LANSING — Buoyed by an estimated $9 billion state surplus, Gov. Gretchen Whitmer unveiled a $79 billion budget proposal Wednesday to make big investments in education, infrastructure, the environment and economic development while saving room for a one-time $180 check for tax filers and other tax relief plans.
In a presentation to the House and Senate Appropriations committees Wednesday morning, Whitmer said this year is a “huge opportunity” to help improve Michigan.
“Now the ball is in your court,” Whitmer told lawmakers, later adding, “We’re going to do a lot of good stuff together.”
Whitmer’s budget proposal for the upcoming fiscal year totals $79 billion, up from the $76 billion spending plan she signed last year. However, the governor is proposing slightly less spending from the state’s discretionary fund, $14.8 million compared to $16 million allocated for the current year.
Despite a big surplus, the state could soon be facing a recession and residents continue to deal with high inflation rates. Much of the surplus is considered one-time funding due to unique circumstances caused by the COVID-19 pandemic.
The budget as proposed would allocate all but $250 million of the surplus projected in the next fiscal year, State Budget Director Chris Harkins told lawmakers.
But at least $1.1 billion of the proposed spending would go to savings accounts: $200 million for the state’s rainy day fund, and $900 million for a new school aid rainy day fund.
The governor’s budget plan follows a tax deal Whitmer and legislative leaders announced last week that would give every Michigan tax filer a onetime $180 check as well as expanding the state’s Earned Income Tax Credit and rollback the state’s so-called pension tax on retirement income.
Whitmer announced a few other suggestions for proposed tax relief in her budget plan, including a temporary sales tax pause on electric vehicle sales and a tax credit of up to $3,000 for early childhood educators.
Wednesday’s announcement was the first step in a months-long annual process that could look very different when it ends.
Now, members of the House and Senate Appropriations Committee will review the governor’s recommendations and come up with their own spending priorities.
Michigan’s next budget is due before the new fiscal year begins Oct. 1, although lawmakers in recent years have approved it far sooner.
Here’s a look at other initiatives Whitmer hopes to fund in the next budget:
Pre-K expansion: $306 million
Whitmer wants lawmakers to expand the state’s free preschool program, hire more teachers and fund student transportation as part of her push for a universal pre-K system, to the tune of $306 million.
The plan calls for $73 million to add up to 5,600 additional 4-year-olds to the Great Start Readiness Program and allow more families to access the free preschool.
Under the proposal, 4-year-olds would qualify for Great Start Readiness if they live in a home with adults who earn 300 percent or less of the federal poverty level or about $79,000 for a family of four.
The proposal includes $30 million in ongoing funding to create a tax credit of up to $3,000 for early childhood educators and child care professionals, as well as $18 million in ongoing funding to support transportation of preschool students.
Onetime spends proposed by the governor include $50 million for hiring more teachers and early childhood professionals, another $50 million for startup grants to fund additional preschool classrooms and $75 million to help preschool programs shift to a five-day weekly schedule and offer year-round options.
Sales tax pause on electric vehicles: $48.4 million
Whitmer’s budget includes $170 million to support an ongoing push to maintain the state’s position as a mobility leader while the auto industry transitions to electric vehicles.
To spur that transition, Whitmer wants to temporarily exempt the first $40,000 of the purchase price of new and used electric vehicles from the state’s 6 percent sales tax, which would cost the state about $48.4 million next fiscal year.
The proposal would save EV buyers up to $2,400 and “get more Michigan-made cars and trucks on the road,” Whitmer argued in her budget presentation.
The governor’s plan also includes $10 million for the state government to buy new electric vehicles, and another $45 million for grants to help local governments, airports and other agencies buy their own “climate-friendly” vehicles and convert existing fleets to zero-emissions.
Whitmer is also asking legislators for $65 million to build out EV charging stations, including fast chargers and residential units. And she wants $2 million to create a new “Arsenal of Innovation Fund” to support new defense industry related mobility projects.
Free student breakfasts and lunch: $160 million
Whitmer is recommending $160 million to cover costs for school breakfast and lunch for all 1.4 million K-12 students in Michigan, as well as an additional $1 million to forgive school meal debt.
Michigan covered the costs of any child under 18 at the height of the COVID-19 pandemic under a federal initiative, although some educators feared school lunch debt would be an issue for many families after that funding dried up.
