State budget director: Post-COVID budget should mark a 'return to normal' in Michigan

LANSING — The COVID-19 emergency is pretty much over — officially, at least — and the billions of federal relief dollars that came with it are pretty much spent.

So the state budget Gov. Gretchen Whitmer presents in February will mark a "return to normal" after a few years of unusually inflated revenues, coupled with greater need for state government help, says Whitmer's new budget director, Jen Flood.

Flood, who formerly served as Whitmer's deputy chief of staff, said she aims for more of a stand-pat, or continuation budget, for the 2025 fiscal year that begins next Oct. 1.

"We've had a really unique set of circumstances the past couple of years, navigating the pandemic," Flood said in a Tuesday interview in her office in the Romney Building, across the street from the Capitol.

"But then we've also had this incredible opportunity with the billions of dollars from the federal government that came down," she said. "I think we've done a really great job at seizing the opportunities that those dollars have provided to the state."

Now, "they're off the balance sheet," so "we're going to be back to a bit of a new, more normal budget year."

Flood said she and other officials are preparing the budget with the state in a strong financial position, having used some of Michigan's surplus revenues to boost the Rainy Day Fund to a record balance of nearly $2 billion.

Still, potential budget challenges loom. One is a pending lawsuit in the Michigan Court of Claims over whether a legislated cut in the personal income tax rate to 4.05% from 4.25% — interpreted by the Whitmer administration and Attorney General Dana Nessel as a one-year cut for only the 2023 tax year — was intended to be permanent. If the court rules against Whitmer and Nessel in favor of business groups and Republican lawmakers, the state's budget outlook changes significantly.

"I think no matter what comes our way, we'll be well-positioned," said Flood, who has a bachelor’s degree in economics and a master's degree in public policy from MSU and succeeds Chris Harkins as budget director.

Flood is delivering not just a budget of around $80 billion, but a second child she is expecting in January, right around the time of the Jan. 12 revenue estimating conference. She said she expects to take maternity leave, so it's not clear whether she will be at the Capitol for the budget presentation in early February.

"I'm incredibly lucky that there's a team of professionals here who've done this for decades," Flood said. "So I'm just going to get as far as we can in the process, and then one day, I'll have a baby, and they'll get everything across the finish line."

Flood said the state has done a great job of making sure one-time money has been used for one-time expenditures. Those have ranged from billions in spending on new water lines and other measures to improve drinking water and major capital improvements to state parks to billions in financial incentives paid to attract new manufacturing facilities, particularly ones related to batteries and electric vehicles.

But in a few cases, such as the expansion of state-sponsored child care, it's expected state budget architects will have to find state revenues to replace federal COVID-19 funding.

"There will certainly be some pressures and challenges," Flood said. "We're going to have to really prioritize going forward without the federal dollars, but we've been really strategic to make sure that we have the ability to build on the investments that we've made."

Flood said she likes to think about the budget in ways that can be understood by regular Michiganders, such as her parents, who have a small business related to heating and cooling.

"That's the perspective that I am hoping to continue to bring," she said. Every investment should be looked at through the prism of what it means to real people and how the state can make sure it is connecting with those residents in a way that they will understand the budget's impact, she said.

Though it is not expected to provide for major funding increases in education and other programs that were centerpieces of recent Whitmer budgets, Flood said the 2025 budget could incorporate some recommendations of the Growing Michigan Together Council, which presented its report Thursday aimed at reversing Michigan's population decline.

Its recommendations included improving mass transit, financial incentives to attract new workers, offering students two years of tuition-free postsecondary education, and investing in "regional innovation districts" as a way to retain more postgraduates educated in the state and support entrepreneurship.

Republicans, who have criticized Whitmer for spending too quickly what was a $9.2-billion budget surplus at the start of this year, slammed the council's report Thursday as a report laying the groundwork for Whitmer tax hikes. The council made no recommendations about how to pay for its recommendations.

In the February budget, "I wouldn't anticipate any tax increases," Flood said Tuesday. "People are really concerned about lowering costs right now."

Contact Paul Egan: 517-372-8660 or [email protected]. Follow him on X, formerly known as Twitter, @paulegan4.

This article originally appeared on Detroit Free Press: Michigan official: Post-COVID budget should mark a 'return to normal'