#FactsMatter, the Citizens Research Council of Michigan podcast

Vic McCarty of the Vic McCarty Morning Show, WTCM Traverse City, interviews Eric Lupher, president of the Citizens Research Council of Michigan, which last week released novel research making the case that much more work is needed on the road funding issue than just securing more resources for roads and bridges.

In a Nutshell:

Michigan ranks 30th among all 50 states in road and 40th in road system conditions.

Michigan’s road program performance has declined between 2004 and 2024.

Policy discussions regarding road funding review the efficacy of Michigan’s approach to pavement management and to prioritize the repeal and replacement of Public Act 51 of 1951.

Eric makes the case that Michigan’s residents and taxpayers deserve a thorough evaluation of transportation funding policy, without questioning that more road funding is probably needed, before being subjected to substantial tax increases or redirecting general fund revenue from other critical Michigan programs. “There are multiple inefficiencies in our current system. Allocating more funding to roads without addressing these inefficiencies may reinforce systemic problems without making much progress in fixing the roads.”

Infrastructure research associate Eric Paul Dennis and senior research associate for state affair Bob Schneider catch up with Clara Hendrickson, politics reporter for the Detroit Free Press, to discuss the state of Michigan’s roads, the latest two road funding “frameworks” put forward by Governor Gretchen Whitmer and Speaker Matt Hall, how they differ and who or what the different revenue-raising proposals would hit the hardest.

John Lindstrom and Bob Schneider discuss a topic that has been popping up increasingly among Michigan lawmakers lately: transparency and reforming the use of budget earmarks … especially “11th hour” earmarks.

Lindstrom, a former reporter, editor, and publisher of Gongwer News Service, and Schneider, senior research associate for state affairs at the Citizens Research Council recall the history of end-of-session budget earmarks.

“This is nothing new,” said Lindstrom. “I mean, you go back to when I first started covering the legislature when dinosaurs still roamed the earth. The last session day before Christmas, it was well understood that there was a bill called grants and transfers, which was known in the legislature as the “Christmas tree bill.”’

While ham is often associated with traditional Christmas dinners, Christmas tree bills/11th-hour earmarks are always associated with pork.

Eighteen months ago, Schneider reviewed and wrote that over 65 percent of over $1.3 billion in earmarks in the FY2024 “omnibus” budget bill were “eleventh-hour earmarks” that appeared only in the final bill – not in the Executive Budget or in the House- or Senate-passed budget bills.

$1.3 billion in unseen, non-public, non-transparent spending of state taxpayer dollars.

He wrote at the time that the legislature should move to improve “front-end” transparency and vetting by providing upfront details on sponsored earmarks and respecting legislative rules that should prohibit these eleventh-hour earmarks.

Since then, it has become noticeably clear that the best way to prevent these earmarks is through restrictions in statute.

“The downside to earmarks is that they, you know, they're sort of politically motivated rather than most often policy or policy motivated,” Schneider says. “The best place for these earmarked protocols would be to put them in state statute so that they are part of permanent law.

“We know the legislature -- both parties and both chambers with Republicans in charge, with Democrats in charge -- have ignored their own rulemaking at times and the courts don't really have any way to deal with that.”

On this week's FactsMatter podcast, hear Citizens Research Council Senior Research Associate Bob Schneider and Ryan Wrecker of WWJ Radio in Detroit chat about the hot-off-the-press Executive Budget for fiscal years 2026-27. They discuss everything from "where's the road funding" to K-12, new "sin" taxes on vaping and patches to yet another initiative designed to cast more sunshine and transparency on state budget earmarks ... aka: pork projects. Catch up on it all in just 25 minutes!

Citizens Research Council Senior Research Associate Bob Schneider sat down today with Research Director Craig Thiel following today’s Consensus Revenue Estimating Conference (CREC) to discuss updated economic and revenue forecasts and analyze what they could mean for Michigan’s current and future budgets.

Officials from the Department of Treasury and legislative fiscal agencies agreed that Michigan’s combined General and School Aid Funds will receive an additional $769 million in FY2025 and an extra $910 million in FY2026, compared to the previous May 2024 revenue forecast.

Thiel and Schneider noted that the increased revenue growth in Michigan will likely ease tensions, to a degree, among policymakers' many competing priorities. Schneider remarked that the stronger-than-expected revenue growth in the School Aid Fund will be welcomed among lawmakers seeking an ongoing increase in the per-pupil foundation grant.

“It makes the budget process very interesting,” said Schneider. “I’m sure road funding and tax relief will be among the many priorities discussed regarding these increased revenue projections. While more revenue certainly makes things a little easier, there will still need to be compromise.”

Schneider and Thiel also discussed that economic projections come with greater economic uncertainty, risk and variability stemming from the incoming Trump administration’s promises of both tax cuts and higher tariffs, as well as about retaliatory tariffs, and uncertainty about what will get done at the federal level and the impact on Michigan.

The CREC exists so that the Governor and lawmakers have the most accurate revenue account possible before starting work on the next fiscal year’s budget. Michigan’s top budget and fiscal officials came together, as they do each year in January and May, to seek agreement on the amount of revenues they expect state government to take in over the coming years. Top state economists also provided the CREC with U.S. and Michigan economic projections and U.S. consumer conditions updates.

The May 2025 conference will provide an update to the forecast before the FY2026 state budget is finalized. Michigan’s budget is required by law to be finalized by July 1 each year.

Citizens Research Council health policy analyst Karley Abramson is interviewed by guest host Andrew Minegar, a reporter with MIRS News. Last year, Abramson wondered why there was a stark rise in healthcare spending by the Michigan Department of Corrections, one of state government's largest general fund budgets. In subsequently published research, she discovered that there was no data to review.

