Leaders agree on budget blueprint with 2 weeks until new fiscal year

Michigan Capitol | Susan J. Demas

Just a few weeks ahead of the state’s new fiscal year, which begins on Oct. 1, leaders have come to an agreement on a state budget framework.

The deal, which was announced Monday evening by Senate Appropriations Chairman Jim Stamas (R-Midland), House Appropriations Chairman Shane Hernandez (R-Port Huron) and State Budget Director Chris Kolb, won’t cut into the state’s K-12 public school funding or revenue sharing for local governments. 

Schools in Michigan started their fiscal years in July and have been operating under a cloud of uncertainty, especially with the expense of increased safety protocols during the COVID-19 pandemic.

The Fiscal Year 2021 agreement comes after the pandemic caused soaring unemployment and shrinking tax revenue in the spring, but the economy has begun to bounce back. State fiscal leaders last month said that revenues were coming in higher than they estimated in May.

Michigan budget outlook is brighter, but cuts still loom

Michigan’s budget is roughly $58 billion.

This has been a year unlike any other,” Stamas said in a statement. “The unprecedented challenges Michigan has faced meant that working together — Republicans and Democrats and the Legislature and the [Gov. Gretchen Whitmer] administration — was absolutely essential. This agreement means a fiscally responsible budget will be in place in time for the new fiscal year.”

The next step now is for House and Senate subcommittee chairs to work with state departments and the State Budget Office to resolve budget details, and final legislative action will occur on all budget bills next week.

Whitmer signs supplemental package after rocky first budget year with GOP leaders

If the deal holds, this would be a much smoother budget process than Whitmer and GOP legislative leaders had last year when they did not agree to budget targets for Fiscal Year 2020. Talks broke down over Whitmer’s road funding plan and the Legislature passed a budget without the governor’s impact.

Whitmer signed the budget, but issued about $1 billion in line-item vetoes and shifted more than $600 million for her priorities, angering Republicans. Leaders negotiated a couple budget supplementals adding back some spending months later.

Then the COVID-19 pandemic hit Michigan this winter and budget predictions for the state were bleak.

In January, the state was forecasting about $412 million in overflow for Fiscal Year 2021. Then in May, as the state was feeling the blow from many businesses closing due to the pandemic, experts were expecting a budget shortfall of $6.3 billion over the next two fiscal years.

Whitmer signs FY 2020 budget fix

During a rare August Consensus Revenue Estimating Conference (CREC), state officials reevaluated to find that the budget was not as grim as expected in May, but still not in the same position it was pre-pandemic. 

Whitmer and Kolb have repeatedly urged Congress to agree to a new COVID-19 relief package with aid to states. A second coronavirus wave could shock state budgets once again.

“COVID-19 has had an unprecedented impact on our state budget, and by quickly working together since receiving the August revenue estimates we’ve been able to build a budget framework that reflects a bipartisan commitment to moving our state forward,” Kolb said. “These targets will provide critical funding for our key priorities such as education, health care and skills training, and I appreciate the partnership I’ve had with both Sen. Stamas and Rep. Hernandez.”