SB 596: State finance: budgets; legislatively directed spending items; create a request and monitoring process for. Amends 1984 PA 431 (MCL 18.1101 - 18.1594) by adding sec. 364. TIE BAR WITH: HB 4420'25 - Michigan

As Passed by the Senate → Substitute (S-1) · 12 edits

MAJOR

The substitute version makes several substantive changes to the legislatively directed spending item framework: it replaces the fixed 10-day submission deadline with a flexible date agreed upon by both chambers, broadens eligible recipients from 'nonprofit corporation' to 'nonprofit entity,' narrows the federal tax lien prohibition, shifts oversight focus from agreement compliance to benchmarks and deliverables, and removes the specific January 1, 2026 effective date in favor of tying it to enactment of a companion bill.

TIMELINE

The deadline for legislators to submit requests changed from 'at least 10 days before the bill is passed by both chambers' to 'before the date agreed to by the senate and house of representatives,' giving the legislature flexibility to set its own timeline rather than a fixed statutory deadline.

The effective date was changed from a fixed 'January 1, 2026' to being contingent solely on enactment of House Bill 4420, with no specific calendar date. The retroactive application carve-out also changed from 'before January 1, 2026' to 'before the effective date of this section.'

REQUIREMENT

The provision allowing either chamber to require, by rule, that legislators submit requests at an earlier date was removed, consistent with the shift to a mutually agreed-upon date.

The requirement to post information at least 10 days before a bill containing directed spending items is passed by both chambers was removed from subsection (3).

A new requirement was added that a legislatively directed spending item must not be included in a bill or conference report unless it was presented at an appropriations committee hearing, with explicit reference to conference reports which was not in the original.

SCOPE

The term 'nonprofit corporation' was replaced throughout with 'nonprofit entity,' broadening eligibility beyond incorporated nonprofits to potentially include unincorporated associations and other nonprofit forms. The corresponding definition referencing MCL 450.2108 was removed.

The disaster/emergency exemption was narrowed from 'a disaster or emergency situation' to 'a declared state of disaster or state of emergency,' limiting the exemption to formally declared emergencies rather than any situation that could be characterized as one.

ENFORCEMENT

The oversight requirement in subsection (6) changed from ensuring funds were 'spent in accordance with the terms of the legislatively directed spending item agreement' to ensuring 'the benchmarks and deliverables of the legislatively directed spending item have been met,' shifting the focus from general compliance to specific measurable outcomes.

The audit provision was simplified from 'subject to audit at the discretion of the auditor general' with a restriction that only department restricted funds could be charged, to simply 'the auditor general may audit a state department or agency that administers a legislatively directed spending item,' removing both the discretion qualifier and the funding restriction.

The compliance enforcement mechanism in subsection (7)(d) was restructured: the department now must cease payments until a corrective action plan is submitted and approved, and if the item is canceled, the money must remain in the original fund and not be expended until properly appropriated. The previous version allowed broader discretionary actions including seeking reimbursement.

ELIGIBILITY

The prohibition on using directed spending to pay tax liens or delinquent taxes was narrowed: it no longer covers obligations owed to 'the federal government,' only those owed to the state or a political subdivision of the state.

TECHNICAL

The website transparency requirements were simplified: instead of separately listing the legislator's name, cosponsors, recipient name, purpose summary, and description, the substitute requires posting 'the form, and all of the information on the form, that was submitted under subsection (1),' consolidating those details into a single requirement.

Senate Introduced Bill → As Passed by the House · 10 edits · Oct 30, 2025

MAJOR

This bill significantly restricts how legislators can request legislatively directed spending items by adding stricter eligibility requirements, transparency rules, and oversight mechanisms. It prohibits for-profit entities from receiving such funds, requires nonprofit recipients to meet specific operational and governance criteria, and mandates detailed public disclosure of all spending requests and outcomes.

Scope change

The bill expands oversight requirements and adds new eligibility restrictions while maintaining the core framework for legislatively directed spending items.

ELIGIBILITY

For-profit entities are now explicitly ineligible to receive legislatively directed spending items, whereas the original bill only stated they were not eligible without explicit prohibition.

Nonprofit corporations must now meet three specific requirements: continuous operation in Michigan for 3 years, a physical office in Michigan for 1 year, and having a board of directors.

REQUIREMENT

New requirement that nonprofit recipients must submit IRS Form 990 or equivalent tax return to the department as part of the spending agreement.

New requirement that legislatively directed spending items cannot be used to pay tax liens, delinquent taxes, or obligations owed to federal, state, or local governments.

Enhanced transparency requirements with new website obligations for both legislative chambers and administering agencies, including status updates and amendment descriptions.

Requires recipients to enter into a formal legislatively directed spending item agreement with specific terms including repayment obligations and compliance requirements.

ENFORCEMENT

Added requirement that recipients repay funds if used for purposes other than those specified, and departments can take corrective action including cancellation or seeking reimbursement for non-compliance.

