Sustainable Michigan Budget Empowers Lawmakers, Strengthens Fiscal Future

Originally published at Mackinac Center for Public Policy.​

MIDLAND, Mich. — After blowing through a $9 billion surplus and seeing slowing economic growth, Michigan lawmakers have a critical opportunity to embrace fiscal restraint and adopt a Sustainable Michigan Budget. Holding state spending to the rate of inflation and population growth would enable the state to prepare for the future, reduce debt and provide tax relief to residents.

Over the past two years, Michigan’s Democratic majority allocated $3 billion to district grants and $4.7 billion in select business subsidies — spending that has failed to yield significant benefits. A recent Mackinac Center study shows that such subsidies rarely deliver on job creation promises. Of the thousands of jobs promised in headlines in the Detroit Free Press from 2000 to 2020, only 9% materialized. These subsidies serve political interests rather than economic sustainability, diverting resources from essential services like education, infrastructure and taxpayer relief.

A Sustainable Michigan Budget would limit spending growth to 3.6% this cycle, ensuring the state meets its financial obligations, including pension debt payments. Fiscal discipline would also give lawmakers flexibility to respond to future downturns without resorting to budget cuts or tax hikes.

“Michigan lawmakers can achieve more by exercising fiscal restraint,” said James Hohman, director of fiscal policy at the Mackinac Center for Public Policy. “Restraint allows flexibility in tough economic times, ensures debt reduction, and provides greater capacity for key services and tax relief.”

Last year, legislators diverted $670 million away from pension debt payments, worsening the state’s liabilities. Michigan’s largest creditors are public employees in the state retirement system, who depend on lawmakers to uphold pension commitments.

With Republicans taking control of the Michigan House, there’s an opportunity to correct course. Although pandemic-era federal funds are gone, state revenues remain strong, allowing lawmakers to establish a fiscally responsible framework.
“States that practice sustainable budgeting can offer greater tax relief and foster economic growth,” said Dr. Vance Ginn, president of Ginn Economic Consulting and a senior fellow with the Mackinac Center. “Michigan has a chance to lead by adopting responsible budgets that prioritize long-term prosperity over short-term gains.”

This year presents the ideal moment for decisive action. A Sustainable Michigan Budget will not only stabilize the state's financial future but also ensure that taxpayer dollars are spent responsibly.