Question 1): Yes, Virginia, there was a Michigan government shutdown last Wednesday, no matter how much Gretchen Whitmer denies it. However, it lasted just a few hours, and its immediate impact was so inconsequential as to be unnoticeable.
Then, at the 14th hour, the Michigan Legislature approved a week-long ‘continuation budget’ for the 2024-25 fiscal year. That paved the way for state lawmakers on Thursday and Friday, October 2-3, to finally pass a $81 billion FY 2025-26 spending plan, including K-12 education, for all of state government, well after last Tuesday’s midnight deadline marking the end of the 2024-25 fiscal year.
After lawmakers ignored their own July 1 statutory deadline to get a budget done months ago, the following weeks of gridlock and indecision came down to a few hurried hours capped by a 800-page document being voted on in the middle of the night, just a few hours after its public release.
What is actually in this budget? It’s still being sorted out, but a few highlights include the following major reforms and investments:
- Fixing the Damn Roads: Some $1.85 billion in new ongoing funding will be invested into local roads and bridges, ensuring that money collected at the pump actually goes toward road improvements.
- Shrinking state government: After five years of runaway spending — up 43% and with some departments doubling in size — this budget reduces the state’s general fund by $800 million, restoring balance and delivering better value for taxpayers.
- Delivering tax relief: Aside from the marijuana industry, which was socked with a 24% wholesale tax, this budget eliminates state levies on tips, overtime pay, and Social Security income, helping more than 500,000 Michiganders stretch their paychecks further.
- Eliminating ghost government employees: The budget cuts 2,000 unfunded phantom positions that state departments have used to pad their slush funds, saving hundreds of millions of dollars that were redirected to real statewide priorities.
- Ending wasteful spending on empty office buildings: The budget ensures taxpayers no longer pay for leased office space that sits empty while state employees work from home. If the buildings are not at least 80% filled, they must be sold by the state.
- Supporting public safety: For the first time, $95 million from the new Public Safety Trust Fund will go directly to local law enforcement agencies to put more police on the street and keep neighborhoods safe.
The budget also includes record-high school funding, including a per-pupil foundation allowance increase that was denied to schools last year. It invests $442 more per student, bringing the total foundation allowance to $10,050. Additionally, $321 million for K-12 school safety and mental health services was restored, after House Democrats, then in the majority, cut the programs last year. Higher education funding will get about a 4% increase. The budget also wiped out the failed $2 billion SOAR “cash-for-jobs” economic incentive program touted by Gov. Whitmer for the past three years. Meanwhile, Whitmer and legislative Democrats feel one of their biggest wins was saving full funding for K-12 free school meals that’s been in place for the past three years.
The agreement also includes reforms to improve transparency, limit virtual school days, and ensure dollars go directly into classrooms rather than bureaucracy. Other K-12 spending highlights include:
- At-risk funding increased by 25% to nearly $1.3 billion.
- $65 million for small class size initiatives in early grades.
- $70 million for new “grow-your-own” teacher programs.
- $100 million in school infrastructure grants.
- $70 million to expand career and technical education in underserved regions.
All that said, how messy was this year’s legislative budget process, and, in the end, does it matter? Could it have been avoided? Can it happen again?
Answer 1): It was very messy, and, yes, it matters. It could have been avoided, but, unfortunately, it can happen again. This was a manufactured crisis, by the Legislature and Gov. Gretchen Whitmer. The 2007 and 2009 shutdowns happened when there was a genuine fiscal crunch, when lawmakers were trying to find ways, in recessions, to close a funding gap of more than $1 billion and possibly avoid raising taxes or, if they had to, which ones and how much? There was no such fiscal crisis this year, but one complicating factor was the insistence of the governor and House majority Republicans who felt they had to raise substantially more revenue to “Fix the Damn Roads,” 80% of which will now go to LOCAL infrastructure, which has been largely ignored under the governor’s five-year-old bonding program.
But when a budget is passed this late before the start of a fiscal year, it creates problems for hundreds of thousands of citizens. State employees were worried about whether they’re coming to work. Universities, community colleges, K-12 schools and local governments have been trying to make decisions on the coming fiscal year, but didn’t have the full picture.
Probably the best summation of what happened, and why, came from Mitch BEAN of Great Lakes Economic Consulting (GLEC). Bean was the House Fiscal Agency director during the 2007 and 2009 budget shutdowns. MIRS newsletter quoted Bean opining that “The lack of cooperation on finding solutions has hit a new low. Too many people are trying to play chicken. They obviously think there’s a political advantage to doing it, and they think it plays with their base. It’s pretty similar to what’s going on in D.C. with two sides more interested in playing a situation to their advantage rather than being serious about solving problems.”
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Bill, thanks for this week’s entry. Right on target, as usual.
As I submitted last week, there is a lot to like in this year’s budget. Most of the carping I’ve seen/heard are how it was arrived at, not what the ultimate result was. To me, this is like the sausage factory inspectors griping about the factory floor conditions because, gosh, they had to kill a few hogs.