Requires the auditor general to evaluate management of legislatively directed spending items as part of annual financial audits at no additional cost.

TIMELINE

Added effective date of January 1, 2026, and provision that the bill does not apply to items requested or included in bills before that date.

DEFINITION

Added formal definitions for 'leadership position' and 'legislatively directed spending item' with specific exclusions for disaster/emergency responses, formula-driven awards, and appropriations to state agencies.

As Passed by the House → As Passed by the Senate · 7 edits · Nov 5, 2025

MODERATE

The bill significantly tightened requirements for legislatively directed spending items by adding stricter submission deadlines, expanding oversight mechanisms, and clarifying eligibility rules. These changes aim to increase transparency and accountability while giving legislative leadership more flexibility in committee oversight.

Scope change

The bill's scope remains focused on legislatively directed spending items, but the rules governing how they are requested, reviewed, and monitored have been substantially expanded.

REQUIREMENT

Added a 10-day minimum deadline for submitting legislatively directed spending requests, with flexibility for chambers to require earlier submission by rule.

Added requirement for nonprofit recipients to provide IRS tax returns within 10 business days of department request.

Added requirement for appropriations committees to include vice chairs and minority vice chairs in leadership position definitions.

TIMELINE

Changed the public posting deadline from 60 calendar days to 10 days before a bill is passed by both chambers.

ENFORCEMENT

Replaced mandatory annual audits of legislatively directed spending items with discretionary audits by the auditor general, limited to restricted funds.

ELIGIBILITY

Modified tax lien restrictions to only apply to non-governmental entities, allowing governmental entities to use funds for tax obligations.

DEFINITION

Expanded the definition of legislative leadership positions to include additional committee leadership roles beyond just committee chairs.

House Concurred Bill → Senate Concurred Bill · 8 edits

MODERATE

This bill establishes new rules for legislatively directed spending items, requiring legislators to submit formal requests and restricting recipients to nonprofits with specific operational requirements. The changes add transparency measures, including public websites to track spending and agreements that require recipients to repay funds if misused. The bill also expands oversight by requiring the auditor general to evaluate management of these funds and adds new reporting requirements for recipients.

Scope change

The bill applies to all legislatively directed spending items requested on or after January 1, 2026, but excludes items requested before that date. It does not apply to disaster/emergency appropriations, formula-driven awards, or appropriations to state departments.

ELIGIBILITY

Added requirement that nonprofit recipients must have operated in Michigan for 3 consecutive years and maintained a physical office in the state for 1 year before receiving funds.

REQUIREMENT

Requires legislators to submit formal requests using a specific form and prohibits legislators without leadership positions from requesting funds for recipients outside their district.

Requires nonprofit recipients to submit IRS Form 990 or equivalent tax return to the department as part of the spending agreement.

TRANSPARENCY

Mandates public websites maintained by the legislature and department to display detailed information about each spending item, including recipient names, purposes, and status updates.

ENFORCEMENT

Requires recipients to sign agreements that mandate repayment if funds are misused, prohibits use for tax obligations, and allows the department to cancel funding or seek reimbursement for non-compliance.

Requires the auditor general to evaluate management of legislatively directed spending items as part of annual financial audits at no additional cost.

DEFINITION

Defines key terms including 'leadership position' (senate/house leaders and appropriations committee chairs) and 'nonprofit corporation' based on existing state law.

TIMELINE

Added sunset provision stating the section does not apply to spending items requested or included in bills before January 1, 2026.

Substitute (S) → House Concurred Bill · 9 edits

MAJOR

This bill was revised to clarify and expand regulations on legislatively directed spending items in Michigan. The changes include stricter eligibility requirements for nonprofit recipients, enhanced transparency and reporting obligations for legislators and agencies, and new protections to prevent misuse of funds. These updates aim to improve accountability and ensure taxpayer money is used as intended.

Scope change

The bill's applicability remains focused on legislatively directed spending items, but the effective date was set to January 1, 2026, and the bill is contingent on the enactment of a companion House bill.

ELIGIBILITY

Added requirement that nonprofit corporations must have a board of directors to qualify for legislatively directed spending items.

REQUIREMENT

New provisions require nonprofit recipients to submit IRS Form 990 or equivalent tax returns to the department as part of the spending agreement.

Legislators must now submit spending requests on forms described in section 364a, with specific timing requirements for first and second fiscal years of a legislative session.

TRANSPARENCY

Enhanced website posting requirements mandate that information about spending items be posted at least 45 calendar days before a bill is passed by both chambers, up from 10 days.

ENFORCEMENT

New provisions require recipients to repay funds if used for unauthorized purposes and give departments authority to cancel payments or seek reimbursement for non-compliance.

Changed the auditor general's role from discretionary audits to mandatory annual evaluations of legislatively directed spending item management at no additional cost.

DEFINITION

Added explicit definitions for 'leadership position' and 'legislatively directed spending item' to clarify scope and prevent confusion.

TIMELINE

Established a sunset provision stating the section does not apply to spending items requested or included in bills before January 1, 2026.

