Dear Neighbor,
I hope to share insight about our state’s recently passed budget, and what it means for Michiganders moving forward.
In Solidarity,
Dylan Wegela
State Representative
The 26th District
Legislative Updates
Budget
The Michigan Legislature passed its General and School Aid Budgets. These budgets were tied to a road funding plan. I ultimately decided to vote no on both budgets. I urge you to read this entire post, as it is necessary to fully understand why I voted the way I did.
I want to first try and explain what I believe is our undemocratic and non-transparent budget process. In my opinion, the way we do budgets in Michigan always stinks, but this year was particularly bad.
The Process:
Normally, budgets are passed before July 1, but this year, the Republican Speaker, in my view, intentionally dragged the budget process out to the Oct. 1 deadline. The deadline approached, and we were facing a shutdown.
It was announced a few weeks ago that leadership in both parties agreed to a budget deal; yet they did not share the budget details with us rank and file legislators. I strongly believe this was done to prevent the public, the press, lobby groups and legislators from advocating for changes that might blow up the deal.
In the first days of October, we were briefed on the toplines of the budget, with some essential information being withheld. Session on Oct. 3 started at 10 a.m. and ended the next morning at 4:30 a.m. I wrote this at 1 p.m. the day after; exhausted, frustrated and disappointed.
In the House, we ended up voting on the General Budget around 9:30 p.m. It wasn’t until 6 p.m. that I received the House Fiscal non-partisan summary of the General budget. A 240 page document that is simply impossible to review with any real scrutiny in 3.5 hours. We didn’t get the line-by-line budget until around 9 p.m.
We were then asked to vote on this budget almost none of us had seen, with less than 30 minutes to review. To me, this was an obvious intentional tactic used to force votes on a budget. More time to review means more questions to answer. The Republican Speaker is the only one with the power to call the vote, and he did.
Call me a radical, but I think that the press and public should have time to look over the budget, provide scrutiny and ask questions before the vote. At the bare minimum, we should expect that elected representatives should have time to review.
GOVERNMENT SHOULDN’T WORK LIKE THIS.
I want to stress that both of these budgets and the roads package are interconnected. One doesn’t work without the other. I am going to outline why, despite the tactics used to move money around, this budget simply doesn’t work. I first want to start with the budget implementation bills that make this budget possible.
Budget Implementation Bills:
- Decoupling of the Corporate Income and No Tax on Tips and Over Time: I voted yes on this bill, and it is one of the most important bills in this equation.
First, “What is decoupling?”
In tax policy, “decoupling” refers to a state choosing not to follow (or only partially follow) certain federal tax rules, even though state tax codes are often based on federal definitions. It’s a way for states to preserve revenue, maintain policy preferences or avoid unintended consequences when federal tax law changes.
Before this bill, the Michigan Corporate Income Tax (CIT) was coupled with the federal government. So when the so-called ‘Big Beautiful Bill’ tax cuts were passed, it triggered a tax cut for Michigan corporations. Passing this bill stopped that corporate tax cut from happening, freeing up revenue in the budget.
Additionally, this bill started coupling the state with the federal government for the purposes of removing taxes on tips and overtime, as well as social security. This was a revenue hit, but was offset by the CIT decoupling.
Sales Tax & Gas Tax Swap:
- These bills exempted gas and several other fuels from sales tax on fuel. Instead, replacing it with a gas tax. I voted against exempting these fuels from sales tax.
Here is a simple breakdown of where the constitutionally protected revenue from the Sales Tax goes in Michigan.
- Michigan Sales Tax Allocation (6% total)
- *School Aid Fund
- *General Fund
- *Local Revenue Sharing
Exempting fuel from the sales tax means these areas will lose funding. Moving it over to a gas tax ensures that revenue can be used for roads instead.
Schools were set to lose $700 million from this shift. This money was replaced in other parts of the budget (backfilled). Even with this maneuver, I still have major concerns with backfilling school funding from a non-constitutionally protected source.
The local revenue sharing hit is an estimated $64 million. This was not backfilled. Constitutional local revenue sharing is one of the pots of money that cities, counties, villages and townships receive from the state. At the time of this writing, the amount of money local governments get in this budget is still unclear.
24% Cannabis tax increase:
In order to raise money for roads, you need revenue. The road plan proposed a 24% wholesale tax increase on cannabis in Michigan. This is estimated to raise $420 Million (Yes that is the actual estimate…), and this money is to be directed into the newly created roads fund.
I want to note that some believe that this hit of a tax increase on cannabis might have devastating effects on the industry and stakeholders have said the same. Some also believe that this might force people onto the black market, which could lead to inaccurate revenue projections. Conversations that would have been nice to have, but this was another vote given on minimal notice.
It is also possible that this change may be ruled unconstitutional, due to the fact that the cannabis ballot proposal that was passed by voters is constitutionally protected. Depending on interpretation, this might mean changes need a ¾ vote to change (which this didn’t get).
I share these concerns as well, and if this is ruled to be the case or if this is tied up in court, preventing the tax from being collected, the math of the entire budget simply doesn’t work. This would mean local governments would get less road funding than projected under this budget.
I should also be clear that when we voted on this budget, those projections were not available for us to see how each city would be impacted. Even if they were, these projections would be merely speculative.
Even though I had some reservations, I ultimately voted yes on this. I have seen the State Legislature only reduce revenues since being elected. I think it would be wise to find other sources of revenue, such as taxing the rich. We will never have the roads and schools we deserve if we don’t raise some type of revenue.
