Michigan’s New Budget Patched Up with Aid from Federal Government

September 30, 2010

Michigan’s Legislature set aside its usual partisan squabbling to put thefinal touches Wednesday on a balanced budget for the coming year, relyingheavily on an infusion of federal dollars.

But the joke may be on the new governor and dozens of new legislators whotake office Jan. 1. As they work on the next state budget, they’ll have about$1.6 billion less, mostly because federal bucks disappear.

Among the final actions were approval of a onetime, $316-million federalboost for public schools, a retirement incentive for state employees and a$10-million state gift to the Detroit Institute of Arts.

The extra aid to schools restores to all school districts a minimum of $154per pupil that was cut from the current year’s budget. Many lower-spendingdistricts would get as much as $200 per pupil.

Working to beat Friday’s deadline for the new fiscal year, the House andSenate approved the last of 15 bills to wrap up an $8.3-billion general fund –the state-paid checkbook for most daily operations and state aid touniversities.

Legislators finished work on the $13.2-billion school aid budget in June.

As the Legislature completed a 2010-11 state budget to take effect Friday,it seemed long ago that:

• Gov. Jennifer Granholm proposed extending the sales tax to myriadservices.

• House Speaker Andy Dillon sought to place all public employees under asingle, statewide health insurance system to save money.

• Senate Majority Leader Mike Bishop called for $2 billion in budget cutswith no new revenue.

None of those things happened, as the federal government showered more moneyon the state, anti-tax sentiment prevailed and tax revenues took a turn for thebetter to pay for public schools.

The last pieces were put in place Wednesday, and there was no eleventh-hourconflict to threaten an embarrassing government shutdown, as happened brieflyin 2007 and 2009.

Instead, lawmakers took time to iron out the last kinks in budgets for roadsand human services.

With another $660 million in federal onetime aid delivered in the pastmonth, the ax was stored — but not forgotten.

In the new budget, money that was cut from schools this year was put back –at least $154 per pupil, with a little extra in some lower-spending districts– Medicaid recipients, mostly poor children, would get back dental, vision andpodiatry services; universities would see their state aid cut by 2.8%, and thestate prison system would absorb a $42-million cut, which may result in closingone prison or more, Granholm administration officials said.

In fact, the $12.9-billion school aid budget was approved last spring. Itgot a boost recently with an additional $316 million in federal aid.

There were no reductions in state aid to community colleges and cities,townships and counties.

The Detroit Institute of Arts, starving for money, received a gift of up to$10 million.

But plans for a second bridge over the Detroit River were cut short. TheDepartment of Transportation is to receive enough money, $750,000, to continuethe project through May. Then, it will be up to the next governor andLegislature to decide whether to continue planning the Detroit RiverInternational Crossing (DRIC), which is opposed by owners of the AmbassadorBridge.

State employees would be offered incentives to retire, as teachers wereearlier this year. Between the two groups, the state estimates savings at about$600 million.

State departments wou ld be forced to swallow modest cuts.

In all, Michigan received $7.7 billion in federal stimulus money, with $3.9billion used directly for the general fund and school aid fund.

In addition, President Barack Obama and Congress delivered the added schoolmoney, plus $350 million in additional money for Medicaid — money that freedup that much for other areas of the budget.

Both Bishop and Dillon warned that the next Legislature and governor willface a difficult budget road. A deficit of at least $1.6 billion is expectedfor the 2012 budget year, in part because the new budget is propped up with $1billion in federal money that will evaporate.

Bishop said although the new budget includes no tax or fee increases and cutcosts overall by about $200 million, he was disappointed more wasn’t done tocut long-term costs.

"Under the circumstances, this budget did take steps in the rightdirection," said Bishop, R-Rochester.

He added, "The next administration has got to continue to take biggersteps. Hopefully, they’ll have people in place that are willing to dothat."

He said the next governor should immediately devise a 100-day plan to reducespending and cope with another looming deficit.

Dillon said without the federal money, "we’d have been in serioustrouble, and next year is going to be a huge challenge."

Dillon, D-Redford Township, who ran unsuccessfully for governor in theprimary, is term-limited and will leave office without seeing his controversialplan for a unified health care system for public employees. The plan wasscuttled by employee unions and others who attacked it as anti-union andineffective in cutting costs.

Asked whether he was relieved, Dillon replie d, "I’m glad I never haveto answer the question again, ‘When’s the budget going to be done?’ "