TECHNICAL

Minor formatting and text cleanup changes, including removal of page headers and correction of capitalization in the enacting clause.

Substitute (S-1) - 2 → Substitute (S-2) - 3 · 5 edits

MODERATE

This amendment modifies the requirements for legislatively directed spending items in Michigan's budget process. The changes primarily adjust procedural timelines for submitting spending requests and enhance transparency requirements by adding more detailed information that must be publicly disclosed. These modifications aim to improve accountability and public access to information about how taxpayer money is allocated through legislative direction.

Scope change

The bill's scope remains focused on legislatively directed spending items, but the procedural requirements for requesting and disclosing these items have been expanded and modified.

TIMELINE

Changed the timing requirement for submitting legislatively directed spending requests from a date agreed to by both chambers to a requirement that requests be submitted at least 10 days before the bill is passed, with an option for chambers to require earlier submission by rule.

REQUIREMENT

Added a requirement that legislatively directed spending items must be presented at a hearing of the appropriations committee or subcommittee before a bill containing the item is passed by both chambers.

Expanded the information that must be posted on legislative and department websites to include the names of requesting and cosponsoring legislators, recipient names, purpose summaries, and detailed descriptions of each spending item.

ELIGIBILITY

Changed the terminology from 'nonprofit entity' to 'nonprofit corporation' in eligibility requirements, though the substantive criteria (3-year operation, 1-year physical office, board of directors) remain the same.

ENFORCEMENT

Clarified that auditor general audits of legislatively directed spending items are subject to discretion and that only restricted funds may be charged for such audits in applicable circumstances.

Substitute (S-2) - 2 → Substitute (S-1) - 2 · 7 edits

MODERATE

This revision simplifies the legislative process for requesting directed spending items by removing the specific 10-day deadline and replacing it with a flexible date agreed upon by both legislative chambers. The bill also broadens eligibility by changing 'nonprofit corporation' to 'nonprofit entity,' expands transparency requirements to include a department website, and strengthens enforcement by adding provisions to prevent disbursement if recipients are not using funds for intended purposes.

Scope change

The bill's scope was modified to allow more flexibility in the timing of spending item requests and expanded the definition of eligible recipients from nonprofit corporations to nonprofit entities.

TIMELINE

Removed the fixed 10-day deadline for submitting spending item requests and replaced it with a flexible date agreed upon by the Senate and House of Representatives.

ELIGIBILITY

Changed the eligible recipient type from 'nonprofit corporation' to 'nonprofit entity,' which may broaden the range of organizations that can receive legislatively directed spending.

REQUIREMENT

Added a requirement for the state department to establish and maintain a public website listing information about each legislatively directed spending item included in enacted appropriations bills.

Added a new requirement that non-governmental recipients must not use funds to pay state tax liens, delinquent taxes, or other obligations owed to the state or its political subdivisions.

Modified the required information posted on websites to include the form and all information submitted under subsection (1) instead of listing specific data points like legislator names and purpose summaries.

ENFORCEMENT

Added provisions to prevent disbursement of funds if the department determines a recipient is not using or will not use the appropriation for its intended purpose.

Expanded enforcement powers to allow the department to take any action authorized by law to recover funds if a recipient is not in compliance with the spending item agreement.

Substitute (S-1) → Substitute (S-2) · 5 edits

MODERATE

This bill revision clarifies and expands requirements for legislatively directed spending items in Michigan. Key changes include stricter timelines for submitting spending requests, expanded public transparency requirements, and updated eligibility criteria for nonprofit recipients. The revision also modifies audit and oversight procedures to ensure accountability.

Scope change

The bill's scope remains focused on legislatively directed spending items under the Management and Budget Act, but the requirements for how these items are requested, tracked, and reported have been expanded and clarified.

TIMELINE

Changed the timing requirement for submitting legislatively directed spending requests from 'before the date agreed to by the senate and house' to 'at least 10 days before the date that the bill containing the spending item is passed by both chambers of the legislature', with an option for chambers to require earlier submission by rule.

ELIGIBILITY

Changed 'nonprofit entity' to 'nonprofit corporation' in eligibility requirements, which may narrow the scope of eligible recipients to formal nonprofit corporations rather than broader nonprofit entities.

REQUIREMENT

Added new website disclosure requirements requiring the department to list the names of requesting and cosponsoring legislators, recipient names, purpose summaries, and detailed descriptions of each spending item.

Changed the requirement from ensuring benchmarks and deliverables have been met to ensuring the spending has been spent in accordance with the terms of the agreement, shifting focus from project completion to compliance with spending terms.

ENFORCEMENT

Modified audit language to clarify that state department or agency oversight is subject to auditor general audit at the auditor general's discretion, and specified that only restricted funds may be charged for such audits.

State finance: budgets; legislatively directed spending items; create a request and monitoring process for. Amends 1984 PA 431 (MCL 18.1101 - 18.1594) by adding sec. 364. TIE BAR WITH: HB 4420'25

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