Here’s your cheat sheet for Michigan’s budget after a long, hot, stagnant summer

By: - August 14, 2019 9:13 am

Gov. Gretchen Whitmer signs the auto insurance reform bill with House Speaker Lee Chatfield, House Minority Leader Christine Greig, Senate Majority Leader Mike Shirkey and Senate Minority Leader Jim Ananich, May 30, 2019 | Nick Manes

Gov. Gretchen Whitmer and Republican lawmakers have less than seven weeks to reach a Fiscal Year 2020 budget deal to avert a government shutdown, but the Democratic governor is already exploring contingency options. 

Speaking with reporters on Monday during a tour of a bridge in Lansing, Whitmer said she was open to the concept of a short-term spending bill to keep state government operating past the Sept. 30 deadline for a budget deal. Whitmer and Republican leaders appear to remain far apart on funding for key priorities like the state’s infrastructure, workforce development and education. 

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Both the House and Senate have passed their own budget recommendations.

In terms of overall budget numbers, the governor and GOP chambers aren’t very far apart. Whitmer’s budget proposal was $60.2 billion, while the Senate and House passed budgets at $59.4 billion and $58.9 billion, respectively, according to numbers from the State Budget Office. 

But the differing priorities on where that money should go coupled with the dynamic of a Democratic governor and a Republican-controlled Legislature is already triggering memories of the short shutdowns that occurred in 2007 and 2009, when Michigan had divided government. Whitmer says they hope to avoid that. 

Speaker Lee Chatfield and Senate Majority Leader Mike Shirkey, May 24, 2019 | Nick Manes

“Everyone has said they don’t want to get close to a shutdown. If that’s the case, and we have good faith negotiations but we’re not able to get things done in time, I’m confident we’ll do that,” Whitmer said of the idea of continuation funding, often called a “continuing resolution” at the federal level. 

“If we’ve got good faith negotiations — and hiccups happen — I think we’ve got to have a backup plan,” Whitmer continued. “And my understanding from both the leaders is that they’re desperate to avoid any sort of a shutdown.”

Whitmer told reporters that she met with state Senate Majority Leader Mike Shirkey (R-Clarklake) and House Speaker Lee Chatfield (R-Levering) last Friday, but they did not present a long-promised road funding proposal. 

Michigan 2020 budget cheat sheet: What to know before Whitmer’s presentation

Once the Legislature resumes normal sessions, scheduled to begin at the end of August, lawmakers will have to complete a number of steps in order to pass a final budget. Both the House and Senate have passed different versions of the budget, so differences will have to be reconciled in conference committees before final bills go back before the chambers. 

A key part of the process is for chairs of the House and Senate Appropriations committees to lock in spending targets, or general ranges, for each of the 19 budget areas. They still need to do so and will then have to focus on selling rank-and-file GOP members. 

But that’s just getting Republicans in line. Ultimately, GOP leaders have to strike a deal with Whitmer, who, of course, has the power to veto budget bills. 

Eric Lupher, president of the nonpartisan, Livonia-based policy think tank Citizens Research Council, stands optimistic that the state’s political leaders will get things done, particularly in the wake of the bipartisan, historic auto insurance reform earlier this year.

Whitmer signs auto insurance bill with legislative leaders by her side

“We have leadership that recognizes the need to work together, recognizes the need to get things done. It is divided government, but not so divided that nothing can get done,” Lupher said. 

“There’s not bad rhetoric that’s alienating either side, so I think there’s still room to get things done,” he said. “Yes, there was eight years of singular party control [with Republicans under Gov. Rick Snyder], but there was a lot of kicking things down the road and Gov. Whitmer came in with the intent that it was time to tackle some of these things, so that requires working together.”

Michigan’s government went through two brief shutdowns in 2007 and 2009 during a decade-long recession when Jennifer Granholm, a Democrat, was governor and struggled to strike deals with a Republican-controlled Senate and Democratic-led House. 

How past Michigan governors handled budget fights — and what to expect from Whitmer

Line in the sand

Whitmer has been adamant that long-term funding for roads and infrastructure — which multiple reports have estimated would need to be around $2.5 billion annually — be part of a comprehensive budget proposal. 

“I said from the beginning [that] a roads deal has to be part of the budget, and I believe that’s the case,” Whitmer told the Advance last week during an event in Zeeland, noting that the GOP-controlled state House appears to agree given that its proposed transportation budget — which Whitmer has slammed — includes added road funding. 

“So I don’t know how on earth you can claim you got a budget done without a road solution and that’s what we’re going to get done,” Whitmer said. 

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The governor has spent much of the summer blasting lawmakers for taking a typical summer break during July and August, even including a running, daily tally in an email blast to reporters of how many days have passed since Whitmer unveiled her own budget proposal on March 5. 

During the past eight years when Republicans firmly controlled all branches of state government, budgets were done by May or June, ahead of the legislative summer break. 

“I feel the pressure, but I don’t know that the Legislature feels the pressure because they haven’t really been in session this summer,” Whitmer told reporters last week. 

“As we get closer to the end of this fiscal year, it will be weeks after weeks after weeks like this where they haven’t been in session to do their job that will be to blame if we get close to that end of the calendar year, when I do everything I can in my power to avoid that,” Whitmer said. 

House Dems push new business taxes to fix roads

Longtime policy observers, as well as spokespeople for the Republican caucuses, however, note that even with the Legislature out of session, there’s still budget work being done. 

