Gov. Whitmer signed the 2024-25 Fiscal Year budget last week
On Wednesday, July 24, 2024, Governor Whitmer signed the 2024-25 Fiscal Year (FY) budget. This comes after a marathon 19-hour session at the State Capitol in June where the legislative majorities and Governor crafted and negotiated an $82.5 billion budget amongst themselves. This budget represents an increase of 45% compared to the last budget signed by Governor Snyder in 2018.
NFIB opposed this budget as a whole citing grave concerns about the unsustainable amount of government spending in the proposed budget. While the increase in spending was not as stark as last year’s spending (for more information, click HERE), the budget passed by the legislative majorities represents an increase in both program spending and in state government itself.
Most of Michigan’s money comes from sales taxes, income taxes (4.35%), and federal funding. NFIB reminded lawmakers about the challenges faced by small business owners and that the money used in the state budget is money from individuals and businesses and should be used wisely. NFIB’s letter of opposition included:
“In response to inflation, inability to find workers, rising energy costs, and increased uncertainty about the economic and regulatory climate, small business owners are doing what government should be – making sure that how they are operating is as streamlined and efficient as possible. And make no mistake, NFIB members know that if there is a downturn in the economy, tax increases will be needed to maintain the current spending levels, creating more costs and worries for small business.”
Last year, the current Democratic Trifecta had the opportunity to allow an income tax cut to remain permanent (read more HERE). Instead of paying down retirement liabilities or putting money in the rainy-day fund as the previous administration did, the legislative majorities have chosen to continue their spending spree. These new programs are in addition to those passed last year that cost billions of dollars in ongoing costs, including handouts to large corporations and tax cuts to retired state employees, Here are just a few of the expenditures in the new FY 24-25 budget:
- $30 Million for electric vehicle charging stations
- Scrapping transparency metrics for departments
- $3 Million for a solar array
- $20 million for a new park by the capitol complex
- $3 million to start a new retirement fund called Secure Retirement for Small Businesses for employers with under 100 employees
- $60 million for a new fund aimed at bringing start-ups to Michigan
- 10 new employees for the newly created Community and Worker Transition Office with an extra $2.5 million to help with starting the office
- $360 Million in community enhancement grants
- 31 new employees to administer the recently passed “clean energy” mandate legislation as well as $5.8 million
NFIB continues to fight against overspending and expansion of government through misguided or unnecessary policies and programs. Learn more details about the Michigan FY 24-25 budget HERE.
State Budget Basics
The state fiscal year starts on October 1 of each year and ends on September 30 of the next. Under the Michigan constitution, the budget must be balanced and in effect by 12:01 a.m. on October 1 or the government will shut down. Traditionally, building the state budget has been a months-long and tedious process in order to prioritize and fund the hundreds of programs and line items that receive funding from the state.
The budget includes several billion dollars of ‘pass through’ funding which is money given to the state by the federal government for a specific purpose, eg: money to expand broadband to rural areas. The federal government also provides matching dollars for specific programs like Medicaid and transportation funding. These are included in the state budget because the state implements and disperses the money and will have restrictions on how it can be used.
Several programs have dedicated funding sources. For example, vehicle registration fees go directly toward road funding, lottery proceeds go toward education, and the tobacco excise tax goes toward medical related funds. The “general fund” is unrestricted money that can be used at the discretion of the legislature to fund departments, increase or create new programs, and fund one time “pet projects”.
Michigan passes two budgets: the general fund and the School Aid Fund. It is important to note the distinction between the two budgets. The general fund is Michigan’s primary operating fund and it’s estimated that around 85% of the budget is spent on health and human services, public safety, education, and debt. Michigan spends the remaining 15% of its general fund on 13 state departments, the judiciary, the legislature, and the executive office.
The School Aid Fund supports K-12 schools, intermediate school districts, and some postsecondary education. Michigan spends about 95% of its School Aid Fund on K-12 schools and 5% of its budget is spent on community colleges and universities.
