Governor and lawmakers announce plan to balance state's 2020 budget

LANSING – Democratic Gov. Gretchen Whitmer and the Republican-controlled Legislature reached an agreement Monday to balance the state 2020 budget after a sharp drop in state revenues resulting from the coronavirus pandemic.

The plan to balance the budget relies on a mixture of spending cuts, the use of close to $1 billion in federal coronavirus relief money, and use of $350 million from the state's Budget Stabilization Fund, better known as the Rainy Day Fund, which has a balance of more than $1 billion.

“COVID-19 has had an unprecedented impact on our state budget," Whitmer said in a joint statement with House Speaker Lee Chatfield, R-Levering, and Senate Majority Leader Mike Shirkey, R-Clarklake.

"In this time of crisis, it is our responsibility to come together and build a budget that reflects a bipartisan commitment to the things we value most as Michiganders. This agreement provides crucial funding for Michigan families, schools and communities grappling with costs incurred as a result of the virus."

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The leaders said the budget includes reductions in state aid to schools and local governments, but that those cuts would be largely offset by allocation of federal relief dollars.

Part of the agreement appears to be built on flexibility — greater than initially anticipated — in the use of the just over $3 billion in Coronavirus Relief Fund money Michigan was allocated under the CARES (Coronavirus Aid, Relief, and Economic Security) Act approved by Congress.

Concerns remain for the 2021 budget year, which starts Oct. 1.

"Our collective priority is a healthy state and a healthy economy," the leaders said. "We are committed to working together to address the remaining shortfalls in next year’s budget and we are looking to our partners in Congress for support to help maintain the essential services relied upon by our families and small businesses.” 

Prior to the agreement, the state was facing a shortfall of more than $2 billion for the 2020 fiscal year that ends Sept. 30. The budget gap was projected to grow to close to $6 billion when the 2021 fiscal year is included.

Other items in the budget plan include:

• $490 million in state budget savings from a freeze on hiring and promotions, as well as other cuts to discretionary spending.
• The use of $475 million in federal coronavirus relief money to cover public safety costs.
• $256 million in state aid reduction to schools and $200 million in reductions to colleges and universities. Those cuts are partly offset by $512 million in federal funding for schools and $200 million in federal coronavirus funding for colleges and universities, though all schools are facing costs related to COVID-19 they would not have faced without the pandemic.
• $97 million in state aid reductions to local governments, also offset by major infusions of federal coronavirus relief cash.

Sandy Baruah, president and CEO of the Detroit Regional Chamber, said Whitmer and legislative leaders "proactively and collaboratively" came together to address an unprecedented budget crisis.

"The business community stands ready to help advocate for Michigan's fair share of federal support in forthcoming aid to state and local governments," Baruah said.

Robert McCann, executive director of the Tri-County Alliance for Public Education in southeast Michigan, said he welcomes the willingness of state officials to put aside differences and call on the federal government for more help.

"We appreciate the commitment of resources and we are hopeful, as details develop, that there will be clarity on how these funds will be distributed and assurances that there will be flexibility in how it can be spent so it can go where it is needed most," McCann said.

Looking to 2021, Shirkey urged caution along with the call for more federal help.

"As Congress contemplates further assistance to states, our caucus encourages them to balance fiscal responsibility with the realities of unprecedented challenges related to this insidious virus," Shirkey said.

"We must resist the urge to default to debt and call it a plan. The immediate needs of our country are very real. Restraint on spending will be difficult in the face of these needs, but absolutely necessary."

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.  Read more on Michigan politics and sign up for our elections newsletter.