Updates About Appropriations

A settlement between Governor Whitmer and House Republicans has been reached regarding the over $370 million in work project funds canceled by House Republicans last year. The settlement, which was resolved in the Michigan Court of Claims, removed the designated funds for all work projects and instead put them mostly back into the State’s General Fund.

The litigation started when Attorney General Dana Nessel issued an opinion, at the request of Senate Democrats, that the original funding blockage was unconstitutional. After this opinion, Governor Whitmer directed the departments to spend the money as appropriated, causing House Republicans to sue in order to block the spending.

The ruling also upheld the rule that allowed a single appropriations committee to act alone in canceling the work project. However, Senate Democrats are interested in working on legislation that would ban this authority.

Both Republican House Speaker Matt Hall (Richland) and Democratic Senate Appropriations Chair Sarah Anthony (Lansing) claimed victory in their statements on the court’s outcome. Hall pointed to the $370.8 million returned to the General Fund as restoring budget flexibility, while Anthony emphasized that only $370 million of the $645 million total they had argued was blocked.

Read past newsletter articles on the work project funding developments here:

Unexpected House Action Shifts Spotlight to Work Project Funding

AG Issues Formal Opinion on Legality of Work Projects, Judge Issues Preliminary Injunction

Following the recently announced executive recommendations, House Republican Appropriation Subcommittee chairs were given budget targets for Fiscal Year 2027. Although House Appropriations Committee Chairwoman Ann Bollin (R-Brighton) did not outline specific numbers, she did share that the highest budget threshold goal is lower than what we saw in the previous budget. House Republicans say they plan to address the projected $800 million January CREC shortfall without raising taxes. Representative Bollin said GOP priorities for the upcoming budget include strengthening Michigan’s businesses and improving the education system, while cutting spending where possible. Republicans also signaled they will push back against any proposals that increase taxes.

Prior to this report, Republican House Speaker Matt Hall (Richland) announced a new 6% sales tax proposal on select services that is projected to garner $4.73 billion for the state. His proposal applies to certain services usually popular with tourists and wealthier residents. Among the services included in the tax proposal are country club memberships, travel agencies, newspaper publishing, performing arts, political advertising, environmental consulting, and recreational activities such as skiing and golf. Speaker Hall stated that his proposal is not aimed at working class families and instead targets out of state visitors.

The proposal is intended to offset Hall’s proposed property tax cuts that currently generate about $5 billion in revenue. Overall, his tax plan would result in approximately a $270 million net tax cut.

Shortly after the new year, Michigan Attorney General Dana Nessel issued her formal opinion that the mechanism used by the Michigan House Appropriations Committee to eliminate over $644 million in work project funding is unconstitutional. The disapproval mechanism used, MCL.18.1451a(3), can be found in the Management and Budget Act and allows for previously approved funding from the last fiscal year to continue to be used for its direct purpose in the new fiscal year. The funds are approved by the State Budget Director and are known as work projects. According to the law, either the Senate or House Appropriations Committee can then decide to approve or disapprove the work project funding. Historically in Michigan this funding has typically been approved by both chambers.

In her opinion, AG Nessel deemed MCL.18.1451a(3) unconstitutional. She argues that the mechanism violates Separation of Powers because it allows a single legislative committee to effectively have authority over the executive’s law implementation powers. Continuing her argument, she laid out that since the action was not approved by the Senate, and subsequently by the Governor, it violates the Bicameralism and Presentment requirements. Lastly, Nessel concluded that the veto disapproval mechanism is separate from the rest of the statute, so the remaining portions, such as the State Budget Director’s authority, can remain.

Two weeks after the Attorney General’s formal opinion was published, Court of Claims Judge Michael Gadola issued a preliminary injunction that preserves the status quo of the law. This injunction temporarily prohibits state departments from spending any remaining work project funds until the courts have made a final decision on the constitutionality of the House Republican Appropriations Committee’s actions.