(Note: The author wishes to
acknowledge the exceptional work done by the
Gongwer Michigan Report in describing the
details of the state budget. Gongwer is a subscription‑only daily newsletter
that covers state government, and its reporting on H.B. 4831 was invaluable in
assembling this overview.)
The fiscal 2006 state budget
proposed by Republicans in the House of Representatives departs from past
practice by placing all state spending in just three appropriations bills. One
bill includes the policy portions of the public elementary and secondary school
budget, and a second contains capital outlays for government buildings and
The third bill,
House Bill 4831, contains virtually everything else on which the state
spends money. Eighty percent of this spending goes to the departments of
community health (Medicaid), social services (welfare), corrections (prisons),
and higher education (community colleges and four-year state universities). The
house passed this bill on June 9, 2005.
All told, the three House
budgets authorize $39.7 billion in gross spending — about the same as the
current year, and approximately $800 million less than recommended by Gov.
Jennifer Granholm. To hold overall spending at this level, the House budget
proposes many changes in current policy to offset cost pressures due to general
inflation, increases in health care costs and expanded demand for government
assistance brought about by Michigan’s poor economy and high unemployment. Among
the changes are, cutting 15,000 current recipients from state welfare rolls,
eliminating Medicaid eligibility for 43,000 current beneficiaries, requiring
co-pays for other Medicaid recipients, closing two Upper Peninsula prisons and
cutting funding for Northern Michigan University and Wayne State University.
Gov. Granholm, in contrast, has
recommended paying for higher spending levels through revenue increases, such as
escalated liquor taxes, taxes on vending machine food sales, and a new tax on
doctors (which would also generate higher federal Medicaid reimbursements). The
House budget contains none of these revenue increases, but does generate new
funding from the proposed Medicaid copays and premiums.
Here are some highlights of the
House budget bills from the major spending categories:
Medicaid would no longer cover low-income 19- and 20-year-olds, the "caretaker
relatives" of eligible children and a group of adults who are not quite poor
enough to qualify for Medicaid without a special waiver. This change would
remove some 43,000 individuals from Medicaid, which currently provides health
benefits to some 1.4 million uninsured, low-income Michigan residents.
In addition, adults who are not
disabled, not elderly and not mentally ill would pay a $5 monthly premium for
Medicaid, as well as a $3 copay for each physician office visit. Monthly
premiums would rise from $5 to $10 for the "MIChild" program, which extends
Medicaid coverage to the children of working families that lack
employer-sponsored health insurance.
The budget would not fund any
administrative expenses at the Wayne County mental health system that exceed 3
percent of the system’s state aid. Reportedly the current amount is 7 percent,
and this change would save $20 million. Other savings include $400,000 from
cutting "multicultural health programs" for American Indians, Asian‑Americans
and Chinese‑Americans; $510,000 from eliminating the positions of state surgeon
general, drug czar and chief nurse executive; and $524,000 from eliminating a
program that teaches "parenting skills" to adults in "at-risk families."
The 1996 federal welfare reform ended federal aid for welfare recipients after
five years, but allowed states to use their own tax dollars to provide extended
assistance to those deemed to be doing all they could to find work. These
additional benefits would end under this budget, which reduces the maximum
lifetime welfare eligibility period to four years, removing 10,600 from the
rolls. The budget also cuts the maximum monthly welfare benefit by $50 to $409.
Currently, the state pays
welfare recipients a day-care subsidy. The subsidy paid to relatives of a child
is higher than the amount paid to nonrelatives. By reducing the former to same
level as the latter, the budget saves $37.9 million. In addition, the budget
eliminates funding for seven regional welfare offices, three of which are in
Two prisons in the Upper Peninsula, the
Newberry Correctional Facility and Camp Manistique, would close, saving $27.5
million. Supporters of the cut contend that Newberry has the highest daily cost
per prisoner of all prisons with comparable security levels. Opponents say that
the higher costs are due to the prison being the largest provider of high school
diploma equivalence degrees in the prison system. In addition, state
spending on prisoner vocational and academic education would be reduced by 52
percent, saving $17.1 million. Contrary to the wishes of Gov. Granholm, the
state would not end its lease with the
privately-owned Michigan Youth Correctional Facility in Baldwin.
This budget begins shifting state university funding closer to the amounts
dictated by a new funding formula proposed by House Republicans. This formula is
based on the university’s enrollment, research activities and number of degrees
granted. The two big losers would be Wayne State University and Northern
Michigan University, which would get 5 percent less than they currently do. All
other universities would get modest increases.
Other Budget Areas
The sections above describe some of the
more important policy changes contained in the 700-page House Bill 4831, which
is the largest of the three House budget bills. Other high profile changes
include the following:
The Michigan Economic Development Corporation would see cuts of $1 million from its administration overhead costs and $6.5 million from its "job creation services";
Arts and cultural institution grants would be cut by 12 percent, to $10.3 million;
An $8.2 million state subsidy for Amtrak would be cut by $1 million;
The entire $12 million annual state grant to the
Detroit "People Mover" would be eliminated.
As mentioned, one of the three
House budget bills contains state aid to public schools. However, the "omnibus"
H.B. 4831 contains basic school operations funding, including the $175 increase
in per-pupil foundation grants proposed by Gov. Jennifer Granholm. The minimum
per-pupil grant has been $6,700 for the past three years. The average grant is
Some Democrats contend that the
school aid increase was placed in H.B. 4831 for political reasons, in order to
make it more difficult for their members to vote "no" on the welfare and
Medicaid cuts. Republicans deny this, but have not publicly provided a different
The House budget contains
literally hundreds of changes from current policies and spending levels.
Detailed analysis of the budget from the nonpartisan House Fiscal Agency can be
Jack McHugh is a legislative
analyst for the Mackinac Center for Public Policy, a research and educational
institute headquartered in Midland, Mich. Permission to reprint in whole or in
part is hereby granted, provided that the author and the Center are properly