Good news and bad news on the Michigan budget

The 2022-2023 budget that recently passed the House and Senate showed restraint on spending after state taxes produced unanticipated record revenue. The  Legislature did not spend all the extra unexpected revenue it had at its disposable. That’s the good news.

The bad news: Spending is high, unsustainably so.

The increased spending “exceeds the rate of spending increases prescribed in The Mackinac Center’s Sustainable Michigan Budget plan, which would set a maximum limit on what lawmakers can spend, based on changes in population and inflation,” according to James Hohman, fiscal policy director at the Mackinac Center for Public Policy.

If lawmakers had used the sustainable budget tool, spending would only have increased the state budget by 3.15%, rather than 5x that.

The current year budget has $38.3 billion in state spending. That will increase to $44.2 billion in the 2022-2023 fiscal year, a 15% increase. With federal dollars included, the total budget is $75.8 billion. That's actually a $3.4 billion decrease from this year, due to the expiration of COVID money given to the state. 

There is $7 billion left over that lawmakers did not spend. 

Hohman notes that Michigan government is constitutionally required to balance the budget and not go into debt. He says that budget growth should be limited and that people should be concerned about the state’s budget growing beyond residents' ability to pay.

“The limit I recommend is to keep the growth of the budget below the rates of growth of the state population, plus the inflation rate,” Hohman said. “In other words, if the population grows by 1% and inflation grows by 2%, the state budget shouldn’t grow by more than 3%.”

Gov. Gretchen Whitmer signed the education budget, however, it is unclear if she plans to veto portions of the overall budget.