$83B state budget heads to Whitmer’s desk after all-night session

Michigan House Appropriations Committee Chair Rep. Angela Witwer speaks in support of lawmakers’ state budget for the 2025 fiscal year on June 27, 2024. | Anna Liz Nichols

The Michigan Legislature worked all day Wednesday and into the early morning on Thursday in order to finalize an $82.5 billion budget for Fiscal Year 2025, which starts Oct. 1.

The 19-hour marathon session began with conference committees on Wednesday in both the House and Senate gaveling in and then promptly standing at ease as Democrats, who hold the majority in both chambers, continued to work through differences in each plan before they could be sent to the floor for votes. 

Gov. Gretchen Whitmer at the Mackinac Policy Conference May 29, 2024 | Anna Liz Nichols

Gov. Gretchen Whitmer said the budget made record investments that will benefit all Michiganders without an increase in taxes. 

“This budget will grow our economy, fix the damn roads, ensure first responders have the funding to keep our neighborhoods safe, and build a heck of a lot more affordable housing, while also bringing down costs and putting more money back in people’s pockets,” said Whitmer in a statement. “As a parent, I know our kids are our number one priority, which is why this budget puts students first by making historic investments to improve learning outcomes from pre-K through college, so that every child can get a world-class education.” 

The two omnibus bills that make up the state’s budget: House Bill 5507 is the $23.4 billion K-12 budget, which was the subject of most of the debate, and Senate Bill 747, which covers the remainder of the state’s departments and agencies at $59.1 billion. After negotiating through the night, the conference committees finally reported out both bills early Thursday, sending them for final votes in the House and Senate, which came just before 5 a.m.

Lawmakers gave themselves an informal July 1 deadline to complete the state’s spending plan, although there’s no penalty if they fail to hit that mark. However, there was pressure to complete work on the budget as the Legislature was slated to take its usual recess for the summer. That’s of particular importance to House members, as all 110 seats are on the ballot this year. 

A major procedural standoff was avoided, as enough Senate Republicans voted to give both budgets immediate effect (I.E.) — which is necessary to ensure that the budgets are in place at the start of the Oct. 1 fiscal year. During a panel last month at the Mackinac Policy Conference, Senate Minority Leader Aric Nesbitt (R-Porter Twp.) didn’t commit to his caucus providing I.E. votes, which caused some additional consternation during budget negotiations.

Although Democrats control both chambers, a two-thirds majority is required to give bills immediate effect. While the House has an informal, voice-vote process, the Senate does record roll-call votes — which gives the minority some leverage. But during the wee hours of Senate session on Thursday, both budgets garnered enough I.E. votes, ending the suspense.

The major policy sticking point was the approach to funding the state’s public schools. 

When Whitmer in February rolled out her $80.7 billion blueprint, it included free preschool and community college as centerpiece proposals, with plans to pay for it with $670 million her administration said had been freed up by the early payoff of certain liabilities to the Michigan Public School Employees’ Retirement System (MPSERS). 

Amid negotiations between legislative leaders and the governor, those additional dollars were instead reallocated into the K-12 budget through legislation that allowed districts and some teachers to avoid paying in a 3% contribution to the fund, saving districts $598 million in payroll costs. Because of those savings, next year’s budget includes no increase in the per-pupil allowance, the first time in about a decade it has remained the same. It sits at $9,608 per student, as it did in the current budget.

When asked why the Legislature took 19 hours to clear the $83 billion budget for 2025, Senate Appropriations Chair Sarah Anthony (D-Lansing) told reporters after the votes on Thursday morning that there was a lot to talk about between Republicans and Democrats.

“A lot of conversations took a long time. Many of the conversations we were having with our Republican colleagues who, for whatever reasons, wanted to continue to have lengthy conversations and negotiations,” Anthony said. “Sometimes it takes a long time to get to a good product, but what I’ll say is, I don’t like to do things fast. I like to do them right. And as you can see, we were able to get bipartisan support. So however long it took, it needed to be done.”

But despite those hours, many Republicans in both chambers expressed their disappointment over Democratic leadership’s decisions in the state budget, prominently the decisions to not increase per-pupil funding for the first time in a decade and to redirect about $670 million from the state’s teacher retirement system to provide funding in schools.

“I nor any of my colleagues can vote in support of this budget, nor can we fail to speak up because we so fundamentally disagree with the direction that will take our state,” said Rep. Sarah Lightner (R-Springport Twp.). 

“As Michiganders feel the squeeze of inflation, weare considering spending tens of millions of their tax dollars on wasteful pet projects, and redirecting critical funding away from where it’s needed most. It is indecent of us to play with their money like Monopoly, all because a presidential hopeful wants to make headlines,” she continued in a clear reference to Gov. Whitmer.

At that point, Lightner was gaveled down by House Speaker Pro Tem Laurie Pohutsky (D-Livonia) who admonished her to “quit impugning people who aren’t even in the chamber.”

Lightner then continued.

“Our constituents deserve a state budget that represents their interests and puts their priorities first. When we fail to accomplish this task we kick the can down the road for the next generations to deal with. It’s not only irresponsible, but it’s morally wrong,” she said.

Democrats, however, focused on what they see as a “fiscally responsible” state budget, that makes critical investments that have been long overdue.

“Our investment in public safety is robust and comprehensive, reflecting our values and priorities,” said Rep. John Fitgerald (D-Wyoming). “First, we are increasing funding for the Michigan State Police by 6.8%, with an additional $58 million dedicated to their crucial work. This includes $5.5 million to support the training and integration of 50 new troopers graduating from our recruit school this fiscal year. These funds will ensure our officers have the resources they need from fleet leasing to IT support, making sure they are well prepared to protect and serve our communities.”

Fitzgerald also noted a $10 million deposit into the disaster and emergency contingency fund which provides state matches for federal funding and supports response and recovery efforts in the event of disasters or emergencies. Another $1 million was also directed to cold case investigations, including partnerships with Western Michigan University and Northern Michigan University.

But the school funding portion remains an issue, as the Senate did not pass its version of the MSPERS bill, which would make the cost savings to districts a long-term guarantee, as opposed to just one year as it stands now. Democratic leaders acknowledged there was still work to be done.

“I think it’s still a work in progress for us,” said House Speaker Joe Tate (D-Detroit) after the votes. “That’s something that we’re going to continue to work through and work on. And our goal is to make sure that we’re going to focus on finding a solution around MPSERS and that there’s going to be ongoing conversations.”

Republicans in both the House and Senate have argued for months that diverting those funds is a “raid” on the teacher’s benefits plan, as pension liabilities remain underfunded by approximately $29.9 billion and should be paid down in part by the excess payments for the retirement portion.

“The budget before us makes history in all the wrong ways,” said Sen. Lana Theis (R-Brighton). “For the first time in over a decade, Democrats are veering Michigan off a fiscally responsible course of paying off debt we owe to our retired teachers. If you vote for this bill, you’re willing to bet there is $670 million in the pension fund, a fund that is still $30 billion in debt. This is like celebrating paying off credit by going on a shopping spree when you still have six other credit cards fully maxed out. It’s irresponsible and it’s reckless.”

Democrats counter that the money being saved would help students now by being reinvested in the K-12 budget and that the payoff of the teacher’s retirement and pension liabilities would remain in 2038 as planned. Although exactly how to use those funds towards the education budget saw different approaches from each chamber, which had to be ironed out through the day and night Wednesday, as well as on Thursday morning.

Advance Editor Susan J. Demas contributed to this story.

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