by Gongwer News Service
January 12, 2009

Faced with the news that Michigan’s worsening revenue collections, higher unemployment and lagging auto sales may mean the state can’t hold out for a federal stimulus package, leaders around the state last week scrambled to get out their ideas for balancing the budget and, in turn, protect their respective interests.

Looming large on most everyone’s radar was Friday’s Revenue Estimating Conference for 2009, which brought the unwelcome, but perhaps not surprising, news that the state’s revenues will fall short by an estimated $917million this year and could potentially leave the state with a $1.4-billion deficit in 2009-10.

The House Fiscal Agency estimated on Wednesday that General Fund and School Aid Fund revenues could drop by more than $1.5 billion from 2007-08 to 2009-10.

Also, there were 73,000 fewer jobs in 2008, and it is expected that number will balloon to 191,700 jobs this year, raising the unemployment rate to 11.3 percent in 2009.

The tough news from economists spurred a flood of strategy suggestions for increasing revenue with the help of the federal government and for reducing costs in corrections and Medicaid.

Governor Jennifer Granholm has already cut $134 million from this year’s budget, saying that although she may have needed to dig deeper to balance the budget, she is holding out in anticipation of a federal stimulus plan under the new Congress and President-elect Barack Obama.

Indeed, the Michigan League for Human Services said last week that further cuts aren’t the answer and that instead, the state needs to work with the federal government to find creative ways to make existing dollars stretch.

The League said cutting millions from social services, as the governor has proposed, would have disastrous consequences for the ever-increasing number of people who have fallen prey to the economic downturn and then depend on the state’s safety net to survive.

Instead, said the nonprofit group, the state should push Congress to initiate the suggestions released by the National Conference of State Legislatures.

Those suggestions include increasing the federal share of Medicaid spending by 8 percent, which would in turn decrease state spending on the program by about $800 million a year, and increasing food assistance dollars that would increase spending on food items, funneling money back into the state’s economy.

NCSL also called on the federal government to provide direct grants to states and to extend unemployment benefits.

While some focused on the federal government’s ability to offer yet another bailout, others said there’s plenty the state could and should do to balance its own budget before driving the federal budget further into the red.

Senate Majority Leader Mike Bishop (R-Rochester) and other legislative Republicans continue to push for further spending cuts in the state’s budget, saying that there’s still fat to trim.

In keeping with tradition, the Department of Corrections is again being singled out as a source of state overspending.

For example, the Citizens Alliance on Prisons and Spending said last week that continuing to fund corrections at $1.9 billion in 2009 will make it “impossible to fully fund higher education.”

CAPPS is calling on lawmakers to enact a plan that it says would save hundreds of millions of dollars a year by reserving prison beds for dangerous offenders, encouraging successful reentry into society, increasing the use of drug and mental health courts, as well as offering community based alternatives to prison and clearly defining the discretion of the parole board.

With hundreds of millions spent on the public healthcare annually and billions spent by hospitals for uncompensated care, some are also taking aim at reforming Medicaid.

The Grand Rapids Area Chamber of Commerce again urged Michigan leaders to follow recommendations it outlined in a report released last May. Those suggestions focused on the idea that in its current state, Medicaid reimburses doctors at far too low an amount, leaving many physicians to turn away program recipients, and forcing those recipients to then turn to expensive hospital visits as their only viable treatment option.

Even with a variety of long-term solutions for lowering costs, legislators and the governor will likely be forced to take a less strategic but more immediate route of slashing the budget in upcoming weeks.

No matter what actions leaders take, it’s likely Michiganders will hear plenty about the reasons behind them as the state’s economy is expected to be the main focus of the governor’s State of the State address, scheduled for February 3.

For nearly 50 years in Michigan, Gongwer News Service has provided independent, comprehensive, accurate and timely coverage of issues in and around Michigan’s government and political systems. For subscription information, including a free trial, visit Gongwer online.