“It’s nearly impossible for hungry kids to learn,” Whitmer told lawmakers.
The governor also asked for additional funding for school safety and mental health supports, including $318 million over two years for discretionary school safety spending, another $300 million over two years for mental health supports and an ongoing $4 million a year for other student mental health needs.
Whitmer wants the state to raise the base per pupil funding from $9,150 to $9,608 per student. Her administration also recommends a $900 million “rainy day fund” be created to set aside for school spending.
Drinking water improvements: $523 million
Whitmer wants $523 million for improving the state’s drinking water, including a $226 million investment to remove and replace 40,000 lead service pipe lines across the state over the next 10 years.
Another $122.5 million under the plan would go towards supporting water filter distribution and faucet and plumbing replacement in communities experiencing lead contamination in water.
The plan also includes $100 million to create an environmental justice cleanup fund for contaminated sites in historically disadvantaged communities.
Elsewhere in the budget, Whitmer seeks $40 million to “accelerate the deployment” of renewable energy, $25 million in one-time funding for dam removal and $31 million to create a groundwater data management system.
Whitmer also wants $350 million set aside to matching federal government infrastructure grants that could become available, “which will allow the state to act in a liberal fashion to be able to ensure that our state taxpayers see the federal resources deployed in our state,” said Harkins, the state budget official.
Another $200 million in the governor’s proposed budget would fund bridge building and repairs across the state, and $5 million to support broadband.
Business incentives: $500 million per year
Whitmer wants to provide a permanent funding mechanism for the Strategic Outreach and Attraction Reserve Fund, a business incentive program she credits with helping the state land “transformational” projects like General Motors expanding in Lansing, Ford ramping up EV production in metro Detroit and Hemlock Semiconductor investing in Saginaw County.
Whitmer wants to put $500 million into the fund each year the state generates more than $1.3 billion in corporate income tax revenue, including during the current fiscal year that runs through the end of September.
The proposal will face opposition from Republicans, who contend that annual deposits would eliminate legislative oversight that was built into the business incentive program when it was approved with bipartisan support in 2021.
House Minority Leader Matt Hall, R-Richland Township, voted to create the fund, but his office said Wednesday that Whitmer wants to make it an “an unaccountable slush fund to offer huge payments to a few large corporations.”
Hall instead is calling for a new research and development tax credit of up to $2 million to help businesses of any size “innovate” in Michigan. House Republicans are expected to introduce supporting legislation soon.
More free community college: $140 million
Whitmer wants to use $140 million in leftover federal stimulus funds to expand access to Michigan Reconnect, a state program that offers free community college or skilled trades training. Her proposal would allow Michiganders who lack a college degree and are over the age of 21 to qualify, up from the current minimum of 25 years old.
The governor’s is framing it as a temporary expansion to benefit people whose “education was disrupted” by the COVID-19 pandemic. The funding would be available through the end of 2026.
To further address pandemic disruptions, Whitmer wants to use another $75 million in federal funds from the American Rescue Plan Act to help recent high school graduates pay for traditional four-year college.
Under her proposal, young people who graduated between 2020 and 2022 but did not go to college could qualify for scholarships of $5,500 per year at one of Michigan’s 15 public universities or $4,000 at a private university.
Insulin manufacturing: $150 million
Whitmer wants $150 million to help Michigan start producing its own insulin in an attempt to drive down the cost of the critical medicine for people with diabetes.
Her proposal would task the Michigan Strategic Fund and partners with developing “low-cost interchangeable biosimilar insulin or other insulin products” and establishing a state-based manufacturing facility for producing the medicine.
The governor also wants $500,000 for the state government to research the health insurance market to “identify and assess opportunities to reduce consumer out-of-pocket costs for Insulin.”
Insulin prices in the U.S. are about 10 times higher than other countries, according to some studies, which can force people with diabetes to make difficult choices between paying for their medicine or other basic needs.
State park trips for kids: $4 million
Whitmer wants $8 million for state park support and $43 million for infrastructure improvements at Belle Isle State Park in Detroit.
Another $4 million would go toward a proposed new program to send every fourth-grade class in Michigan to a state park.
“We’re proposing a free field trip for every fourth grader, all 100,000 of them, to visit a state park and experience Pure Michigan firsthand,” Whitmer said Wednesday. “Let’s show them what makes Michigan so special and incorporate classroom lessons in the process.”