“Even though they’re not in session, I’m sure the leadership has been in contact and in this day and age they can have conference calls and things like that. So physical presence in Lansing isn’t necessary,” said Lupher, adding that he’s not particularly concerned about the possibility of a shutdown at this point. 

“They’ll work it out and come to an agreement and take it to the rank and file and try to get it done. There’s still time to figure this out,” Lupher said.

Unknown GOP plan

With Whitmer drawing a line in the sand that long-term funding for Michigan’s deteriorating roads and infrastructure be part of a balanced FY 2020 budget plan, that likely will be the major negotiation point. 

But the governor’s proposed 45-cent gas tax increase to raise around $2.5 billion annually for roads was dead on arrival with GOP lawmakers, many of whom voted for Snyder’s smaller gas tax increase in 2015 that so far, has failed to do much to improve Michigan’s roads and bridges. 

Whitmer wants to fix the damn roads. Citizens wonder why the last tax hike wasn’t enough.

As the summer has worn on, several details of what might be included in a Republican road funding plan alternative have emerged. That includes a proposal pushed by the conservative Grand Rapids business group West Michigan Policy Forum, which as the Advance previously reported, would involve selling teacher pension bonds and freeing up dollars in the state’s School Aid Fund, which could then be used for purposes like infrastructure. 

The proposal has been panned by Whitmer and various policy experts on both sides of the aisle. 

Lupher said there’s a variety of pluses and minuses with the proposal. 

“There’s risk involved. Pension obligation bonds can work, they have worked, but they do carry risk,” Lupher said. 

Michigan state revenue flatlines for 2019, 2020

“We know there’s a recession coming soon, so how does that play into it? What’s going to happen to interest rates,” he continued. “It’s a game to try to figure that out and hope you’re on the good side of it. Changing the amortization side can be good. From a policy standpoint, though, putting all that together, are we trying to export today’s tax burden on to future taxpayers to pay for roads today?”

The Detroit News reported last week that GOP lawmakers are also exploring expanding the sales tax to a variety of services that are currently exempt, although the specific details of what that might involve or how much revenue it might raise are unclear. 

Expanding the sales tax to services was briefly implemented in 2007 as part of the deal to end the government shutdown before being quickly repealed. Conservative business groups like the Michigan Chamber of Commerce have vigorously opposed such ideas. 

For their part, Republican House and Senate spokespeople are mostly mum on what an alternative road funding proposal might entail. 

Rick Haglund: Why fixing the damn roads is so damn hard

“Members are still looking at many options for various reforms and working on putting together the best possible plan from a combination of improvements to the status quo,” Chatfield spokesman Gideon D’Assandro wrote in an email last week, declining to offer any specific details of the plan. 

“Work on building the best possible plan continues,” he added. 

Likewise, Shirkey spokeswoman Amber McCann declined to go into specific details of a road-funding plan, but said the various parties are working together as the summer progresses.

“The Majority Leader has been in regular contact with the Governor regarding both the budget and long term road funding,” McCann wrote in an email. “More money for roads will have a direct impact on the budget. The Majority Leader is working with his colleagues in the Senate, leadership in the House, and Governor Whitmer to get a road funding plan sooner rather than later.”

School funding

While “fixing the damn roads” stands as Whitmer’s oft-repeated slogan and her core campaign promise, infrastructure funding is far from the only policy area in which the governor and Republican lawmakers appear far apart. 

Report: School funding and clean water top Michiganders’ concerns

Take, for instance, Whitmer’s more than $15.3 billion recommendation for the state’s School Aid Fund, a 3.5% increase from the previous year. Budgets approved in the state Senate and House would grow the fund by 2.7% and 1.4% respectively. 

Whitmer’s budget proposal would increase per-pupil funding by $507 million, while the Senate and House budgets would increase that funding by $342 million and $236 million, respectively. Whitmer, for instance, recommended $50 million for career-technical education, while the House only appropriated $10 million and the Senate zeroed out the recommendation. 

Education advocates have called the House budget funding Michigan’s 15 public universities “disturbing,” as the Advance has previously reported.

Additionally, Whitmer has continued to beat the drum of workforce development and “closing the damn skills gap.” However, GOP lawmakers have not appropriated any money in their budgets for her proposed initiatives, which includes the $110 million Michigan Reconnect program, which would offer tuition-free community college degrees or certificates for in-demand skills. 

Dem senator pushes huge boost to the Earned Income Tax Credit

The Legislature also lags Whitmer’s recommendations in myriad other budget areas, such as drinking water protection, revenue sharing with local units of government and an Information Technology Investment Fund line-item proposal. 

The governor’s budget recommended $45 million for the initiative, while the Senate and House recommended $25 million and $15 million, respectively. 

Whitmer on Monday declined to speculate on whether she believes there will be a government shutdown, but said there’s a very finite amount of time to get the budget accomplished and the clock is ticking, which creates the need for a possible short-term spending plan. 

“I’ve been through this,” said Whitmer, who served 14 years in the Legislature, including as Senate minority leader. “I know what the calendar looks like, and I know that if we don’t have real progress and bills on my desk by the middle of September, we’re going to get serious on that other front as the contingency plan. But we don’t want to negotiate that at this point. It’s time for us to try to get a real budget.”

Advance Associate Editor Derek Robertson contributed to this report.

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Nick Manes
Nick Manes

Nick Manes is a former Michigan Advance reporter, covering West Michigan, business and labor, health care and the safety net. He previously spent six years as a reporter at MiBiz covering commercial real estate, economic development and all manner of public policy at the local and state levels.