by Gongwer News Service
March 23, 2009

While the state is still counting on $2.1 billion in federal stimulus money to get funding to vital projects from education to transportation, with coffers running ever lower it’s less and less clear how much stimulus money will be sacrificed to balancing the books.

One can scarcely sit through an Appropriations Committee meeting in the legislature and not hear reference to how the federal money will likely supplement a cut to one program or another, and local governments reportedly asked for a whopping $60 billion to cover costs of projects they are pursuing. Governor Jennifer Granholm has often said the stimulus will help millions in the state, and communities across the state are eagerly waiting federal money to jumpstart construction in their cities.

But no sooner had Gov. Granholm sent the supplemental request for FY 2009-10 stimulus funds to the legislature than analysts warned the money likely wouldn’t stretch as far, given Michigan’s lower than estimated revenues.

Senate Fiscal Agency Executive Director Gary Olson, for example, told the Senate Appropriations Federal Stimulus Oversight Subcommittee last week that the state may be forced to use more of the federal money than originally intended to keep the 2008-09 budget balanced.

Since revenues for January and February have dropped by some $200 million from earlier estimates, total revenues for the year will have to be re-estimated at the May Revenue Estimating Conference, Mr. Olson said. Since a portion of the stimulus package is designed to help stabilize state budgets and prevent layoffs of those workers, that will force the state to make greater use of those funds for that purpose, he said.

In other words there’s the potential that little of some $1.3 billion that could be allocated by the state to local governments will be, he said.

Local communities and school districts in the state have made requests for nearly $60 billion in construction projects, a figure that could never have been met, but Mr. Olson said legislators should inform their local governments to pare back their expectations of what could be used for projects.

The request for the supplemental appropriation was sent on Friday, but only became generally known on Thursday when the subcommittee held its first meeting to review the stimulus bill, the American Recovery and Reinvestment Act.

Earlier this month, the administration had made its supplemental appropriation request for the $873 million in transportation stimulus funds.

The House approved HB 4582 on Wednesday to allocate those funds, and the Senate is expected to act on the bill next week. Officials have said the measure needs to be enacted into law by April 2 to ensure the state can let contracts to take advantage of all the money it is eligible to receive.

Ms. Granholm issued a statement Thursday, saying the stimulus package would help millions of Michigan residents by saving current jobs and creating new ones, investing in education, helping rebuild the state’s infrastructure, and providing a safety net for people struggling in the economy.

The supplemental request sent by Ms. Granholm’s budget office allocates $962 million in education funding, $435 million in human services funding, $344 million for the Department of Energy, Labor and Economic Growth, $248 million for environmental quality and $6.5 million for community health. There are smaller grants for the National Guard facilities, Department of State Police anti-drug efforts, for the arts and other functions.

The supplemental does not include such items as funding coming to the state to shore up the Medicaid program.

Plus, there are federal funds that will go directly to local communities and that will follow funding formulas in place, Mr. Olson said.

But it was critical for everyone to recall that the federal money is intended as temporary money, Mr. Olson said. The administration is listing all of the stimulus requests as work projects to designate that they are temporary, he said.

He also said officials should expect human nature to intercede, with organizations coming back in later years and saying they did a good job with the federal funds that were allocated and that they should be able to get state money to perform the same tasks.

That temptation should be expected considering some of the enormous changes the stimulus money will make to some state programs, Mr. Olson said.

For example, the state now spends $18.4 million for weatherization projects for low-income households. Under the stimulus package, the state will get $244 million for the same program, plus the definition of which households will be eligible will be increased from 150 percent of poverty to 200 percent, and the maximum amount that can be spent on a house will also be increased from $2,500 to $6,500.

In other energy programs that the state spends less than $5 million on now, it will see $108 million in funding, though the state still needs to see guidelines on how to spend those funds.

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