[00:00:00] John Lindstrom: Hello and welcome to Facts Matter, a regular podcast by the Citizens Research Council of Michigan. I’m John Lindstrom. I was once a reporter, the editor, and then publisher of Gongwer News Service, Michigan. Currently, I write a column on a regular basis for the Detroit Free Press on politics, both in the state and nationally.

And I’m joined today by Bob Schneider, who is a Senior Research Associate for State Affairs at the Citizens Research Council here in Michigan. And if you’re not familiar with the Citizens Research Council, what’s wrong with you? Get on board. It is an outstanding organization. we’re here today, Bob, to talk about a specific issue that’s been popping up more and more in the state legislature.

And we are actually recording on the day after Governor Gretchen Whitmer has presented her budget. For the 2026, 27 fiscal year. and so this issue could become current again. And we’re talking about 11th hour earmarks in the budget. Why don’t you explain very quickly that term actually means?

[00:01:13] Bob Schneider: Yeah, so looked at this back in fiscal year 2024. When the state of swimming in a lot of surplus dollars in its general fund there was really significant legislative earmarking. a legislative sponsor wants an earmark added to specific entity, sometimes a nonprofit, sometimes a local unit of government, sometimes a for profit business and it’s earmarked to them We were concerned as we looked at all of the earmarking that about two thirds of it was, as you said, John, 11th hour earmarking.

And what we meant by that is the didn’t appear. It wasn’t in a house pass budget. It wasn’t in a Senate pass budget. It wasn’t reviewed by a subcommittee or a committee. It appeared literally at the last moment in the final budget that went to one vote. As a conference report by both chambers, and that’s when it all of a sudden appeared about two thirds of those earmarks were of that nature in our view.

And I think in the view of most people, that’s not a good budgeting practice. That means that those allocations, which may be even for a public service, a park renovation or something, but they didn’t go through any evaluation. We don’t know, if we’re going to improve public parks, does it need to be in City A that the earmark went to, or are there other parks that probably needed state support more?

what rationale are we using? there is none with those earmarks. And so we, in that report, Documented the amount of 11th hour earmarking and then put forth a plan to help address that from the legislature.

But recently we have seen some steps and it brings about some hope that maybe we’ll see some progress in this upcoming session.

[00:02:55] John Lindstrom: And those steps include the now majority House Republican Caucus talking about changes to the rules, in terms of that, and Governor Whitmer herself talked about in her budget message.

Putting some strictures on earmarks. But this is nothing new. I mean, you go back when I first started covering the legislature when dinosaurs still roamed the earth. The last session day before Christmas, it was well understood that there was a bill called grants and transfers, which was known in the legislature as the Christmas tree bill.

What makes this now such a concerning issue?

[00:03:32] Bob Schneider: It I would say two things. the first is Post COVID, when the state had a very unexpected revenue boom I think at the end of fiscal year 2022, we had 11 billion combined between our general fund and our school aid fund in fund balance, basically just kind of money in a bank account, right?

So that was unprecedented. A billion dollars combined wouldn’t have been all that unusual. But 10, 11, 12 billion was very unusual. And so now you’re sitting on all this money. It’s not ongoing money. It’s not money that you can use to increase something permanent in the budget. it’s really.

Best used for big one-time purposes earmarks are big one-time purposes. the downside to earmarks are that they you know, they’re sort of politically motivated rather than most often policy or policy motivated. So the size of it was disconcerting in the media.

I think very smartly called it out in many outlets. The other is the lateness with which it appeared even on the old days. and for sure the Christmas tree supplementals you know, maybe they didn’t always pass the smell test either, but at least you had to move through house chamber at least floor votes on a couple of occasions.

And if folks had questions they could get asked and stuff kind of got out before the very last conference report. So I think the other thing that makes it somewhat unique is both the size and scale of the year marking. And the lateness of the year marking with so many things appearing literally in the final bill matters of difference, which used to be a restriction on conference reports back in, you know, 2005, 2000, the nineties, they’re not.

And that’s how you get all of this stuff coming in last minute. And that was something we called for back in our analysis back in 2023.

[00:05:39] John Lindstrom: You mentioned a moment ago the concern about something being politically motivated and, and full disclosure, I’m a member of the East Lansing Parks and Recreation Commission, and I noticed we didn’t get any money for anything.

Is there any. Evidence at this point that one of these awards was possibly made to meet a promise to a political supporter, especially for example one of these grants that went to a private corporation. Has there been any evidence revealed about that?

[00:06:10] Bob Schneider: I think there has certainly been reporting about. apparent conflicts of interest involving some of these earmarks. Looking after the fact we have earmarks for two nonprofits that didn’t exist until after the earmark.

And then the folks running the nonprofit had friends in high places in politics. We have earmarks for, folks who were developing and had friends in high places in politics. there was some suggestion that political connections help drive some and perhaps even more of these.

