Michigan school aid gets boost as lawmakers address $2.2B deficit

Lansing — Relying heavily on federal COVID-19 relief funds and the state's "rainy day" cash reserve, Michigan lawmakers began authorizing Wednesday a plan to patch a $2.2 billion budget hole while boosting funding for schools trying to cope with the pandemic.

The plan uses the vast majority of what remains from more than $3 billion in federal relief dollars provided so far to the state. It also sets aside $53 million in hazard pay for teachers and provides a net increase of $136 million for the K-12 budget.

However, much of the new money going to schools will have to be spent on COVID-19 response efforts.

"I think schools getting more money is merited just because of the changes they had to go through," said Rep. Aaron Miller, R-Sturgis, the top House lawmaker on the K-12 budget.

During a joint meeting of the House and Senate appropriations committees, lawmakers began signing off on the plan Wednesday morning. They approved an executive order from Gov. Gretchen Whitmer that would trim $666 million from the state's current budget that concludes at the end of September.

The reduction order largely relies on cuts in discretionary spending, savings from temporary layoff days and hiring freezes and shifts to federal relief dollars. No permanent layoffs of state workers are part of the plan, said Kurt Weiss, spokesman for the State Budget Office.

The Senate Appropriations Committee approved the order, which reduces about $620 million in state General Fund dollars, in a 15-1 vote. Sen. Jeff Irwin, D-Ann Arbor, was the only no vote.

The executive order is part of a five-part plan to tackle the $2.2 billion shortfall spurred by the COVID-19 pandemic. The plan includes two supplemental spending bills, lapsing state work project dollars and subsequent transfers within the budget, lawmakers said.

The full Senate approved Wednesday the two supplemental spending bills in 36-1 votes. Irwin was the lone no vote, arguing that the plan "forestalls the inevitable hard decisions" while making the state's next budget more difficult.

The House is expected to consider the bills Wednesday evening.

To fill the current budget's hole, lawmakers in the GOP-controlled Legislature and members of the Democratic Whitmer administration previously said they would use about $915 million in relief dollars from the federal government. The plan includes about $350 million from the state's rainy day savings fund and about $1 billion in cuts, Senate Appropriations Chairman Jim Stamas, R-Midland, has said.

When it comes to schools, community colleges and universities, lawmakers and Whitmer are using about $712 million in federal relief funds that effectively fill shortfalls in state revenue.

The budgets for communities colleges and public universities aren't experiencing cuts because of the federal support, while the budget that funds K-12 schools is seeing an $136 million overall increase because of the federal aid, the rainy day fund money and an increased General Fund support.

The cuts reduce funding for schools by $175 per pupil, but the federal relief increases it $350 per pupil, according to a House Fiscal Agency analysis. The net increase would be $175 per pupil.

Weiss, spokesman for the State Budget Office, said the spending reflected the fact that Whitmer and lawmakers made schools a "main priority."

Another bill in the plan directs $53 million in federal dollars to making $500 payments to eligible K-12 classroom teachers "who teach in a public school or nonprofit nonpublic school," according to a Senate Fiscal Agency analysis.

Lawmakers on both sides of the aisle touted their work Wednesday on the plan, which used savings from temporary state layoffs and a state hiring freeze. Multiple lawmakers said the plan protected funding for schools and public safety.

Similar to the schools, one of the supplemental spending bills reduces revenue sharing payments to cities, villages, townships and counties by $96.5 million while providing $150 million in federal relief dollars for payments to the local governments.

"Getting these dollars out to them, I think, is vital," Stamas said of schools and local governments.

State Budget Director Chris Kolb called it a "negotiated agreement."

The plan leaves about $836 million in the state's rainy day fund.

Among the cuts are $720,000 through a one-time salary reduction within Attorney General Dana Nessel's office, $2 million in discretionary spending within the Department of Corrections and $4.8 million in environmental public health response activities within the Department of Health and Human Services.

"Activities in these programs have slowed due to the pandemic," an analysis from the House Fiscal Agency said.

The new plan also trims about $368 million in General Fund support for the Michigan Department of Corrections and $107 million in General Fund support for Michigan State Police. But it shifts federal relief dollars to the departments to effectively keep them whole.

Only about $94 million of the more than $3 billion in federal COVID-19 relief dollars provided to the state remain after the new allocations, according to state budget officials.

But Stamas said the state needed to spend the relief dollars by the end of year.

"The problems that we have are in front of us right now," said Sen. Curt Hertel of East Lansing, the top Democrat on the Senate Appropriations Committee. "Holding these dollars doesn’t help anybody.”

State officials originally pegged the budget shortfall for this year at about $3.2 billion. But officials have used roughly a billion dollars from federal Medicaid reimbursements and unspent money that would have otherwise been carried over into 2021. 

Budget leaders are estimating the 2021 budget hole at $3 billion. Lawmakers will next begin working on tackling that shortfall.

"There is a whole set of challenges ahead of us for the next fiscal year,” said House Appropriations Minority Vice Chairman Jon Hoadley, D-Kalamazoo.

cmauger@detroitnews.com

Staff Writer Beth LeBlanc contributed.