Lansing − Roughly $370.7 million designated for certain projects around the state will be returned to the general fund under a settlement deal between the Michigan House and all of the state’s agencies and departments.
The short stipulated agreement, entered into the court record Friday at the start of Memorial Day weekend, essentially ends the case between the House and state agencies without mentioning the constitutionality of a law the House used in December to cancel $644.9 million in state grants.
“The parties calculate that the remaining unencumbered portions of the original $644.9 million in appropriations for which the state budget director sought work project designations is $370.7 million,” the settlement said.
Those funds, under the agreement, shall be “lapsed to the state fund from which it was appropriated.”
It is likely that funding will be used for the new state budget currently under negotiation.
State Budget Director Jen Flood, on Friday, called the House’s cuts “partisan, unprecedented action” that caused “massive uncertainty” for Michigan residents who benefited from the funds.
The settlement entered into on Friday honors agreements already in place, Flood said, while avoiding “a ruling that could have implicated billions of dollars already at work in our communities.”
“Now, let’s move full steam ahead with finalizing a balanced, bipartisan budget that invests in kids and protects access to health care before the July 1 deadline,” Flood said.
House Speaker Matt Hall, R-Richland, celebrated the settlement on social media Friday, writing that the Whitmer administration had “caved” and agreed to return the “Democrat slush funds” to the general fund.
Hall thanked the House Appropriations Committee for having the “backbone” to reject the funds in December and put a stop to automatic renewals of work projects.
“Their vote to block the work project designation was valid, and the money will be put into the General Fund just as the statute requires. And just like it always should have been,” Hall wrote. “I predicted this on the day we blocked all this wasteful spending back in December.”
The lawsuit stems from a roughly $2.4 billion request made by the State Budget Office in November to designate hundreds of line items from the prior budget year as so-called “work projects” to continue spending past the end of the fiscal year on Sept. 30.
Under state law, if state agencies are unable to spend all their money within a given fiscal year, they can request work project designations for those line items to continue spending down the funds for another four years.
Usually, the State Budget Office request is routine and goes unchecked by the state Legislature.
But House Republicans over the past year have argued the state has been converting far more line items than usual into work projects and creating something of a slush fund for the agencies to tap into without prior legislative approval.
So the House Appropriations Committee deployed a rarely used provision in state law that allows them to disapprove, or effectively veto, that funding without input from their counterparts in the Democratic-controlled Senate.
On Dec. 10, the committee disapproved of roughly $645 million in requests from the State Budget Office. Those cuts were later recalculated to include all unencumbered dollars, or money not already under contract. Of the $645 million, about $370.7 million was considered unencumbered.
Nessel, in an attorney general opinion released in January, found the law allowing for the cuts was unconstitutional and could not be used by the Legislature. Nessel’s opinion, which is binding on state agencies, allowed the state departments to begin unfreezing the money.
But the GOP-led House sued a couple of days later and, on Jan. 16, Court of Claims Judge Michael Gadola ordered state departments not to spend the funds after ruling the House’s actions were constitutional and that the chamber was likely to prevail.
The parties have been in negotiations since and notified the court of their intent to settle on Friday.
eleblanc@detroitnews.com
This article originally appeared on The Detroit News: House, state agencies settle suit over $370.7M in work project cuts
Reporting by Beth LeBlanc, The Detroit News / The Detroit News
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