CHPS Podcast Episode 6: Analyzing Michigan's Budget Process

In this episode of CHPS of Insight, host Chris White sits down with Brad Williams and Brian O’Connell from Clark Hill Public Strategies’ Lansing team to unpack Michigan’s state budget process: what happened this year, why it took longer than expected, and what it means for Michigan businesses and organizations.

With decades of combined experience in state government, economic development, and public policy, Brad and Brian share an insider’s perspective on the political dynamics shaping this year’s budget negotiations and how new transparency initiatives and leadership changes in Lansing have affected the process. They also discuss key funding decisions impacting infrastructure, transit, education, and healthcare, as well as Michigan’s new road funding plan. Whether you’re a business, nonprofit, or public entity operating in Michigan, this episode offers timely insight into how to engage effectively with policymakers and stay informed on the state budget decisions shaping your organization’s future.

This podcast is intended for general informational purposes only and does not constitute legal or financial advice or a solicitation to provide legal services. The information in this podcast is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Listeners should not act upon this information without seeking professional legal counsel. The views and opinions expressed in the podcast represent those of the individual speaker only and are not necessarily the views of Clark Hill PLC.

Transcript

 Hello and welcome everyone to episode six of CHPS of Insight, where we bring policy to practice by providing a current perspective on the policy and regulations that affect your business. From the professionals at Clark Hill Public Strategies.   This podcast is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this podcast is not intended to create and receipt of it does not constitute a lawyer client relationship. Listeners should not act upon this information without seeking professional legal counsel.

The views and opinions expressed in the podcast represent those of the individual.

speaker only and are not necessarily the views of Clark Hill PLC.  

 I am Chris White, an attorney with Clark Hill and a senior Director of Clark Hill Public Strategies, and I have two guests with me today out of Lansing that make up part of our Lansing team. Brad, why don't you start off with an introduction of who you are and what we're talking about today. Thanks Chris, and thanks for having me. My name is Brad Williams. I'm a director here at Clark Hill Public Strategies I'm the new guy on the block.

I've only been here since June but I've been really enjoying my time learning and, and getting to know our clients. Before I came to Clark Hill, I spent 17 years at the Detroit Regional Chamber as the Vice President of Government Relations there. The Chamber is the largest business organization in the state.

One of the top five. In the country. Also spent some time at the Michigan Department of Transportation, so I know we're gonna talk a little bit roads today. Hopefully it can provide some insight there. Awesome. Thank you Brad. And, and Brian, why don't you introduce yourself real quick. Chris, thank you for giving me the opportunity to participate today as well.

Brian O'Connell. I'm the Senior Director at Clark Hill Public Strategies. I've been with Clark Hill for about 18 months. Prior to that I was executive director of Government Affairs at General Motors. Where I oversaw their state and local policy across the country, focusing really on economic development taxes, healthcare, manufacturing, operations.

Before that I, I did some short time lobbying in the pharmaceutical industry and was also chief of staff to the Senate appropriations chair. Incredible. Thank you both  for that background. Being here in Lansing, it seems like the hot topic on on the streets right now is a discussion about Michigan legislature and what they're doing with the budget.

What are you both hearing about that? Well, Chris. It's, it has been a, really quite a long process in the budget.    The state, really took it down to the deadline, which was October 1st. We actually went past October 1st which whether there was a shutdown or not a shutdown. The state continued to operate even though the state budget was a couple days late in getting going.

This was a long process that probably could have been resolved months earlier. But things, certain things have happened in Lansing primarily. We have new leadership in Lansing. You have a new speaker of the house, this term, speaker, Matt Hall. And so the operations are different because there's a different political dynamic.

He's working with the Democratic governor and a Democratic Senate majority leader. And with those things come different personality traits. Unlike 2009 and seven and eight and nine when Michigan also had a similar process. There was Mike Bishop, who's the Senate Majority Leader, and we had Governor Granholm as the governor.

Those were similar situations where we kind of went past the budget deadline and there was a little budget shut, shut down. But here it was different in that a lot of it was more personality based and political abuse. So the Speaker Hall did have a good relationship with the Governor. He did not have a great relationship with Senate.

Majority of the winner when he Brinks probably started when they first got into session. And there were nine bills that were not transmitted last session. That was a responsibility of the former speaker and the former clerk to transmit bills to the governor. They were not done. When Speaker Hall came in, he did not move those bills.

They were partisan bills and he did not move them over. He was sued by the Senate Majority Leader. Both claimed they won the lawsuit. But that's kind of to be determined. So they, they, they got not off to a great start. And I think that has moved its way through the process over the last nine months where it was personality conflicts going forward.

