Michigan lawmakers approve $82.5B state spending plan for 2025

LANSING — Michigan lawmakers early on Thursday passed an $82.5 billion state budget for the 2025 fiscal year, with just over $59 billion going to support state government agencies and about $23.4 billion going toward education.

After a session that spanned 19 hours, the spending plan was approved at 5:10 a.m. with immediate effect, despite nearly unanimous Republican opposition, and sent on to Gov. Gretchen Whitmer, who is expected to sign it into law.

It’s a bigger budget than the $80.7 billion spending plan Whitmer proposed in February, but state revenues and fund balances have improved somewhat since then.

The biggest drama surrounding the final budget plan related to school funding. The budget’s freezing of the K-12 per-pupil grant for 2025 at this year’s level of $9,608 created a split with sectors of the public school education community that has been one of Whitmer’s staunchest allies. Groups such as the Michigan Association of Superintendents and Administrators and the K-12 Alliance of Michigan spoke out strongly against the funding plan Wednesday and said it would result in layoffs. That’s despite the fact Whitmer’s administration insisted schools would have more money to spend in the classroom in 2025 than they did this year, due to a major cut in what school districts will have to pay to the school employee retirement fund.

Without assurances that the one-time cut in retirement expenditures will be permanent, the budget “provides no long-term funding relief and will lead to layoffs this fall and in the future, as the funding for our schools will not be enough to keep up with inflation, rising health care costs, and the ending of federal relief dollars,” the association of superintendents and administrators said in a Wednesday action call to its members.

Charter schools, which don’t pay into the Michigan Public School Employees’ Retirement System, would receive a 3.9% increase to their per-pupil grants, according to an analysis of House Bill 5507 prepared by the House Fiscal Agency.

The education budget passed the House early Thursday in a 56-54 party-line vote and hours later passed the Senate 20-18, also along party lines. Senate Republicans did not try to fight immediate effect for the two budget bills, as they could have done, since neither had the required two-thirds support.

The Democratic-led House also passed Senate Bill 911, which would reduce school district contributions to the employee retirement fund not just for 2025, but for future years. Democrats say the reduction is justified because post-retirement health care for teachers is now fully funded, though other shortfalls in the pension fund continue.

“Teachers and school employees have more than met their obligation to retiree health care and deserve to have their hard-earned dollars back,” said Rep. Regina Weiss, D-Oak Park, chair of the House Appropriations Subcommittee on School Aid and Education. “This legislation ends a decades-long policy that resulted in underfunded classrooms and a loss of pay for teachers.”

The main state government bill passed the Senate in a 20-17 vote, shortly before 4:30 a.m., with only Sen. Ed McBroom, R-Vulcan, joining Democrats in voting yes. The House then approved the spending plan in a 56-54 party-line vote.

Together, the bills fund the 2025 state fiscal year, which runs from Oct. 1, 2024 through Sept. 30, 2025.

The Whitmer administration and Democratic legislative leaders have framed the overall budget as one that continues her administration’s emphasis on improving education while reducing costs for Michigan families, takes steps to make Michigan more attractive for major manufacturing projects, and improves the equity of state government spending priorities to better benefit communities that have historically been underserved. Sen. Sarah Anthony, D-Lansing, chair of the Senate Appropriations Committee, said the budget is “fiscally responsible and also looks out for every Michigander.” State Budget Director Jen Flood has also characterized the budget as a return to normal after several years of sharply increased revenues, largely as a result of federal COVID-19 relief funding.

Republicans denounced the budget as bloated and accused Democrats of raiding retirement funds to find more dollars to spend, after quickly burning through a $9-billion state surplus. “They’ve created an unsustainable state budget and they want to play shell games to simply tread water,” said Sen. Thomas Albert, R-Lowell.

As one would expect for a governor who enjoys a Legislature controlled, albeit narrowly, by members of her own party, Whitmer got much of what she wanted in the final budget plan. But she didn’t get everything.