I’ll take mine with a couple over-easy eggs and a side of hash browns, thank you.
My question is whether the Nesbitt and Runestad gambit will pay off in some separation from Duggan and thus preserve Benson’s win and some Republican reputation? I’ve also said before that if Duggan wins, it may set the MIGOP back a couple election cycles after he lights out after them. Hail Caesar!
Optimum ex optimis, Bill . . .
What about the hundred thousand illegal aliens that are sucking up a billion dollars worth of free health care and other fringes? Is that in the budget?
Guess what happens when an illegal alien gets into a serious car accident and needs hundreds of thousands of dollars in emergency and subsequent rehabilitative health care?
Auto insurance companies, hospital bill write-offs, and ultimately, the citizens of the State of Michigan who absorb the costs.
There is no such thing as a free lunch.
This might never occur to you, but they are human beings, and Sitting Bull would regard you as illegal, with good reason.
Aliens in the State of Michigan who have children born here may apply for government assistance programs such as Medicaid on behalf of their children. In fact, I once questioned an alien seeking asylum in America how he was aware his U.S. born children were eligible for Medicaid coverage – he responded that the Biden administration volunteered the information to him and actually promoted it.
Is this fair to taxpayers who are U.S. Citizens?
Puerto Rico residents pay no federal income tax but can apply for U.S. government programs such as Medicare and Medicaid.
Again, is this fair to the U.S. taxpayer?
Puerto Ricans are as American as you are.
They are U.S. citizens, but not obligated to pay U.S. federal income tax, nor do they have representatives in the Electoral College. Even though they have no voice in electing America’s president at the Electoral College level, they DO send delegates to both the Republican and Democratic national conventions.
They are deemed a commonwealth and NOT a state.
David L Richards says
(Edit)Children born here are American citizens. Trump doesn’t think so, but the US Constitution does.
That’s up for debate. The Constitution does spell it out, though.
The Crow Nation would like to have a word with you about Sitting Bull, the Lakotas, and illegal migration.
I think those stats came out of an orifice below your waist. Undocumented folks aren’t. entitled to health care under federal law and there are fewer than 1000 in MI
About 1% of emergency department visits across the country are illegal immigrants. In some locales the number exceeds 30%. MDHHS and the medical community refuse to compile this statistic for Michigan hospitals, but there is no reason to believe that Michigan differs significantly from the national statistic.
The cost to Michigan taxpayers and those with insurance (who pay higher rates to cover hospital deficits from free care) is somewhere in the $ 300 to $ 500 million range. Then there are the extended treatment delays which legitimate patients incur.
The illegal alien population in Michigan is estimated at 91,000 individuals. That’s significant!
The Republican candidate that seems to have emerged as the nominal frontrunner after the Mackinac event is Aric Nesbitt, who won the informal straw poll.
Nesbitt has raised the most funds of any GOP governor candidate.
Nesbitt has been aided in his race in Wayne County by former Republican State Representative John Stewart of Plymouth, a moderate who also was at the Mackinac event. Stewart is believed to have the inside track to a lieutenant governor pick by Nesbitt.
Nesbitt’s role in ameliorating the budget dispute and shutdown will likely ingratiate him with GOP voters.
John James, who has ZERO Lansing experience, could possibly withdraw his candidacy for governor. He was not at Mackinac, has not seriously campaigned for the governor’s seat.
John James was at the mackinaw Event. However, he didn’t participate in the Q and A forum.
If he, Mr. James, was at Mackinac, I certainly did not see him – and I do not know why he would want to make himself inconspicuous if he is supposedly running for the office of Michigan governor.
Nice article, Bill, and a good appearance on OTR.
Mr. Bean is right. In my days of working for the State, I called it activity masquerading as accomplishment. The delay past July 1st is inexcusable. It’s a statutory deadline, much like a deadline one has in school. Get the work in late and you’ve screwed yourself. But apparently not in Lansing.
As for some of the stuff they shut the government down for, the one thing that still amazes me is the universal school lunch. It is a free school lunch for the children of the well off. No offense to them, but their economic status generally means they can afford to buy a lunch. And they should. If either my parents or my grandparents were told the Democrats were shutting down government so the well off could get free school lunches, their first reaction is that the story got wrong party. Of all the political hills they could die on, the Democrats chose this. Someone’s priorities are in need of a few dozen enemas to rid themselves what they are quite obviously full of.
The highlights you listed are interesting. Fixing the damned roads should have been done with the COVID money from the Biden administration. In fact, that one-time only money was perfect for the roads. Existing gas taxes could pay for subsequent maintenance while the bulk of repair, rebuild or new construction is done with the one-time money and would require no tax hikes.
As to shrinking state government, where will the cuts come from. From what I’ve read, do they know what they are getting rid of?