If I’m the representative who represents East Lansing, and I push for parks improvement in East Lansing, that legislator is bringing home the bacon for his or her district.

it was the size and magnitude of some of them that I think were Particularly troublesome to many and called into question whether, there was sufficient oversight

[00:07:26] John Lindstrom: as we just now mentioned, both the governor and the House Republican caucus have proposed rules dealing with these late requests.

have you had a chance to really look at them? Obviously it’s early days yet, but have you had a chance to really study these? And if so, do you think one is a superior proposal to the other? And do they go beyond just saying, you gotta present this. With a minimum number of days before they’re acted on.

do they go into requirements about explaining who the recipient will be, what the recipient is supposed to be doing with the funding and things like that?

[00:08:06] Bob Schneider: They do. and I think both, you know, the new Republican led house, led the way with the resolution that was passed a week ago from our recording date. And that included Several good things. It does require prior to the vote disclosure of the legislative sponsor.

The purpose of each earmark, the intended recipient of the earmark. It requires some certification that, for instance, a nonprofit has been around for a certain period of time. Importantly. The resolution requires some certification on conflicts of interest. So it requires certification that the entity, whether it’s a nonprofit or a local government or any other entity There’s no conflict with not only the legislator, but a staffer a member of the family, which is a positive thing.

It also prohibits any type of grant or funding to for profit entities. Which is probably a good move. there’s constitutional language that requires a two thirds vote of chambers to appropriate money to private entities. The workaround on that is there’s always some declaration of a public purpose when money goes to private businesses It’s not always clear if that’s really the case or if it’s just a declaration. So are improvements. I think the governor’s proposal brings in some federal guidelines for how Congress deals with earmarking that run along the same lines. The one improvement that I see in the governor’s proposal is it also at the federal level, there’s a requirement for subcommittee oversight over these grant, the kind of earmarked grant proposals.

And I think we know The process is not perfect, but if you want to get to the folks who most know about and in any individual department’s budget about the public policy in the area surrounding that budget, it’s those appropriation subcommittee members are generally the best, the best folks to be overviewing.

Certainly we have brand new people on some subcommittees that are learning, but hopefully you have experienced folks as well who, who have an understanding of the budget and The issues that surround that budget. So as we looked at it, we’d like the House resolution. we would suggest adding that subcommittee oversight to the House has proposed.

but where both missed the mark I would say is the house resolution, of course, would be it was adopted, would effectively be part of the house rules. It’s a resolution on how we’re going to implement some of the house rules. The governor’s language might, you know, might end up in a budget bill.

The best place for this type of product, these earmarked protocols would be to put them in state statute so that they’re part of permanent law. So that if they aren’t followed we know the legislature on both in both parties and both chambers with Republicans in charge, with Democrats in charge, have ignored their own rulemaking at times and the courts don’t really have any way to deal with that.

You can’t bring a case to court about the House not obeying its own rules because the courts say it’s their rules. They set them and they enforce them. Putting it in statute changes that. And so the one serious suggestion we would make to go beyond what’s been put out so far is take it and put it into state law so that it has some teeth to it.

[00:11:40] John Lindstrom: You and I both know that the legislature is often not enthusiastic about putting controls on itself on a permanent basis. You look, for example, on questions of freedom of information as it affects the legislature. They keep saying, oh yeah, we’re going to do it, but it’s never been done. Are you, is there anybody in the legislature right now talking about what you’re talking about?

Introducing a bill to make this a statute. And if that were to happen, what do you think the chances are that that might pass?

[00:12:09] Bob Schneider: You know, I don’t have a good sense of that there. I am not aware of anyone proposing to do this. We do have legislation on FOIA on that matter. that’s out there. But not on this earmarked bill. Protocol. I hope that our piece and our recommendations on this generate interest.

I am proud to say I do think perhaps folks that were working on the resolution may have referred back to our old recommendations because I was pleased to see a lot of elements of what we proposed back in 2023 are part of the resolution. That, you know, that’s a critical flaw right now in my mind.

And whether the legislature is willing to put some cuffs on their behavior in this regard is still an open question. Maybe the one positive thing is, back in 2022, 2023, we were sitting on this mountain of one time money, which lent itself to these types of earmarks that maybe have been more politically helpful than public service helpful.

We aren’t sitting on that kind of mountain of money anymore. our fund balances. are getting down to being close to more normal. So we don’t have a boatload of money to pass around. Clearly the new Republican House leadership has decided they think that this is a good reform, at least for the rules.

I’m hopeful they may consider putting this in statute so that you really do have an enforceable with teeth,

[00:13:36] John Lindstrom: you brought up the fact that a couple of times now that one of the reasons why this has popped up as an issue is because the state has had tons of money just sort of dumped on it.

