(The Center Square) – Gov. Gretchen Whitmer agreed with Republican leaders Monday to fill a $2.2 billion budget hole for fiscal year 2020 using money from the Coronavirus Relief Fund (CRF), reduced government spending, and rainy day funds.
Most lost revenue stems from the COVID-19 pandemic or lost tax revenue from government-mandated shutdowns to curb the virus’ spread.
The budget agreement cuts state aid to K-12 schools, universities and colleges but backfills those cuts with federal funding to compensate for unexpected costs associated with COVID-19.
Whitmer, Senate Majority Leader Mike Shirkey, R- Clarklake, and House Speaker Lee Chatfield, R- Levering, also asked the federal government for additional aid.
"Our collective priority is a healthy state and a healthy economy,” they said in a statement. “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.”
Over $900 million of CRF dollars will soften the blow of budget cuts. That total is comprised of $512 million for schools, $53 million of hazard pay for teachers, $200 million for universities and community colleges, and $150 million for local governments.
Federal money can only be spent on COVID-19-related expenses that weren’t originally budgeted.
The $2.2 billion shortfall is partly bridged by cashing out $350 million from the rainy day fund, $490 million in savings from a freeze on state hiring, discretionary spending, and layoffs, and $475 million from public safety costs covered by federal money.
The rest is patched by a $256 million reduction in K-12 school aid, a $200 million reduction to universities and community colleges, a $97 million reduction to local governments, and $340 million in savings to continue enhanced federal Medicaid matching funds.
Shirkey said his caucus is committed to working with Whitmer and the House “to craft a reasonable budget” for fiscal year 2021 but encourages Congress “to balance fiscal responsibility with the realities of unprecedented challenges related to this insidious virus.”
“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 state faces another $3 billion budget deficit for fiscal year 2021, which should be more accurately estimated after a summer revenue estimating conference accounts for delayed taxes.
Whitmer has repeatedly asked for federal help to cover budget deficits, but Appropriations Committee Chair Rep. Shane Hernandez, R-Port Huron, said he won’t rely on that possibility.
“We are not sitting back and waiting for the federal government to bail out state governments with an additional new spending plan – because that isn’t a plan at all,” Hernandez said in a statement. “We instead are working with resources that already are available, while also making tough decisions that are necessary in unprecedented times like these.”
Hernandez acknowledged difficult decisions in the future but said he “will fight to protect funding for K-12 students and their schools, as well as the local governments that provide invaluable services to our communities.”
President and CEO of the Detroit Regional Chamber Sandy K. Baruah called the deal “positive news.”
“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 in a statement.