Whitmer pitches $74B budget with boost for K-12, infrastructure aid

Beth LeBlanc
The Detroit News

Lansing — Gov. Gretchen Whitmer proposed spending $74.1 billion over the next year during a Wednesday presentation as the state emerges from the pandemic flush with cash thanks to increased state tax revenue and federal COVID relief aid.

If passed, the $74.1 billion would represent the largest budget in the state's history — an outgrowth of the economic recovery. The budget is a combination of state revenues and federal aid for joint programs such as welfare, health care services and infrastructure.

The governor's fourth budget recommendation includes $18.4 billion for education, including teacher retention bonuses; about $6 billion for infrastructure; nearly $52 million for the state’s rainy day fund; and $500 million for future business incentives.

Another $500 million would go toward “hero pay” for frontline workers, $325 million for a new state psychiatric facility complex and $88 million to boost Michigan’s jobless aid system, which has come under fire for paying out more than $8.5 billion in fraudulent claims during the pandemic.

The GOP-led Legislature, while expressing openness to some spending increases, has pushed strongly in recent weeks for policies that would return some of the state's extra cash to Michigan taxpayers, including cuts to the individual and corporate income taxes

Whitmer lobbied for a repeal of retirement income taxes as well as an earned income tax credit increase during her State of the State address last month, and included those proposals in Wednesday's budget plan.

“The budget I put forward today delivers on those tax cuts and makes strong investments in the kitchen-table issues that make a real difference in people’s lives," Whitmer said in a Wednesday statement.

Republican leaders weren't quick to endorse the spending plan, which Rep. Thomas Albert described as a "spending spree" that contained some "common themes" but diverged on key points. 

"Fortunately, the governor’s initial proposal is just the first step in the process, and we will need more details to better define what is proposed as one-time versus ongoing spending," said Albert, the Lowell Republican who chairs the House Appropriations Committee. 

The budget is in a "solid position" because of years of work but state Sen. Jim Stamas cautioned against abandoning "the principles of fiscal responsibility."

"It is a start for more detailed discussions on how to best use our taxpayer dollars," said Stamas, the Midland Republican who chairs the Senate Appropriations Committee. “While our budget situation here in Lansing is strong, that isn’t the reality facing many Michigan families and small businesses." 

Revenue largess

Pending Whitmer's signature on a $1.2 billion spending plan approved Tuesday by the Michigan Legislature, the state has about $4.7 billion from the federal American Rescue Plan Act left of federal COVID relief dollars sent to the state during the pandemic. 

Another $7.3 billion is available for federal highway programs and $563 million in federal aid through the federal bipartisan infrastructure bill.

In terms of state revenue, Michigan's available tax revenue for fiscal year 2022-23 is expected to come in $1.7 billion higher than was originally forecast in May 2021. And with balances and surpluses from the past two years, Michigan has about $7 billion extra to carry into the new fiscal year. 

The $74 billion budget proposed Wednesday includes nearly $3 billion in one-time spending, including about $520 million in federal American Rescue Plan Act dollars and $840 million in federal bipartisan infrastructure dollars, according to the state budget office.

Last year's budget totaled about $70 billion, including $17.1 billion for K-12 education, which Whitmer's office said at the time was the largest investment in schools in state history. Since then, supplemental spending plans have increased overall spending beyond that budgeted $70 billion and a similar scenario is likely to occur with the eventual budget adopted for the 2022-23 fiscal year.

The Legislature will later propose its own budget plans, and all parties are supposed to come to a budget agreement by June 30. But that ideal deadline has not been met since Whitmer took office in 2019. In the past two years, uncertainty over the pandemic's impact on the state economy has pushed finalization up to the start of the new budget year Oct. 1.

Budget details

Whitmer's budget includes about $18.4 billion for education, including $2.3 billion over four years to recruit and retain teachers and staff. The plan would grow annual bonuses from $2,000 to $4,000 by 2025. Whitmer's plan is to increase per-student funding 5% to $9,135 per pupil to increase personalized learning.

Whitmer also is proposing about $361 million to open 40 school-based health clinics and increase access to mental health screenings and hire an additional 425 mental health professionals.

Whitmer proposed injecting another $500 million into a fund created late last year to lure large business investments and development projects into Michigan. The fund was used last month to help attract a $7 billion General Motors investment.

Whitmer's proposed $6.3 billion transportation budget reflects a $1 billion, or 20% increase, Michigan's spending on roads and infrastructure. About $34 million of that would be targeted at local governments for high water infrastructure and $66 million spent on 164 state-owned highway pumping stations, a piece of infrastructure whose failure in June was partly at fault for massive freeway flooding in Metro Detroit.

The governor is also proposing more than $85 million for matching and assistance grants to help with lead line replacement projects and water treatment. Another $69 million would go toward the cleanup and redevelopment of historic industrial contamination sites and $30 million toward state fish hatchery improvements.

The budget included about $50 million for an electric vehicle rebate program Whitmer announced during her State of the State address last month, $40 million for EV charging stations across the state as well as $10 million to begin converting the state’s 7,000-vehicle fleet to electric.

The proposal would put about $500 million toward front-line worker pay, $135 million for behavioral health workers, $60 million for nursing home non-direct care workers and $50 million for law enforcement and first responders. 

The Democratic governor is seeking more generous aid for local governments, proposing 5% ongoing and 5% one-time increases in revenue sharing with cities, villages and townships. The governor wants to set aside $50 million to ease the impact on communities that lost population and may be subject to lower revenue sharing percentages as a result. 

Among the Michigan cities that lost population in the 2020 census were Detroit, Flint and Lansing.

eleblanc@detroitnews.com

Staff Writers Craig Mauger and Jennifer Chambers contributed.