Saving Medicaid:
This was another change that was needed because of the president’s Big Beautiful Bill. I voted yes on this. Here is my best simple explanation of what we did.
Michigan helps fund Medicaid using a tax on health insurance companies called the Insurance Provider Assessment (IPA), but new federal rules say the current setup doesn’t fully qualify anymore. To avoid losing federal money that supports health care for millions of residents, we passed changes that allow Michigan to temporarily keep using the IPA while it asks the federal government for permission and works on a new plan. If that permission is denied, Michigan will need to create a different funding system to replace the IPA. The state has up to about three years to make the transition.
Those are the major bills that were required to make the budget work functionally. Now, let’s look at the budgets. I want to start with the School Aid budget, because what they did to this is at the core of why I opposed both budgets.
School Aid Budget:
Budget Highlights!
- Per-Pupil Funding $10,050 ($442 Increase)
- You will see people calling this record funding. We have to stop doing that. Is it the highest it’s ever been? Yes. Does that account for inflation? No. Michigan schools are still severely underfunded according to the Michigan School Finance Research Collaboration.
- Free Breakfast and Lunch Protected
- It’s wild to think this funding line would ever be on the chopping block
- Mental Health and School Safety Funding increased
- English Language Learners, Special Education line items preserved
- At-Risk Funding Increased
In my opinion, there are things that should never happen:
- An additional $400 million were moved from school aid for Higher Ed
- This was one of the largest transfers from the School Aid fund in Michigan’s History. This was done in order to free up more money for roads. This isn’t complicated. We shouldn’t move funds away from public schools to fund roads.
- In 2018, I helped lead one of the largest teacher strikes in US history to secure $400 million for Arizona’s Public Schools. I refuse to move that amount away from K-12 schools. As I said, these budgets are intertwined. I refuse to support budgets propped up by taking from our kids.
- $100 million was reduced from MPSERS reimbursement, raising costs for our school districts.
- Cyber Schools are getting the same Funding as traditional public schools.
- It simply doesn’t cost nearly as much to run online schools. I believe this will lead to a larger profit margin for these online schools.
- Public Dollars funding private schools.
- This budget allows private schools to access some public funds related to school lunch and school safety.
- I am all for requiring private schools to feed kids and keep schools safe, but, in my opinion, it is unacceptable to fund them with public school dollars. This is a slippery slope and brings us one step closer to vouchers and other ways for private schools to receive public funds.
General Budget:
It is important to note again that the General Budget cannot be funded without moving an additional $400 million from the School Aid fund. This brings the total amount of School Aid dollars being transferred from School Aid to $1.3 billion!!!!
What’s in the General Budget:
- Almost every Single Department in the State had its funding cut.
- At a time when we are seeing federal efforts to cut departments across the government, I refuse to support a budget that makes significant cuts across the board for no good reason.
- Republicans will claim they are cutting 2,000 ‘ghost jobs’, and Democrats will claim they are cutting no people currently in a position. In reality, there are around 1,000 of these positions that our departments are actively trying to fill; in some cases, these are seasonal positions, subject to regular turnover.
- Now these positions will simply not be filled. Just because a position isn’t filled, it doesn’t mean there wasn’t work that needed to be done. It is my belief that we should not be cutting government jobs for the sake of cutting jobs.
- The Local Revenue Sharing
- We are cutting $64 million from constitutional revenue sharing. Some types of local governments are getting additional road funding. It was unclear at the time of the vote and of this writing, the exact breakdowns. Estimates will be based on the assumption that the cannabis tax holds up in court. If it doesn’t, the road funding would certainly be less than advertised.
- Like with schools, it is usually a bad idea to cede constitutionally protected funding.
Wins!
- The SOAR (Corporate Handout) Fund has sunsetted (Ended) and will not be funded moving forward. I have been fighting to eliminate this funding since being elected! I am happy to see it go.
- Medicaid and SNAP protected (for now).
- Money for Lead Line Replacement.
Enhancement Grants:
As with every budget, enhancement grants are used to wrangle votes and drum up support for the budget.
- Romulus received $1 million for a Fire Truck thanks to state Rep. Reggie Miller.
- Inkster received $500,000 for the Inkster Cultural Center thanks to state Sen. Dayna Polehanki.
However, please note not every district received an enhancement grant, they were limited this year.
While I am glad these were added to the budget, it doesn’t change the potential risks of limiting constitutional revenue sharing for all of the cities in District 26 and it didn’t fix the fact that this budget was propped up by what I believe to be questionable math, unusual tactics, and, most unfortunately, by moving even more money from our public schools.
This isn’t an easy job, and this wasn’t an easy decision, but I center myself in always trying to do what is right for our District and the long-term health of the State. I am sure some will have an honest disagreement with my assessment, and I welcome that. There will be others who weaponize it for political victory.
We are in a split government, and things could have been worse. That could be true, but it is equally true that if we had an open and transparent budget process with journalistic and public discourse, it could have resulted in a better budget.
It would have been almost certainly easier for me to fall in line, plug my nose, and vote yes, but I think that is part of the problem right now. We have to stand up and demand better from leaders on both sides of the aisle. Demand better for the people of Michigan and the working class. I will never stop fighting to ensure that we have the public schools and government we deserve.
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Please reach out if you need anything: Call my office at (517) 373-3818 or email me at [email protected].
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