So it kind of slowed down the process. They also fundamentally differ, I mean, you're talking about a Democratic senate. Republican House, they differed on political views, but they also differed on the process. The, the Senate Democrats wanted a very traditional process of working through the budget, which has happened to the last 30 years.

And the House Republicans wanted a different process. They wanted more transparency, they wanted more hearings. They wanted a road plan. And a lot of those things took longer than normal to kind of get to the stages where actually the leaders could negotiate. Yeah, and I think it's important, you know, Chris, to reflect on what Brian just said about the Transparency initiative speaker Hall really hung his hat on that early on.

That he wanted more transparency in budget earmarks. And the fact that the Senate didn't adopt that same approach until later in the game certainly made that more difficult. At the end of the day, this process is probably more transparent for taxpayers, but it does make the work that Brian and I do a little bit more complicated as well.

Absolutely. And I know that you know, what you read in the, in the news and obviously all the opinions are that people are wondering you know, why, why won't the budget be done sooner? Why haven't been completed sooner? And why, why don't we have one yet? So what, what's your insight there? Well, Chris, as I, I, as I mentioned, a lot of it was personality related.

I believe the. The, the word is that the speaker kind of wan wanted a government shutdown. He thought it would be potentially politically beneficial for him. He was very open about it, that having a government shutdown, having to delay in that work to his advantage the transportation plan took a while to come together.

That's a very complicated issue. They've been working on it for 20 years, it seems finding the right mix of general fund revenues, tax revenue, and actually to find a state budget. They promised $3.1 billion to help fund our roads. They end up coming back with 1.85 billion because of making sure that we had enough money to fund a lot of programs, fund the schools, fund higher ed, but also take some of that money to fund roads with different road plans that I think that Brad's gonna touch on regarding some tax increases and other funding shifts to pay for the roads the roads.

Needed to get done in, in connection with the budget. And I think that kind of d delayed the process significantly in making sure that we had a balanced budget, which is required in our Constitution. And sometimes that takes longer than necessary. And let me put this Road Roads plan in perspective here, Chris.

Because you know, as I mentioned earlier between my work at Mdot and the Chamber, this is something that I've spent some time on. So this is gonna be the nerdy part of the podcast. So I'll just warn you if you wanna hit the forward button, now's the time to do it. But you know, to put it in perspective, how long this has been an issue.

I know Brian said 20 years, I think it's. Been even longer than that. Back in the late nineties, the legislature passed. A 4 cent increase in the gas tax. And one of the issues at the time was whether or not to index that that gas tax increased to inflation. You know, had it been indexed to inflation at the time, we certainly wouldn't be in the situation that we find ourselves in now.

I mean, so much so that when Governor Whitmer came in you know, seven years ago, she proposed a 45 cent increase in the gas tax. So this has been in the works for. For a very long time. There was a ballot initiative a few years ago that went down in flames. So the fact that they moved forward with this much money, even though it's short of what we, we actually need, the fact that they were able to do this really is a step in the right direction.

They did it by imposing a wholesale tax on marijuana. So this is before final sale. So if a grower sells to a dispensary, there'll be a 34% tax on that. Additionally they made some changes to the corporate income tax, which the business community, you know, my previous employers at the Chamber are furious about.

But certainly are going to add to the fiscal health of the, of the state. And so, you know, the changes in the one beautiful, one big, beautiful Bill also had implications for Michigan's corporate income tax. And so they were able to decouple from the changes in the Federal Act so that they won't impact the, the taxable income.

For the corporate income tax, they also made a number of cuts. They eliminated the SOAR fund which funds the critical industry program and the site readiness program. Both Brian and I have worked extensively with that program to help develop jobs in Michigan. So there's. A, a definite downside, but they also really trimmed in part because of the transparency plan the speaker put in place.

They trimmed the number of legislative earmarks that you typically would see in the height of the, you know, inflation reduction act. When there was all the COVID money coming in, that budget could get up to a billion dollars. Now that this year it's up to about 200 million, so that's a, that's a big difference as well.

That sounds like a lot of big differences. And so with, with those actions they're taking you know, how much money does it look like they're, they're gonna be able to raise with with those adjustments? Yeah. The, different analysis have said anywhere between 1.5 and 1.9. I think it will probably start out in 1.5 and grow over

the course of the years. But you know, we've already seen plenty of orange barrels around the state, Chris, and I think, you know, while people want more better roads, I think their tolerance for construction is limited too. You'll often hear the governor say, when she talks about the road construction going on, she'll say, you're welcome.