Tax relief always sells well, but we will see a drop in cannabis stores, dispensaries or whatever they call themselves now. As I don’t consume their product, I probably won’t miss them, though some landlords might.
Eliminating ghost employees is not exactly correct in that it implies these phantoms are kept for an almost fraudulent purpose. Many departments have these spots in order to get them filled in the next fiscal year when the budget may be kinder. In DHHS, it tends to be positions they have problems keeping staffed, such as Child Protective Services (CPS). In Corrections, it may be spots they have problems filling at a “troublesome” prison(s). Other times, and this was a trick of the Engler and Snyder administrations, spots are kept open in one agency so they can absorb folks whose jobs in another agency that the administration no longer wanted to fund, but wished to avoid a bumping chain. Readers of Gongwer News Service (I think Zach Gorchow wrote the story, but I wouldn’t bet on that) may remember a decade ago or so a story they ran on the Snyder administration eliminating the SSI Advocates program. They interview Dan Bomberski, one of the Advocates, about the job and the agency’s elimination. For each dollar the State spend on them, they returned $9.00 to the state by getting folks they had on the state disability rolls onto the Federal rolls. One thing to remember, Engler got rid of them but the Republican legislature during the Granholm administration restored them because a ROI of 9 – 1 made sense to them. It was amazing how Civil Service had no issue making them disability examiners to fill the unfilled vacancies in the Disability Determination Service. But that is an issue for another rant in the future.
Getting people back into the workplace will happen. If the boss is paying you to do a job, the boss has a pretty big say in where you do the job that they are paying you to do. The one downside is that when the State sells these buildings, they will wind up spending more money on rental space, much like they are doing with Michigan Rehabilitation Services that is moving from shared space with DHHS in southwest Detroit to rent space in the old Department of Labor building now in private ownership instead of moving them down two blocks to Cadillac Place. Paul Egan of the Free Press had a story on this issue this past July 25th.
More cops on the street is always good politics for the vast majority of voters.
More money to schools always sounds good, but the recent series of stories on the quality of our schools done by Bridge Magazine indicates someone is going to have to make sure that we get a good return on investment and they do not allow what has happened to the number of school administrators which have increased as enrollments and test scores plummet. My home school district of Plymouth-Canton has increased the number of administrators by 50% over the past decade while test scores and enrollment drop and truancy goes up. At some point in time, the falling numbers have to rise and the rising numbers have to drop. Our State Board is mostly useless and unfortunately, our local school boards seem to be following suit. Maybe Mr. Bean’s comments apply to school boards as well.
My final thoughts, GO TIGERS! GO LIONS!
When I attended public schools in the 1970s, the only students getting a free lunch were those who qualified due to indigency. They qualified for public assistance so when it came time to pay the the cashier in the cafeteria, the cahier examined the list of indigents and waved them on. Most other students paid for their lunches.
The humiliation of getting special treatment in receiving a free lunch due to poverty while other students watched was certainly a cost that the student getting the free lunch that the student did not want to incur. I personally felt that if an indigent student could not afford a lunch it was better that the government pay the cost of that free lunch so the child would not go hungry and his education impaired.
That said, my relatives in Slovenia after WWII had a communist regime imposed upon them and all students were forced to eat their breakfast and lunch as “guests” of the Stalinist regime. It was a way to separate the bond between children and their families in consuming family meals and redirect their loyalty to the government. The students in school were forced to chant Tito/Stalin!! in obedience to the regime.
In the same vein, Democrats wish to foster a dependency upon our children in public schools by making all students eat government-funded school lunches. This is not acceptable. It is a family’s duty to feed their children – not the government.
Project 2025 – recently embraced by President Trump – seeks to curb abuses in the school lunch programs that are federally-funded. I applaud Donald Trump for his support of Project 2025.
During my public-school days in the late ’60’s to early ’70’s, lunches were free to those who admitted to being disadvantaged (not many, but I knew some since their parents happened to be tenants of my parents), but to the paying customers, lunch started at $0.35 and escalated to around $1.00 when I graduated. Believe me, lunches outside school cost more than this.
So, communist free lunches are not cool but socialist subsidized lunches are cool? If paying for lunches is the barometer, why not bring in a private catering service (like today’s corporations do) and charge what lunches and breakfasts really cost. Might have a lot more “rich” folks claiming poverty all of a sudden. Sheeesh.
Not that they have any reason to listen, but people running for office should quit trying to use the budget to gain votes. Most voters have no idea how the budget works nor do they care. No matter how you try to spin it, it’s not relevant to the average voter. Just do your job.
Leave budget anquish till Inauguration Day, and talk about what you are going to when elected, not some arcane discussion about budget deadlines or obscure conversation about K-12 funding. Leave appropriation talk to nerds like Bill who understand what a continuation budget is or why violating the constitution (which is what happened although the consttution doesn’t seem to matter anymore) is important.
The Crow Nation would like to have a word with you about Sitting Bull, the Lakotas, and illegal migration.