Honigman Capitol Report

Revenue Estimating Conference Official Revenue Forecasts Announced

The May Consensus Revenue Estimating Conference was held last Friday and included presentations focusing on state and federal economies and state government revenues. Official revenue forecasts were established for fiscal years 2024, 2025, and 2026 by a consensus of the conference principals including the State Treasurer, the Director of the Senate Fiscal Agency, and the Director of the House Fiscal Agency. Overall Revenue Forecasts (in millions) are listed below:

Revenue estimates are based on the most recent economic projections and forecasting models. Since January estimates, the General Fund is projected $351.4 million higher and the school aid fund $163.3 million lower for the current fiscal year. For the 2024-25 fiscal year, General Fund revenues were estimated up $235.6 million and School Aid Fund down $160.1 Million.

House, Governor and Senate Budgets Focus on Different Priorities

The Legislature is heading in to budget negotiations with key differences in priorities. The House’s $80.9 billion budget highlights housing, changes to local government revenue sharing and water infrastructure funding. The Senate’s focuses on increasing Medicaid reimbursements and housing affordability. Governor Whitmer’s budget calls for funding free preschool for all Michigan four-year-olds, reworking scholarships to fully cover community college and focusing on large-scale attraction and retention spending.

The Governor wants to increase local government revenue sharing by 5 percent. Both the House and the Senate want to shut down the current policies completely and start over. The House has proposed to give local governments a set 8 percent of the 4-cent portion of the state’s 6-cent sales tax instead of changing it from year to year. The Senate wants to set up a three-factor formula to determine how much each local government receives.

Governor Whitmer also wants to increase access to the Great Start Readiness Program (GSRP) to include all four-year-olds and eliminate the maximum income eligibility completely. The Senate has proposed increasing income requirements from 300 percent of the federal poverty line to 400 percent while the House wants to set it at 350 percent for prioritized households and 450 percent if there are GSRP spots leftover.

The Governor’s budget redirects $670 million in public school retirement debt payments to other K-12 priorities including the GSRP above and the free breakfast and lunch program. The House and Senate agree on the funding relocation, however, the Senates wants the money to go towards teacher student loan forgiveness and a higher foundation allowance. The House proposes that the funding go towards helping school districts and educators with their own MPSERS obligations.

Board of State Canvassers to Resolve Challenges for August Primary

The Michigan Board of State Canvassers will meet on May 31st to resolve any challenges and release the list of candidates for the August primary ballot. A number of challenges have been filed. Republican attorneys filed a challenge to the petition of Democrat Curtis Hertel Jr. in the 7th U.S. House District because it said “U.S. Congress” instead of U.S. House. Additionally, two U.S. Senate candidates have had their access challenged, Democrats U.S. Representative Elissa Slotkin and Nasser Beydoun. U.S. Representative Shri Thanedar (Democrat) filed a challenge asserting that one of his opponents for the Democratic nomination in the 13th U.S. House District, former Senator Adam Hollier, did not submit sufficient valid petitions to be on the ballot. The Wayne County Clerk agreed and has now disqualified Adam Hollier  Challenges for most offices were due April 30 with U.S. Senate challenges due May 2, in total 31 challenges were submitted.

In addition to the challenges filed within the required time frame, the Michigan Democratic Party sent a letter last Friday, May 17, to the Board urging an investigation into petitions filed by four Republican U.S. Senate candidates, former U.S. Representatives Justin Amash, Peter Meijer and Mike Rogers along with Sandy Pensler. The letter indicates that an initial review showed potential forgery of signatures by petition circulators and that “[t]he board has the authority – and, practically speaking, a duty – to conduct a full investigation of candidates' nominating petitions, even absent a formal or timely complaint."

The FTC Non-Compete Ban Explained in Detail

The Federal Trade Commission (“FTC”) issued a final rule last month, effectively banning nearly all employee non-compete agreements nationwide. On May 7, 2024, the FTC rule was published in the Federal Register. Subject to the pending legal challenges to the rule, it will go into effect on September 4, 2024.  A ruling is expected regarding one of the legal challenges by July 3, 2024. You can learn more about the rule here. Additionally, this week, Honigman's Labor and Employment partner, Sean Crotty, hosted a webinar discussing the intricacies of the FTC rule and providing strategies for preparing for compliance in anticipation of any legal challenges to the ruling. A recording of the webinar can be found here. 

Looking Ahead

State Budget negotiations and elections will likely always figure as consistent pillar issues for Lansing policymakers and politicos, alike. Fall House elections will continue to color legislative policy and timing choices, however, the state budget is the major item that needs resolution prior to legislative summer recess and increased focus in district for House members running for reelection. Whether running for reelection or not, one piece of good news for state legislators is the fact that the final consensus revenue estimate projects stable revenues. Specifically, modest gains to the state general fund and modest losses to the state’s school aid fund will allow policymakers to pass a budget without drastic reductions. With federal Covid and related relief dollars a thing of the past, many anticipated a year of budget disruption. It is possible this will still become the story at some point, but not this year. We will, instead, see the usual trade-offs between funding public health, economic development and education programs without the recent additional litany of projects supported by federal relief funds in recent years. 

Legislative leadership is presently meeting to determine budget targets, the total spend under which all appropriations to the various state departments must fit. Once targets are agreed, the work of finalizing negotiations on individual budget choices will begin. This framework for negotiating will come together around the time of the annual Mackinac Policy Conference. Hosted by the Detroit Regional Chamber, this event pulls members of the political and business communities to Mackinac Island for a week of networking and conference programming. The event frequently coincides with the announcement of government and industry led initiatives, leveraging the critical mass of media who attend to follow all the influencers. Expect the final stages of negotiations on the approximately $80 billion state budget by the time the legislature returns for June session days.