And I'm sorry. No kidding. It's absolutely orange cone season. Right. Exactly. And, and is this affecting more than just roads? Like are we looking to see this flow into other forms of transportation, mass transportation and programs like that? Yeah, transit actually got a big boost in this too, Chris.

You know, about 160 million overall for transit in the state, including 65 million for what they call transformational transit projects. When I worked at the Chamber, we did quite a bit of work on regional transit in, in metro Detroit. And 65 million certainly won't cover what the metro region needs for transit.

But it starts metro Detroit and other regions along the path towards modernizing their transit system with things like bus rapid transit that will increase reliability and in users. That's fantastic. And then, I mean, I guess the, the big question is, how should our clients expect this to affect them?

What impact do you guys see coming down the road? Well, Chris, I think it already has had a pretty significant impact on our clients. The new process has changed the way. The state has budgeted. We have some outstanding clients that have been in the budget for years, for 10, 15 years. And there are programs whether helping out with diabetes and the kidney foundation whether it's afterschool program, whether it's literacy program.

All those programs were kind of brought to the forefront and considered as one-time projects and had to be debated in the legislature of whether they were worthy. With the trimming down of the budget, it was very critical that we had to make sure that we convey the right message to the legisla.

To prove the need to our clients. That has certainly changed the process, has really made it more difficult as the budget process and as our clients move through, navigate through that process, it is more difficult but it also can bring light to the positive things that our clients are doing. Changes to the programs changes to the state budgets, how it's impacted the Department of Health and Human Services, how it's impacted higher education, how it's impacted school aid.

There was money in the school aid fund for school safety, which benefited one of our clients greatly which was a positive thing to provide school safety devices to prevent active shooting situations. But the important thing is, is, is part of the new process. We need to work closer with our clients to navigate them through this more difficult process.

The outcomes of the budget, what's really gonna happen, what line items are impacted, increase, decrease. They all have an impact on the variety of our clients. And, and part of that is, working with them, with the state agencies, how their programs can be funded, how the changes in boilerplate, which is impacting a policy on those programs are impacting them to most benefit them.

And it's a step one of the process as we move into future budgets. It's kind of a template of how things are gonna be moving forward and we wanna work with our clients to make sure that they benefit through this new process. 'cause it is a complicated new process and we need to make sure that they're in early and their message is conveyed appropriately.

Yeah, I think Chris, and this, this will be a good time for me to toot toot the horn of the chips team as to how we can work together. You know, it's one thing to have a good story to tell and it's one thing to you know, to have history on your side as a as a budget recipient. What we're finding out now is history, knowledge.

That isn't enough anymore. You need to have a strategy and people like Brian and I can help you develop that strategy. The budget work for next year started before the ink was dry on this year. For future assets can be important to get in early with the with the state departments, with the executive office, get yourself hopefully in the executive recommendation, but also start having those conversations.

With legislators now because it's easy for something to slip off the table if it's not top of mind. That makes sense. Obviously shocking to learn that the work on the budget started, you know, even before the last budget was done, and so that, that means there's a lot of lead time there.

I know you guys have touched on a lot of it, but for save rounds or for final thoughts on what immediate steps do you think people should be taking? In order to get themselves prepared for, you know, even this budget considering next budget as well, I think it's important to work with your government affairs.

Team. As Brad mentioned, we have a great team. Our top person de Schnat is really one of the leaders in Lansing. Well respected. We are a bipartisan group. We have close connections with the governor's office, state agencies, and the legislature. And I think that is proven with our success in the, in the legislature because you have to work on both sides of the aisle.

And that's important. And we encourage the process 'cause it must start early. But, you know, luckily we do have a solid team and we're doing our best for our clients across the board. I think there, there's gonna be a lot of changes with the process in Lansing. You know, I'll take a little bit exception with Brian saying that De Shanat is one of the leaders in Lansing.

Brian O'Connell is too and has been for a really long time. But we look forward to continue to work on this process. It's, it's, it's the thing we love to do. It's the thing we've you know, learned to do and been doing for a number of years for our clients and we look forward to continuing.

Fantastic. Well, thank you both. I think everyone should stay tuned because once this budget's finalized as well as new things are coming out, you'll, you'll be hearing more from these two dissecting what, what does get done and what those highlights are for you to, to be paying attention to. So thank you all and I, I appreciate you, Brad, and Brian for joining us today.

Thanks, Chris. Thank you, Chris. This podcast is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this podcast is not intended to create and receipt of it does not constitute a lawyer client relationship. Listeners should not act upon this information without seeking professional legal counsel.

The views and opinions expressed in the podcast represent those of the individual.

speaker only and are not necessarily the views of Clark Hill PLC.