We’ve had, however, also in the past. Some mammoth recessions, which cut the state budget down into the marrow, not just the bone. And we, of course, back some decades ago, passed the Budget Stabilization Fund Act. And I’m just personally curious if there was any consideration as to possibly saying, You know, looking at expanding what the BSF can hold and it’s right now to help protect the budget and then maybe money like this shows up the first purpose to it should be before it goes to any parks or anything else should go to build up the budget stabilization fund and then make it available for grants.

Has anybody talked about that in any way? Are these folks. Because of term limits, they just have no memory and no knowledge of what the state had to go through.

[00:14:40] Bob Schneider: There’s, there’s never, I mean, you know, the statute has a pay in and a pay out recommendation. you need to give the legislature some credit over the years because we really have used some of that money too.

To prop up the budget stabilization fund. We do have with this budget puts more on the budget stabilization fund. So I think the regular rainy day fund will approach two and a half billion dollars. if these latest deposits and the governor’s current budget recommendation are approved, perhaps even a little more.

And then separately, we have a new kind of school aid stabilization fund that adds maybe another half billion dollars. So we’re probably 3 billion plus dollars a budget stabilization fund, which is pretty healthy. Should be higher, should be more. We’re probably getting closer to 10%, which is a pretty healthy buffer.

I think that would have been a better investment than The billions of dollars in earmarks for sure. but I wouldn’t say they’ve neglected it either. We, depleted our budget stabilization, very quickly when the floor fell out of revenues in the early two thousands but we have one back that’s actually in pretty good shape right now.

We definitely have grown that budget stabilization fund significantly, but in the end, I will agree with you it would have been a better use for those dollars than a lot of the earmarking I have not heard any discussion of, formulaically requiring a certain amount.

Of the general fund balance, for instance, every year to go to the budget stabilization fund. they prudently have put in money on a pretty much annual basis. Snyder administration that was happening. Whitmer administration so far that’s happening. And our buffer is healthy. And hopefully we’ll continue to go up as revenues continue to grow.

[00:16:30] John Lindstrom: I think we’re getting pretty well close to the end here, but I’m just curious. I always whenever I interviewed somebody just sort of get the conversation going. For example, if I was interviewing a police officer, I always say, well, who was the dumbest crook you ever caught? So I’m curious.

Is there one? Of the earmarks that really stood out one or two of the earmarks that really stood out to you as a real head scratcher. You’re wondering yourself, what was all this about?

[00:16:58] Bob Schneider: I mean, there have been many that have been highly publicized. We had money to a developer Southeast Michigan that strong connections to the GOP on that side. There’s a lot of discussion right now on a grant to a nonprofit that was headed by a close friend of Governor Whitmer’s and purchases of very expensive coffee machines and things such as that, those pop out, but I just thinking back, we had grants for low altitude space mission.

satellites and, new fangled vending machines and stuff that, when I read it, I thought, what’s that about? And those are just two. if I had my, you know, we go through the list and there were a lot that looked kind of goofy. So, and many that, Look like they could have been part of the normal budget, but again, circumvented the sort of evaluation.

Is this the highest need for parks or for new water infrastructure or was this over here? The highest need and this got ignored. And instead it went to a politician in a swing district to help them bring home the bacon. You know, those are some examples, and that’s kind of a highlight of the problem is, you get out of the deliberative evaluation type process, I think, with almost all of these earmarks

[00:18:16] John Lindstrom: and finally, if you’re a betting man at the end of this legislative session, do you think the legislature take the next step and try to make these kinds of reforms on a permanent basis, or are we going to continue to see this as an ongoing problem as we go in legislative session to another?

[00:18:36] Bob Schneider: You know, again, the size of the problem probably diminishes a little bit with the fact that we’re coming back to normal on revenue. The Senate has clearly expressed its desire to see the FOIA legislation move.

that is legislation. You know, I hope that there would be grounds for it. like it’s cause they care a lot, or they think it’s a good political message right now transparency seems to have taken hold a little bit. The democratically led Senate, Republican led Maybe can be an agreement to do both.

if it’s done, I would be hopeful that folks would heed our suggestion. FOIA gets passed in legislation and maybe the earmarks reforms also get passed in the form of legislation. That would be the best of both worlds in my opinion.
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[00:19:24] John Lindstrom: Well, I think we’ve reached enough time. I think people have gotten their interest. Peaked on this issue, and I hope that they’ll to pay attention to what’s going on. Thanks so much, Bob, participating in this conversation. And again, I’m John Lindstrom. I’ve been chatting with Bob Schneider here at the Citizens Research Council.

Thanks so much for listening. And please hit like or follow for the Research Council on Facebook, its Blue Sky, its Instagram, its Twitter, or X. Page, whatever look at and to get hold of and listen to your podcasts and make sure you also follow citizens at CRCmich.org and @CRC.mich on your social media. Thanks so much. Have a good time.