Finish Line for Revamped State Budget is Within Sight

As we reported last week, the state Legislature and Governor Whitmer’s administration have been negotiating to address the $2.2 billion deficit in the state’s current year budget. On Wednesday, a solution was all but finalized when the Legislature approved both HB 5265 and SB 0373 and signed off on Executive Order 2020—155. The next step is the Governor’s signature on the legislation.

Taken altogether, the Executive Order and the two bills referenced above, along with a handful of appropriate adjustments, fills the huge funding gap. All totaled, the measures utilize make use of $1.3 billion in federal funding, nearly a half a million in cuts, and a $350 million withdrawal from the state’s rainy day fund.

The $1.3 million in federal funding was used to backfill funding cuts and provide funding for the Michigan State Police, per pupil funding for K—12 schools, state universities, Medicaid, General Fund spending, revenue sharing to cities, and community colleges.

The rest of the strategy includes a complicated combination of budget adjustments (i.e., from one fund to another), a pause on some state work projects, savings from temporary layoffs, hiring freezes, discretionary spending freezes, cuts to specific programs (such as road fixes, economic development, transportation, and some much smaller programs), and allocation of the $350 million that was pulled out of the rainy day fund.

Comments by legislative leadership on both sides of the aisle are heralding the revamp effort as bipartisan… and a very hefty undertaking. Our gratitude to Senator Stamas and Representatives Glenn and Hauck, as they all voted in favor of both SB 373 and HB 5265. Senator Stamas is the Senate Appropriations Chair.

The next big step with budgeting is the August Consensus Revenue Estimating Conference. And, states are still waiting to hear whether Congress will authorize another federal aid package in response to the financial crisis created by COVID-19. By all accounts, Congress will take some action, but it is undetermined if our how much aid to state and local governments that aid package may include.

As the state Legislature winds down the current fiscal year, the task for Fiscal Year 2021 looms even larger: That shortfall is expected to be $3.1 billion.