Whitmer says $80.7B budget proposal for 2025 will ease pocketbook issues for Michiganders

LANSING — Gov. Gretchen Whitmer made free preschool and community college a centerpiece of an $80.7 billion budget she presented to state lawmakers Wednesday for the 2025 fiscal year that starts Oct. 1.

“My proposal today will deliver on the vision that I outlined a couple of weeks ago,” Whitmer said, referring to her recent State of the State address. “Lowering costs, improving education and ensuring that anyone and everyone can make it here in Michigan.”

The governor said her spending plan would guarantee a free public education from preschool through community college, provide tax relief for family caregivers and expand subsidies for companies that create jobs in Michigan.

She said the budget will not raise taxes and will make another deposit into the state's Rainy Day Fund, bringing its balance to a record $2.2 billion.

But Senate Minority Leader Aric Nesbitt, R-Porter Township, said the budget continues a "reckless spending spree," noting that officials said it would leave less than $20 million on the state's balance sheet if adopted in full. "It seems like it’s only a matter of time before spending officially outpaces revenues if we do not change course," Nesbitt said in a Wednesday letter to Whitmer.

Whitmer's proposal includes a $14.3 billion general fund, which is the state's main checking account, and a $19 billion School Aid Fund.

State Budget Director Jen Flood has described the 2025 budget proposal as a "return to normal" after years of massive surpluses largely spurred by federal stimulus measures responding to the COVID-19 pandemic.

But she and Whitmer said progress in eliminating unfunded post-retirement health care liabilities in the Michigan Public School Employees' Retirement System had freed up about $670 million to spend in classrooms as the state continues to work to reduce other unfunded MPSERS pension liabilities.

The 2024 budget was signed into law at $81.7 billion but later had about $276 million in supplemental spending added to it, bringing the total to about $82 billion, according to Senate Fiscal Agency tracking of appropriations bills. The 2023 budget was signed into law at $76 billion, but later had more than $1.35 billion in supplemental spending added, bringing its total to close to $77.4 billion.

Whitmer previously outlined in her State of the State address last month many of the proposals she detailed Wednesday, including a tax credit for family caregivers, rebates for new car purchases, and an innovation fund to support startup companies.

Free public education from pre-K through community college

Whitmer asked for $650 million to remove all income eligibility requirements for 4-year-olds to attend preschool at no cost to their families and $330 million for a Michigan Achievement Scholarship to attend community college.

Flood said investments in early childhood education are "where we get the biggest bang for our buck."

Last year, Whitmer launched a new education department focused on early childhood learning and higher education. "For too long, we have thought of education as K-12, but we know that's not good enough if we want to remain competitive," Whitmer wrote in a tweet announcing her education overhaul.

More: Whitmer rolls out the budget today, and state debt could get its own spotlight

As part of her goal to expand access to educational opportunities to more residents, Whitmer initially set a goal of providing universal access to state-funded pre-K by the end of her second term as governor in 2026. But in her State of the State speech last month, she announced her plan to shorten that timeline by two years, providing pre-kindergarten for every 4-year-old starting in the next state budget.

Whitmer also wants lawmakers to provide funding for two years' tuition-free community college to all high school graduates in Michigan.

The governor proposed a 2.5% per-pupil increase for K-12 students, bringing the basic per-pupil grant to $9,849 per pupil. She asked lawmakers to continue a program providing free breakfast and lunch to all public school students in K-12.

The budget also proposes a 2.5% funding increase for higher education.

It calls for a 5% increase in statutory revenue sharing for local governments, plus a one-time 2% allocation to support public safety.

Cost-saving proposals for Michiganders' pocketbooks

Whitmer detailed a couple of proposals aimed at lowering costs for Michiganders, including measures to reduce housing costs through a $1.4 billion housing construction and rehabilitation program, through the Michigan State Housing Development Authority.

She proposed a caregiver tax credit in Michigan that would provide up to $5,000 in tax relief for uncompensated caregivers supporting aging or sick relatives to cover expenses such as counseling, transportation and nursing or respite services.

That's proposed to cost $59 million in 2025, according to the budget documents.

Whitmer also put forward a tax savings plan aimed at boosting vehicle sales in Michigan. The proposed "MI Vehicle Rebate" would save buyers $1,000 on new internal combustion vehicle purchases and $2,000 on new battery electric or hybrid vehicle purchases with an additional $500 in savings on vehicles made in unionized facilities.

The proposal marks Whitmer's third attempt to ask lawmakers to approve tax savings for car purchases. But, for the first time, she has expanded the proposal to include all new vehicle purchases, not just electric vehicles, at a proposed cost of $25 million. While her latest proposal expands the types of vehicles covered, it would set aside about half the funding compared with previous versions. The savings program would continue until the funds dry up.

Business subsidies aimed at growing Michigan's economy

Whitmer also outlined her ideas for supporting Michigan's businesses. She proposed a $60 million innovation fund to support startup companies and a research and development tax credit.

Whitmer also proposed a plan under which more than 275,000 small businesses with fewer than 100 employees would have the option to enroll their workers in a state-managed retirement plan. But the biggest state funds to support business would go toward the fund used to lure investments in the state from large companies.

The governor requested an additional $500 million for the state SOAR (Strategic Outreach Attraction Reserve) Fund which provides grants to companies that create jobs in the state and money to prepare their work sites. The program has largely been used to subsidize electric vehicle-related projects, and state budget deputy director Kyle Guerrant said the recommended boost in funding for SOAR will "attract transformational projects and keep Michigan at the forefront of manufacturing."

The budget proposes a $247.6 million investment in state roads and another $150 million in spending on bridges and culverts.

Senate Appropriations Chair Sarah Anthony, D-Lansing, said Democratic lawmakers will craft their own spending priorities soon as they negotiate over the governor's proposed budget. But she said she was excited to see what she called "historic investments in education" in Whitmer's budget, along with other recommendations to keep money in Michiganders' pockets.

State Sen. Mallory McMorrow, D-Royal Oak, expressed concern that funding for public transportation wasn't a bigger priority in Whitmer's budget proposal, given the governor's population growth council recommended investments in public transit.

"I think it's hitting a point where it's do or die on this, and it's critical that we are no longer the only — particularly metro Detroit — the only major metro region in the country that doesn't have a feasible transit system," McMorrow said.

Whitmer said her budget provides more transit resources than past recommendations and welcomed further conversation with lawmakers on what additional spending they'd like to see.

Income tax issue looms

A legal battle related to the state's personal income tax rate hovers over the budget picture.

Republicans argue a 2015 law that triggered the tax cut after a spike in revenues intended that a cut in the personal income tax rate to 4.05% from 4.25% should be permanent. The governor and Attorney General Dana Nessel both interpret the statute to provide for a one-year cut for the 2023 tax year only.

At a Wednesday news conference, Whitmer expressed confidence in the Michigan Court of Claims ruling last year that the tax rate can rise back to 4.25% for 2024.

"And so we built a budget around what our expectations are," she said.

The Michigan Court of Appeals will soon decide whether to uphold or overturn the lower court's ruling.

Contact Clara Hendrickson: chendrickson@freepress.com or 313-296-5743. Follow her on X, previously called Twitter, @clarajanehen.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on X, @paulegan4.

This article originally appeared on Detroit Free Press: Whitmer says $80.7B budget plan for 2025 will ease pocketbook issues