Rachel Richards

It’s July 2, and do you know where our state budget is?

It’s still stuck in negotiations. And it’s odd; we’ve heard so much about how big our state budget has gotten — over $80 billion — that it should be easy to find consensus to fund everything we need, right?

But revenues and budget are two sides of the same coin — money expended cannot exceed the money we bring in. When revenues come in strong, the state can increase investments in housing, health care, education and programs that help put food on the table. In leaner years, such as during economic recessions, the state either has to make cuts across the board or prioritize funding for important or essential programs. Regardless of the size of the state budget, policymakers always say the same thing: We have limited resources and have to prioritize our investments.

Why are we so stuck in the age of austerity?

At the May Consensus Revenue Estimating Conference (CREC), revenues were adjusted slightly downward from January’s estimates. The good news is that this adjustment did not cause a current-year deficit, and total state revenues are still projected to grow year over year. But we just don’t have as much as expected to craft the budget for the year starting October 1, 2025. In fact, budgets proposed by the governor and the Senate would be out of balance as they were — and typically are — based on the January revenue estimates.

Michigan’s budget picture gets even murkier as policymakers in Lansing consider an income tax rate cut that would provide outsized benefits to Michigan’s richest residents while pulling over $700 million out of state coffers. This is on top of a road funding proposal that simply shifts over $3 billion in state dollars that currently fund existing state programs, like housing programs and maternal and child health care, over to roads. Together, these two proposals, as passed by the Michigan House of Representatives, would take nearly $4 billion out of our state General Fund, which are the dollars the state has the most discretion over.

At the same time, policymakers in Washington are negotiating a bill that would cut health care and food assistance for millions of Michiganders to pay for a huge tax break for wealthy taxpayers and profitable corporations. These proposals will have wide-ranging impacts, including reductions in benefits, complete loss of benefits, loss of jobs and reductions in state economic impact. Additionally, the proposals would shift costs to the state, either directly by changing cost-sharing requirements or through states attempting to mitigate the harm caused by the cuts and making up the difference in the loss of benefits.

What we’ve heard over and over again is that the Michigan budget cannot absorb all of these cuts and costs without cutting other vital services that Michiganders rely on. Increasing funding

for one priority will come at the expense of another. And because we’ve operated in this age of austerity for so long, we think this is the only way to balance the budget. The problem is now that we’ve underinvested in so many of our priorities for so long, including housing, child care, education, health care, and programs that help families afford basic necessities, we find ourselves at a crisis point for so many of them.

There’s another way to look at it. By any standard you look at it, Michigan’s budget has room to grow. Michigan is not a high tax state, and well below the national average, when considering all state and local taxes. We are far below — by about $13.2 billion — our constitutional revenue cap set in the 1970s with the adoption of the Headlee Amendment. And revenues, despite recent growth, have not kept pace with inflation, meaning we are consistently having to do more with less. Revenues are one-half of the budget discussion but are always overlooked.

Budgets are moral documents — they show us what we value. If we value healthy moms and babies, accessible housing, affordable groceries, vibrant communities, safe roads, clean water, and high-quality education, then we will figure out how to pay for them. There are countless ways to make sure we can have a budget that reflects our diverse needs, raising sufficient revenues in equitable ways. These include implementing a graduated income tax; taxing wealth, such as an estate tax or a mansion tax; ensuring our business taxpayers are paying their fair share; taxing vape products; and broadening our sales tax to services.

We can, and we should, do better. We need to scrap the concept of austerity and make sure our budget — both taxes and expenditures — reflect what people really want and need.

Rachel Richards is the fiscal policy and government relations director for Michigan League for Public Policy.