Legislative Report as of September 23, 2021

The Michigan Legislature has completed its work on the FY 21-22 state budget, and not a moment too soon.  The October 1 deadline is fast approaching, but on September 22 the House and Senate agreed on omnibus budget bills to fund state government, local revenue sharing and higher education for the upcoming fiscal year.  The Governor has announced her support for the plan, although there still may be a few line-item vetoes before she signs the bills into law. 
 
The Legislature and Governor also continue to spar over COVID-19 policies.  The question around mask and vaccination mandates continues to dominate many discussions in Lansing and it has now spilled down to local government and school board levels.  Although COVID-19 infections and hospitalizations in Michigan are not yet at the level currently being seen in the southern US, there has been a spike of new cases in children since schools opened in late August.  This has prompted vicious debates at school board and county commission meetings sometimes ending with threats of violence.  The Legislature has weighed into the fray by including language in the budget bills that seek to neuter vaccine and mask mandates, and prohibit “vaccine passports” in all departments.  They are also currently moving separate legislation that would ban vaccine and mask mandates altogether.  That budget boilerplate language and the separate legislation is expected to be vetoed by Governor Whitmer.
 
A more detailed breakdown of key budget decisions is below.
 
 
Budget Completed Before Deadline, but Funds Still Left on the Table
 
The House and Senate completed its work on the state budget and sent a pair of bills to the Governor on September 22.  House Bill 4400 contains funding for universities and community colleges, while Senate Bill 82 is the omnibus budget bill for all state departments.  SB 82 also includes funds for revenue sharing to local governments.  Funds for K-12 schools was passed last June.
 
The total funding for state government is just over $50 billion – $10 billion in state general fund dollars and the remainder from other sources (primarily federal funding such as Medicaid and highway funds).  However, the budget that the Governor will sign did not include approximately $6 billion in federal COVID-relief funds and an additional $5 billion in School Aid and General Fund dollars stemming from the current projected budget surplus.  Those dollars will likely be appropriated over the next few months in a series of supplemental budget bills. 
 
Below is a list of some highlights and major changes to the current year budget.
 
Agriculture and Rural Development
 
$25 million for new nutrient best practices program targeting water quality improvement in West Lake Erie basin.
 
Civil Rights
 
Adds $250,000 to perform outreach and public awareness regarding the increase in racially motivated violent crimes during the COVID-19 pandemic.
 
Transfers Women’s Commission to the Department of Labor and Economic Opportunity
 
                                                                                                                                   
Corrections
 
$7.4 million in new dollars to train additional custody staff to fill existing vacancies.
 
 
Education
 
$1.5 billion in federal dollars to increase access to affordable child care.  These funds will provide grants for licensed child care providers, increase subsidies for families, increase provider reimbursement rates, and provide additional funds for programs to enhance child care access.
 
 
Environment Great Lakes and Energy
 
$39 million for programs to address drinking water contamination, PFAS contamination and other contaminated site cleanup.
 
$10 million for lead line replacements
 
$33 million for high water infrastructure and dam safety grants.
 
 
Health and Human Services
 
$415 million to continue wage passthrough for direct care workers another year and increase to $2.35/hour.
 
Includes $22.5 million in General Funds to continue Coronavirus relief for state psychiatric hospitals (this was one-time federal funding in current year budget which otherwise would have ended)
 
 
Labor and Economic Growth
 
Adds a cumulative $25 million to the Reconnect Program.
 
Continues Futures for Frontliners Program at $25 million.
 
$24 million in upgrades for the Michigan Career and Technical Insititute.
 
Adds $15 million to the Pure Michigan program.
 
Increases Going Pro program by $11 million for a total of $40 million.
 
Added boilerplate language requiring UIA offices to be open to in-person visits, and authorizes hiring of up to 500 contract workers to address backlog.
 
 
Licensing and Regulatory Affairs
 
$1.1 million for increased nursing home infectious disease surveys.
 
$648,000 to hire six additional inspectors to regulate adult-use marijuana licensees.
 
 
Military and Veterans Affairs
 
Reduces funds to Grand Rapids Veterans Home by $13 million due to the move to a smaller facility.
 
Increases funds for the Chesterfield Township Veterans Home by $12 million in recognition of its first full year of operation.
 
 
Natural Resources
 
$1.5 million to add 8.8 FTEs to the Parks and Recreation Division and increase division wages as part of a recruitment and retention initiative.
 
$500,000 in one-time funds to address Chronic Wasting Disease
 
 
State Police
 
$5 million to support troopers graduating from recruit school in FY 2020-1. 
 
$7.8 million ($5 million of it being one-time funding) to support a trooper school in FY 2021-2.
 
$3.8 million for body-cameras.
 
 
Technology Management and Budget
 
$20 million in one-time funding to address cyber security.
 
Adds additional $17 million to IT Investment Fund for IT upgrade projects.
 
 
Transportation
 
$10 million to hire an additional 114 FTEs for state trunkline maintenance.  Some of the FTEs will be used to replace temporary winter maintenance employees and to reestablish maintenance forces in Monroe County.
 
 
Next Wave of Supplemental Budget Bills Coming Soon
 
As Governor Whitmer is set to sign the 2021-2 FY budget, we expect the Legislature to begin working almost immediately on a series of supplemental budget bills that will appropriate over $10 billion in state and federal funds that were left on the table in the annual budget process.  Approximately $5 billion of that figure stems from higher than expected revenues in the state General Fund and School Aid Fund; while the remainder consists of unspent federal COVID-19 relief funds left over from the American Rescue Plan Act. 
 
A number of labor groups are lobbying hard to use a portion of the federal dollars on premium pay grants for frontline workers.  The federal guidelines in the American Rescue Plan allow grants of up to $25,000 each for workers who worked in person in “essential” jobs.  However, even though that amount is authorized, a much more likely scenario (assuming the Legislature approves a plan for premium pay) would be between $1,500 and $3,000 per worker.  At that level, the cost of the program would be between $1 billion and $2 billion out of the total $6 billion in federal funds available. 
 
Other proposals currently being discussed in Lansing for uses of the state and federal funds include things like rural broadband expansion, increased access to college scholarships, park and trail improvements, small business grants, and IT improvements for public schools.  Technically there are some strings on the federal money and it must be used in relation to combating the COVID-19 pandemic.  Realistically, though, the parameters are very broad and have led to some creative proposals.  The other limitation is that the federal dollars are “one-time” funds, which makes it less likely they would be used to create ongoing programs.  Instead, they are expected to go for single-use proposals such as infrastructure projects, capital improvements and grants.
 
As for the $2-3 billion in General Fund surplus, there are no strings on those funds.  The surplus stems from higher-than-expected revenues over the latter part of 2021.  Assuming the economy continues to recover and the state is not forced into another shutdown situation due to the pandemic, those dollars are expected to remain available.  However, as the federal stimulus dollars expire, unemployment benefits revert to pre-relief levels, and threats of a federal debt default loom, the possibility of an economic downturn could temper the desire to spend the excess funds quickly.  The most likely probability over the next few months are a partial expenditure of surplus state funds for short-term projects (similar to the expectation for the federal dollars), with a probability that a good portion of the excess revenue will be socked away for a rainy day.