- Michigan’s new budget is actually $86 billion, despite claims it reduced spending, according to new analysis
- Citizens Research Council also identified a budget shortfall that the Whitmer administration says is already being plugged
- That deal involves draining remaining funds in the controversial SOAR state subsidy fund.
LANSING — Michigan’s new state budget is larger than it appears, according to a new analysis that claims the spending plan signed by Gov. Gretchen Whitmer is also out of balance by at least $600 million.
The nonpartisan Citizens Research Council of Michigan contends state lawmakers shifted large sums of money “with the apparent intent of making this year’s budget appear smaller than last year’s,” making it challenging to assess the true size.
But the budget likely authorizes $86.4 billion in spending, not the $75.2 billion it adds up to “on paper.” That’s also larger than the $84 billion that Bridge Michigan initially reported.
Much of that difference is attributable to about $9 billion in Medicaid provider taxes, which the state collects but was shifted from a line-item to “boilerplate” language in the state budget the past two years.
The new budget also anticipates getting $418 million in federal school funding but would still allow the state to spend more than $2 billion, should it receive similar amounts of funding as last year, according to the report.
But beyond that, the budget also appears to overspend expected revenues by between $600 million and $900 million, said Bob Schneider, a senior research associate for the council who previously worked as associate director for the Michigan House Fiscal Agency.
And that would be a violation of the Michigan Constitution, which requires a balanced budget, so officials must take additional steps to balance it, Schneider told reporters Wednesday morning.
“Our assumption is, there’s some kind of framework for addressing this (shortfall) in the budget … but the key is, we don’t know yet,” he said.
And that seems to be the case, according to the Whitmer administration.
A State Budget Office spokesperson told Bridge that officials have agreed to use uncommitted funding from the Strategic Outreach and Attraction Reserve (SOAR) fund, along with a COVID-19 contingency fund, to smooth out the budget.
“Any implications that the budget is not balanced are simply false,” said the spokesperson, Cole Pachucki. He added: “Michigan law requires a balanced budget, and Governor Whitmer has signed a balanced budget every year of this administration — including this one.”
Say goodbye to SOAR
That “framework” deal to balance the budget involves lapsing $449,200,199 from the SOAR Fund and $97,544,038 in COVID contingency funding from the Michigan State Police, Pachucki said. That’s a total of $546 million.
“These lapses are not reflected in the enacted budget documents,” he added. “They’re accounting treatments applied administratively, not itemized appropriations.”
House Speaker Matt Hall, R-Richland Township, seemed to confirm as much on social media Wednesday.
As part of an agreement to pass the state budget, Hall said the state was “finally defunding and draining the governor’s ‘SOAR’ fund … We’re also taking money back from the COVID-19 slush fund that shouldn’t exist.”
The move is expected to come by way of an administrative order.
Schneider, who in his call with reporters identified lapsing SOAR as a way to address the shortfall, acknowledged that moving money from the fund “could be sufficient when added to other strategies like redirected State Fiscal Recovery Fund COVID dollars to close the gap.”
“But the budget doesn’t provide any direction on that,” he added. “We hope policymakers will release additional financial details to show the assumptions and strategies being employed to ensure the budget is fully balanced.”
Size matters
Michigan lawmakers passed a compromise budget to fund the state government and schools for the next fiscal year on July 3 after a nearly 24-hour session.
Republicans have championed it as a plan that reduces total state spending.
“We made better use of the money state government already has so we could pass a balanced budget smaller than last year and give taxpayers better value for their dollars,” Hall said Wednesday on social media.
But disagreements on the total value of the spending plan emerged almost immediately after lawmakers approved it, as media outlets like Bridge reported that lawmakers had again shifted more than $9 billion in Medicaid provider taxes. CRC identified additional shifts.
Budgets aren’t always a perfect measure of the true size of government, but the large shifts in the new budget “create extra problems for anyone interested in monitoring the size of state government spending,” according to the CRC report.
The group previously used historical budget totals to document the massive COVID-era spike in state spending, for instance, which is “important information for both the public and policymakers to understand.”
That kind of comparison would be more difficult now.
“We encourage the new governor and legislature seated in 2027 to stop this practice in future budgets,” the authors wrote.
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