New Fiscal Year Begins, Uncertainty Abounds
The new budget year in Michigan started on October 1, and while Governor Gretchen Whitmer signed budget bills sent to her desk by the Republican Legislature in time for the new state budget year to begin without a government shutdown, she utilized her line-item veto authority to eliminate 147 projects and/or programs throughout the budget, totaling $947 million in cuts. While Governors regularly utilize line-item veto authority in Michigan, the size and scope of the vetoes issued by Governor Whitmer are unprecedented in recent history. Many of the vetoes have garnered significant media attention that is likely to continue as the impact of the various cuts become a bit more “real” going forward.
In addition to issuing those vetoes, the Governor immediately on October 1 convened the State Administrative Board (SAB), comprised of the Governor, Lt. Governor Garlin Gilchrist, members of the Governor’s Cabinet, Attorney General Dana Nessel and Secretary of State Jocelyn Benson, to reallocate $625 million in spending within 13 state departments, a rare exercise of executive branch authority that has not been utilized since the Engler Administration in the early 90s and frankly has never been utilized to such a degree. The SAB usually functions in somewhat of a procedural role approving various state contracts, with the aforementioned officials sending designees to meetings rather than attending in person. In this instance, the SAB redirected money within various state Departments, cutting some programs and increasing funding to others contrary to what was included in the individual Departmental budgets passed by the Legislature.
The Governor has repeatedly characterized the budget the Legislature sent to her desk as “a mess” and “fatally flawed”, noting that the budgets did not represent a negotiated product. In turn, Republicans in the Legislature have criticized the Governor’s vetoes and strongly condemned the administrative actions the Governor took with the SAB. Legislative leadership has declared the budget process complete at this time, arguing that they funded the various programs vetoed by the Governor and stating their intention to move on to various policy issues going forward.
Both sides have since introduced supplemental appropriations bills that would restore various items either vetoed in the budget or that were proposed by the Governor but not included in the budget, but while the sides have engaged in preliminary discussions, no bills have moved to date. The Governor has signaled a willingness to negotiate over various budgetary items, but both House Speaker Lee Chatfield and Senate Majority Leader Mike Shirkey have stated they are hesitant to sign off on sending the Governor any legislation allowing additional state spending on any programs without assurances that funding will go where the Legislature intends it to go.
So what does this all mean for our industry? The Legislature has begun to hold hearings on various policy items, including some of the transportation reforms noted last month. However, while uncertainty is abundant with respect to the state budget, fallout from how the budget ultimately came together will certainly have a lasting impact how both sides work on policy items moving forward as well.