Whitmer, GOP leaders agree on patch to 2020 budget amid virus fallout

Lansing — Gov. Gretchen Whitmer and Republican legislative leaders announced a deal Monday that would patch what was expected to be a $3.2 billion shortfall in the current budget year with a combination of federal coronavirus relief funds, state savings and some reductions to schools, higher education and local governments. 

Whitmer, Senate Majority Leader Mike Shirkey and House Speaker Lee Chatfield also called on the federal government for more help, as a $3 billion shortfall looms for the 2021 fiscal year. 

"Our collective priority is a healthy state and a healthy economy," the trio said in a statement Monday. "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.” 

The budget deal solves the $2.2 billion shortfall that remained after the state had eked out roughly a billion dollars from federal Medicaid reimbursements and unspent money that would have otherwise been carried over into 2021. 

The deal has two major prongs: A little more than $900 million in federal Coronavirus Relief Funds, and $2.2 billion made up of the state's rainy day fund, spending freezes, layoffs and cuts to state aid for schools, universities and community colleges and local governments.

The $915 million in federal Coronavirus Relief Funds will work to lessen the sting of most of the state cuts enacted for schools, universities and local governments. The federal COVID-19 dollars must be used for coronavirus-specific expenses that were not already budgeted prior to the pandemic, but the funding still will help to mitigate much of the state aid cuts. 

From the $915 million in Coronavirus Relief Funds, $512 million will go to schools to pay for COVID-19-related responses, $53 million in hazard pay for teachers, $200 million to universities and community colleges for coronavirus-related expenses and $150 million for local governments' response to the virus.

The remaining $2.2 billion will be made up of $250 million from the state rainy day fund; $490 million through spending and hiring freezes and layoffs; $475 million through public safety costs now eligible for federal COVID-19 dollars, $256 million in state aid cuts to schools; $200 million in state aid decreases to universities and community colleges; $97 million in state aid cuts to local governments' and $340 million by utilizing other dollars through federal Medicaid match funds and coronavirus relief money. 

The Republican appropriations chairs in both the House and Senate expected the Legislature would vote to approve the 2020 allocations before the end of July. The Legislature is on a three-week break from session but still plans to hold some committee meetings.

The relief comes none too soon for schools across the state whose budget year, unlike the state, begins Wednesday. 

"Having some certainty that there will be no spending cut in fiscal year 2020 — which we're closing out in the next few hours — is obviously welcome news," said Peter Spadafore, deputy executive director for external relations for the Michigan Association of Superintendents and Administrators. 

"We’re still concerned about next year, but we’ll take it one step at a time." 

The state's universities on the same fiscal year budget beginning Wednesday were likewise relieved by the announcement, which brought "significant near-term clarity" on the "huge spectrum" of budget issues the institutions may need to overcome.

"In this moment of political polarization, I can’t think of an action that would have had a more profound impact on the state today than the budget agreement that was struck," said Daniel Hurley, CEO for the Michigan Association of State Universities.

Future budget challenges "will come, and we understand that’s another task at hand, but for the time being, this provides a lot of relief and some near-term certainty," he said.

Shirkey on Monday expressed a commitment to working with the House and governor to "craft a reasonable budget" for 2021, but he urged Congress to balance the needs created by the pandemic with "fiscal responsibility."

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

The governor and Legislature are expected to make adjustments to the fiscal year 2021 budget in August after state and legislative budget offices are able to incorporate delayed tax payments into a new estimate for the year. 

During a May Consensus Revenue Estimating Conference, budget leaders pegged the 2021 budget hole at $3 billion but agreed to an August meeting that could reconcile the ongoing cost of coronavirus response and the late tax payments for a better budget picture. 

Whitmer has expressed hope the federal government will be able to ameliorate some of the budget pinch the state is facing in 2021. But appropriations chairmen, Rep. Shane Hernandez, R-Port Huron, and Sen. Jim Stamas, R-Midland, planned to address the budget hole as if no help was coming. 

"We need to probably plan for the worst and hope for the best, which would be additional dollars from the federal government at this point," Stamas said. 

But both chairmen expressed hope that negotiations with the governor would go smoothly headed into planning discussions for the fiscal year 2021 budget.

The Legislature last year agreed to a July 1 deadline for submitting a budget to the governor, but the law cementing that deadline was undone in light of the challenges of the coronavirus pandemic. 

"We are at the table right now, and we’re willing to work together on it," Hernandez said. "We want this to be a collaborative approach.”