being recommended for the state’s $1.15 billion rainy day fund. The administration is projecting an additional $38 million in revenue for FY ’21 in presumed interest gathered off the fund, but no additional payments in or out of the General Fund to the “Budget Stabilization Fund” are being recommended.

Whitmer’s budget calls for a 5.8% General Fund increase (to $11 billion) and a 4.9% School Aid Fund bump (4.9%). 

The General Fund increase is due to Medicaid cost increases and federal match rate changes, declining restricted funds from the Michigan Department of Health and Human Services (DHHS) budget and more GF money going toward road improvements through the 2015 road package.

Skill development through her planned $35 million Michigan Reconnect program to provide training for workers over 25 is also a top priority for the Governor. She’s been trying to fund this initiative yet this fiscal year through the mid-year supplemental process. She also wants $27.9 million for former Gov. Rick Snyder’s Going Pro program to support job training grants for current students and employees in high-demand skilled trades industries.

“Our future depends on making strong investments in these core priorities, and while we cannot correct decades of underfunding overnight, particularly in the area of education, this budget builds on last year’s budget to provide additional funding in these critical areas,” Whitmer said.

Significant spending changes Whitmer is proposing include:

– An extra $150 to $225 per pupil in K-12 spending, which brings up the state’s minimum allowance to schools to $8,336.

– A weighted funding formula that puts an extra $60 million in for special education, $60 million for poor and at-risk students and $5 million for English language learners.

– $42 million more for expanded preschool programs.

– $25 million to reimburse teachers up to $250 a year for school supplies they buy for their kids out of pocket.

– Funding to eliminate all school lunch debt for Michigan students.

The Governor is offering to bring back $15 million of Pure Michigan tourism ad spending, which wouldn’t be as much as the $30 million-plus that had been in the budget.

Whitmer is proposing a $38.1 million increase for universities, a 2.5% boost, and $8.1 million for community colleges, also a 2.5% increase.

For revenue sharing for local governments, constitutional revenue sharing was set at $37.2 million. There was $6.5 million set aside for cities, villages and townships and $5.7 million for counties.

For health initiatives, Whitmer proposed:

– $86.5 million to expand the MIDocs medical residency program, which is intended to improve access to services in rural and medically underserved areas by providing loan forgiveness to physicians committed to those areas. There will be a one-time $21.6 million in GF to support this.

– $37.5 million for the Healthy Moms, Healthy Babies initiative that the Governor announced in the State of the State, of which $17.5 million is General Fund (GF).

– $30 million for state psychiatric hospital special maintenance.

– $27.5 million for Child Development and Care to expand access to child care for low-income families.

– $12.3 million to expand the response to the opioid crisis.

– $10 million for a Lead Poisoning Prevention Fund, which is designed to get the lead out of older homes.

– $10 million for paid parental leave to help provide state workers up to 12 weeks of paid leave if they are a parent of a newborn or newly adopted child.

– $8.6 million for foster care prevention programming, of which $5.4 million is GF.

– The budget will maintain $4.1 billion to support Healthy Michigan, as the state match requirement of 10% was fully phased in starting in January 2020. 

In the areas of environment, climate and water, the Governor offered in part:

– $40 million for local climate resilient infrastructure grants to support planning activities and green infrastructure projects to protect local communities from “changing climate” conditions like high water levels.

– $40 million for school infrastructure grants.

– $20 million for rapid environmental contamination response.

Other spending proposals include:

– $100 million for business attraction and community revitalization, $20 million more than a reduced FY 2020 amount.

– $117.5 million to support indigent criminal defense.

– $66.5 million to support state veterans homes.

– $35 million to support the information technology investment fund.

– $7.2 million to support recommendations from the Joint Task Force on Jail and Pretrial Incarceration.

– $2.5 million for 120 new Michigan State Police (MSP) troopers.

The Governor is asking for eight pieces of stand-alone legislation to implement her FY ’21 budget recommendations. She wants to:

– Increase the state hospital tax $120 million so the state can leverage $250 million in Medicaid dollars for $352.6 million additional for higher hospital reimbursement rates. In the process, the state saves $15 million to $16 million in the deal. The Michigan Hospital Association supports the change.

– Raise radiological health fees 20% to maintain adequate funding for the Michigan Occupational Safety and Health Administration (MIOSHA) to administer the registration program and provide the legally mandated inspections of all X-ray machines with radioactive imaging.

– Transfer the authority of the Post/Posthumous Fund Authority to the Michigan Veteran Homes Administration.

– Allow the Department of Military and Veterans Affairs to expand tuition assistance benefits to spouses. 

– Sign into law HB 4125, which reverses a lame duck bill from last year that moved online sales tax revenue from the School Aid Fund for environmental cleanup and road improvements.

– Transfer the administration of the OK2Say program from the Attorney General’s office to the Michigan State Police. 

– Change the necessary state laws so recreational marijuana tax revenue can be put into the Michigan Transportation Fund.

– Create the Michigan Reconnect program through SB 0268 and HB 4456.

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