Updates About Budget

The Michigan State House and Senate approproations subcommittees have issued their respective budget recommendations for the upcoming fiscal year beginning on October 1.

The Senate’s Department of Health and Human Services (DHHS) budget closely aligns with the governor’s proposal in overall funding levels but includes some notable differences. Notable changes include adjustments to funding for the Temporary Assistance for Needy Families (TANF) program, Medicaid reimbursement rates, juvenile justice programs, and various one-time funding items and new programs. Additionally, the Senate introduced boilerplate language aimed at safeguarding the privacy of individuals seeking abortion services in Michigan from out-of-state investigations. The Senate’s proposed budget stands at $37.71 billion (with $6.68 billion allocated from the General Fund), coming in $110 million higher than the Governor’s proposed $37.6 billion budget for DHHS.

On the other hand, the House’s DHHS budget introduces its own modifications to the Governor’s proposal. Notably, the House subcommittee opted to allocate $53.4 million from opioid settlement funds toward opioid recovery and addiction care services. The House also proposed various adjustments to Medicaid reimbursement rates, foster care administration rates, and funding for behavioral health initiatives. Additionally, the House prioritized several one-time projects, including investments in public health initiatives, behavioral health programs, and community violence prevention. The House’s proposed budget amounts to $35.9 billion (with $6.6 billion allocated from the General Fund). Their total budget for DHHS is $1.81 billion less than the Governor’s DHHS budget proposal.

Overall, both the Senate and House Budget Recommendations exhibit nuanced differences from the governor’s proposal, reflecting varying priorities and approaches in addressing key areas such as healthcare, social services, and public health initiatives. While the Senate budget came in slightly higher than the executive budget allocation for DHHS, the House proposal is significantly lower. Updated revenues for Fiscal Year 2025 will be presented on May 17 at the next Consensus Revenue Estimating Conference.

This week, the Michigan State Legislature voted on and approved a state budget for Fiscal Year 2024 which begins on October 1, 2023. This budget was months in the making with negotiations culminating between the Governor’s office and Senate and House leadership over the past several weeks. This, coupled with the May Consensus Revenue Estimating Conference’s assessment that state revenues are trending down, meant many of the budget priorities of the House and Senate were negotiated down in total spending, thus bringing the budget for the Fiscal Year 2024 to $81.66 billion.

Both the omnibus and school aid budget received bi-partisan support as increases were made in education, revenue sharing, and behavioral health needs, as well as funding set aside for the state’s rainy day fund and school aid savings account. More than $800 million was spent on projects throughout Michigan that include grant funding for healthcare projects, housing, public infrastructure, and workforce development. To ensure transparency over these projects, the legislature included new boilerplate language requiring state departments to post on a website the requirements of the grants and the grant legislative sponsor.

$91.1 million was appropriated for healthcare grants, $40 million for housing grants, and $234 million for public infrastructure grants. $176 million was allocated for public safety grants and $35 million for workforce development grants.

The Michigan Department of Health and Human Services had the largest departmental budget, setting a record at $33.4 billion. The department’s spending increases are attributed to rising Medicaid caseloads and actuarial soundness funding for pre-paid inpatient health plans to administer Medicaid coverage. Behavioral health programs received a large funding increase in the FY 24 budget with nearly $66 million of the state’s general fund being allocated to help with the mental health crisis.

Both the House and Senate wrapped up voting before 11 p.m. by adopting Senate Concurrent Resolution 9, which prescribes the legislative agenda for the summer as members will begin their in-district period. Per SCR 9, we can expect the House and Senate to return to Lansing July 18 – 20 and August 22 – 24. The legislature will return to a more normal legislative schedule beginning on September 5.

All budget materials for Fiscal Year 2024 can be found here.

On May 19, 2023, state economic leaders gathered together for Michigan’s May Consensus Revenue Estimating Conference (CREC). The CREC takes place in January and May every year to discuss independent economic and revenue forecasts that inform decisions made around the state budget.

The overall assessment from Friday’s CREC is that state revenues are trending down, with an estimated decline in state general fund dollars of $989 million for FY 2023 and $1.85 billion for FY 2024. Economists at the CREC stated that this decline is due to slowing economic growth, reductions in the individual tax rate, and timing issues associated with the 2021 adoption of a flow-through entity tax. CREC leaders also cited the impact of tax cuts adopted in 2023 and a shift in consumer behavior to purchasing more services, which are not subject to tax, as also contributing to the state’s revenue decline.

These forecasts provide the foundation for legislators and the Executive Branch to finalize the state’s FY 24 budget. We expect budget target discussions to begin as early as this week and final budget negotiations to continue into June.