Minegar/MIRS News recently uncovered and reported that the state's former prisoners' healthcare contractor owes providers $35 million in unpaid medical bills, prompting the state to drop the contract before it ended and to go to court to recover damages.

Grand Prairie Healthcare Services, based in Tennessee, was awarded a nearly $600 million five-year contract in April 2021 to provide the Michigan Department of Correction (MDOC) with health care and pharmacy services for prisoners at 27 state prisons.

Listen to Abramson and Minegar as they compare notes and discuss what they believe should be done by the Legislature and Administration.

Gongwer News administration reporter Lily Guiney speaks with Senior Research Director Craig Thiel about his recently published, novel analysis of school-level spending patterns across the largest districts in the state, showing many schools are not being funded equitably. Approximately 55 percent of schools in the state's largest districts do not receive equitable per-pupil funding at the state, local and federal levels. This is at odds with the current school funding policy priorities of Lansing officials.

The study found that among the 25 largest school districts in the state, several of which also include some of the largest populations of low-income students, a significant number of them did not disperse per-school funding proportionate to their students' socioeconomic status and needs.

“As Michigan policymakers look to continue providing additional state “at-risk” funds to those districts with greater proportions of high-need students, they may have to consider additional policy directives to ensure dollars targeted to high-need “at-risk” students are reaching those students and the schools they attend. To this end, Michigan may have to increase the financial transparency and accountability provisions that go along with the additional state “at-risk” dollars or other funding streams intended to serve students with added needs. Those provisions, combined with appropriate state oversight and monitoring, will help ensure that the state’s K-12 funding priorities are being implemented with fidelity at the local district level.”

State budget officials met on May 17, 2024, to finalize state revenue estimates that will be used as guideposts for ongoing FY2025 budget deliberations. The Research Council's Bob Schneider and Craig Thiel provide insights into what the new estimates mean as lawmakers wrap up the budget as well as the budget outlook for Fiscal Year 2026.

Scheider said the conference experts delivered a positive outlook, stating that the forecast for the national and state economy was generally good: real GDP, the key metric to monitor the health of the national economy, is expected to continue to grow through the next few years at a normal, healthy rate. Inflation is falling back, though not quite as fast in Michigan as it is nationally; incomes are growing, and Michigan's unemployment rate remains low.

The revenue conference, held in January and May each year, brings together the State Treasurer, the Michigan Legislature's top budget advisors and economists who present information on the state and national economy, workforce, wages, the auto industry, and spending patterns by businesses and the public in the aftermath of the COVID-19 pandemic. The May Revenue Estimating Conference is a key step for state lawmakers in finalizing the state budget for the upcoming fiscal year, which begins October 1.

Economists and state officials determined that revenue estimates in May showed a slight increase for the state's General Fund and a slight decrease for the School Aid Fund from January estimates.

Schneider says the most important takeaway is that revenues continue to grow.

Revenues for the state General Fund is expected to grow about 1.5 percent, or just over $200 million.

School Aid Fund revenues were adjusted down to about $160 million, or about 1 percent, from January, and that largely reflects slightly slower sales tax growth.

"During COVID, people shifted their spending patterns towards goods and 'stuff.' People were buying stuff rather than services. So now, maybe we're seeing a sort of return to normal on that front, which is slowing sales tax growth."

Lauren Gibbons of Bridge Michigan chats with Eric Paul Dennis, research analyst specializing in infrastructure policy. While Michigan is working to ‘fix the damn roads,’ with historic levels of state and federal road funding, this effort has been undermined by unprecedented inflation in the cost of construction. And road construction inflation is not uniform: using 2015 as a baseline year, cost increases range from 34 percent in the Upper Peninsula to 63 percent in the Detroit Metro region.

Michigan’s highway construction costs have increased 12 percent above expected historical rates, resulting in the purchasing power of Michigan’s road agencies dropping by over $700 million in 2023 alone.

Following the enactment of a 2015 road funding package to increase Michigan’s annual transportation revenue by an estimated $1.2 billion by 2021, subsequent gains in state and federal funding increased Michigan’s transportation budget from $3.7 billion in 2015 to $6.1 billion in 2023. Expenditures on road and bridge programs, specifically, increased from $2.9 billion in 2015 to $5.7 billion in 2023. In nominal dollars, this represents a healthy 99 percent increase over these eight years. But when adjusting for inflation, the purchasing power of this funding is much lower.

Michigan’s road agencies generally have significantly more funding than any time in the past. However, this funding is not going as far as would have been expected only a few years ago. Agencies remain challenged to utilize existing funding levels to catch up with historical maintenance backlogs and bring Michigan’s roads and bridges into a state of good repair.

WWJ-Detroit anchor and reporter Ryan Wrecker chats with Citizens Research Council President Eric Lupher about Detroit’s four-year financial plan to send $10 million in supplementary payments to city pensioners.

Detroit cut benefits to pensioners as part of its bankruptcy settlement 10 years ago. Pension benefits, already modest pre-bankruptcy, have become meager in recent years due to inflation, and that has made life harder for pensioners.

Now that the city is a decade removed from bankruptcy and in much better financial condition, it plans to make up for some of what was done in bankruptcy.

Lupher explained that it was critical that this one-time appropriation for supplementary payments to pensioners, while warranted, should indeed remain one-time, and should not mark a return to “13th checks” that previously drained the city’s pension funds.

He cautioned that attempts to expand or restore benefits to pensioners would sacrifice the present and the future for the past, a choice Detroit can ill afford.