Whitmer’s proposed $25 million Michigan Vehicle Rebate Program was among the budget items that ended up on the committee room floor, according to a summary of Senate Bill 747 prepared by the House Fiscal Agency. It would have provided point-of-sale rebates of $2,000 for the purchase of new electric vehicles and $1,000 rebates for the purchase of internal combustion vehicles, with an extra $500 thrown in for vehicles that were union-made.

Also not making the cut in the final budget plan was Whitmer’s controversial proposal to raise an extra $80 million by massively increasing Michigan’s landfill tipping fees to $5 per ton, up from 36 cents per ton. The extra money would have been used in part to hire more people in the Department of Environment, Great Lakes, and Energy to clean up the state’s contaminated sites.

The conference committee also axed a Whitmer proposal to raise extra money by requiring motorists to “opt out” of getting a recreation passport for state parks when they renew their vehicle registrations, rather than “opting in” for the extra charge, as they do now. Had it gone ahead, the change was expected to raise a little more than $17 million extra per year.

And Whitmer’s call in her January State of the State to accelerate Michigan’s move toward universal publicly funded pre-kindergarten, by removing all income requirements for families to qualify, didn’t quite get there, either. Under the budget, 4-year-olds in all Michigan families, regardless of income, are eligible for free pre-kindergarten. But in the event there is a shortage of spaces, priority will be given to families with incomes at or below 400% of the federal poverty level.

Among the items included in the budget are:

• $100 million to help the Michigan State Housing Development Authority increase housing stock and affordability through the construction of new single-family and multi-unit homes, renovation of existing units, and improvement of energy efficiency. This marks a $50 million reduction from what Whitmer called for in February.
• $65.1 million to increase child care provider pay rates by 15%. This marks an increase from Whitmer’s February budget proposal, which called for a 10% pay hike, but it’s less than the 20% increase in child care provider rates in the version of the budget passed earlier by the Senate.
• Creation of a Michigan Innovation Fund, assuming required state legislation is passed and signed into law, to support Michigan startups, including through direct funding, technical assistance and other services. The fund was initially proposed at $60 million.
• An extra $15 million for the Pure Michigan tourism promotional campaign on top of the $25 million it received this year, with $14 million of the extra funding coming from remaining federal COVID-19 funding.
• Close to $2.1 billion transferred to local road agencies from the Michigan Transportation Fund, which is an increase of $110 million from this year.
• A 2.5% increase for operating costs at Michigan community colleges and public universities.
• $45.5 million to assist businesses locating or expanding in Michigan, specifically around workforce needs. The money would also be used to support development of “customized talent solutions to help fill identified needs in certain industries.” This reflects an increase of the $20 million proposed for this purpose in Whitmer’s February budget proposal. Also, neither the House nor the Senate included any money under this line item in the budgets each passed earlier this year. Separately, the budget includes $2 million to increase the amount of high-tech talent in Michigan through various programs.
• $335 million in one-time “enhancement grants,” including: $12.5 million for the planned Pine Rest Pediatric Behavioral Health Center of Excellence in Grand Rapids; $10 million for the Frankenmuth Youth Sports Complex; $10 million for Potter Park Zoo in Lansing; $7 million for Detroit Zoo infrastructure; $5 million for Mt. Clemens downtown redevelopment; $5 million for Plaza Roosevelt Park improvements in Grand Rapids; and $4 million for the Jim Crow Museum in Big Rapids.
• $18 million in grants to museums, including $5 million to the Motown Museum in Detroit, $2 million to the Lakeshore Museum Center in Muskegon, $1 million to the Chaldean Cultural Center in West Bloomfield, and $1 million to the Michigan Flight Museum near Belleville. Another $9 million would be awarded on a competitive basis to museums and nonprofits that operate educational programs at museums or provide other support to them.
• $6 million for Michigan orchestras, with $750,000 allocated for the Detroit Symphony Orchestra and the balance going to other orchestras through a needs-based program.
• $1.5 million for renovation costs of a township hall in Brownstown Township.
• $10 million to support minority-owned businesses, with funds to be awarded in a “geographically diverse” manner.

Soon after approving the budget, lawmakers adjourned for a summer break. They are next scheduled to meet at the end of July.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on X, @paulegan4.