$370 million in state work project funding will return to general budget pools after the Michigan House of Representatives and 31 state agencies reached a settlement Friday night. The agreement ends months of political and legal conflict over the cancellation of $645 million in allocated funds. Organizations across Ann Arbor and the rest of the state that rely on those grants now know their funding status. The settlement was approved by Judge Michael Gadola of the Court of Claims.
How the dispute started
In December, Michigan House Republicans voted to cancel $645 million in work project spending. They used a provision in the Management and Budget Act that allows either the House or Senate Appropriations Committee to block requested projects.
Michigan House Speaker Matt Hall (R-Richland Township) and House Appropriations Committee Chair Ann Bollin (R-Brighton Township) defended the vote. Hall told reporters at a December 10 press conference that the law allowed the committee to "unilaterally kill hundreds of millions of dollars of Democrat pork and waste, fraud and abuse."
The legal fight
The Senate Appropriations Committee held a hearing to examine how nonprofits and local government entities were affected by the cancellation. Leaders from several nonprofits and government agencies testified that the House had cut funding for efforts that were already underway. They said the loss of funds would devastate their operations.
Senate Democrats sent a letter to Attorney General Dana Nessel asking for a legal opinion on whether the cancellation violated the Michigan constitution. Nessel determined the move was unconstitutional.
The House responded by filing a suit in the Court of Claims to block the departments from spending the work project funds. The case dragged on for months as both sides prepared for a potentially precedent-setting ruling.
What the settlement means
The settlement found that only $370 million of the $645 million at issue was unencumbered. That means the remaining $275 million had already been spent or committed to projects. Under the terms approved by Judge Gadola, the $370 million in unspent funds will lapse back into the budget segments where they originated.
Hall declared victory on social media. He wrote that "Gov. Whitmer and MEDC just caved and agreed to return the $370 million in Democrat slush funds."
"They tried to shove all this waste, fraud and abuse into slush funds, and I said no way. Our Budget committee took a stand and BLOCKED it. Then the Democrats tried to sneak it out the door illegally, and I sued them to stop that."
Hall added that the money is now coming back to the state so lawmakers can "find a much better use for it to protect the taxpayers and give them better value."
The administration's response
State Budget Director Jen Flood criticized the initial vote to cancel the funding. She said in a statement that "this partisan, unprecedented action caused massive uncertainty for recipients and the Michiganders they serve."
Flood said the settlement honors existing agreements with "schools, health centers, soup kitchens, police and fire departments, and many more organizations who rely on this funding to do important work."
"At the same time, a settlement avoids 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."
Why it matters for Ann Arbor
Ann Arbor is home to numerous nonprofits, health centers, and community organizations that received or were promised work project funding. The University of Michigan area alone includes multiple health clinics, social service agencies, and educational programs that depend on state grants. The settlement provides clarity for those organizations as they plan for the coming year. The state budget deadline of July 1 looms as lawmakers finalize the next fiscal year's spending plan.