by Gongwer News Service
April 17, 2009

With state revenues in a continued downward spiral, the legislature will no doubt return from spring break next week only to immerse itself in the task of finding a way to slice up to $800 million from the current year’s budget.

Everyone will play a role to shore up the budget, since analysts predict revenues could come up short by as much as a billion dollars by the end of the fiscal year if current trends continue.

Governor Jennifer Granholm last week reportedly began considering an executive order cut of some $80 million to begin the budget correction process and, working with leaders in the legislature, on further adjustments to the FY 2008-09 budget, as well as discussing how to allow stimulus money to best serve the state.

The state already adopted one executive order in December cutting more than $100 million from the 2008-09 budget. Revenues, however, continue to plunge as the state’s unemployment rate climbs — reaching 12.6 percent in March. Since the January Revenue Estimating Conference, revenues have fallen by more than $100 million each month from the forecast total.

Some officials suggested that if revenues continue to fall at that rate until September, the end of the fiscal year, then the state would have to adjust the budget by more than $1 billion.

Officials are anxiously awaiting April’s revenue numbers to see if the current month brings an end to the hemorrhaging.

Even if April provides some revenue solace, it does not negate the need to make budget fixes and quickly. The scope of those fixes with half the fiscal year lost to history, however, remains daunting.

Early last week, Ms. Granholm warned the state would still have to make large budget cuts even if it used every penny of stimulus money to help keep the budget balanced.

She refused at that time, however, to put a number to the size of the overall problem. But by the end of the week, the number was revealed: $780 million, going possibly as high as $800 million.

At this stage, to make that level of adjustments would take both stimulus funds and spending cuts, though how much would be cut was uncertain. The $80 million that Ms. Granholm suggested lawmakers use as a beginning point includes $30 million in proposed reductions the House had passed in a negative supplemental shortly before the spring break.

Also unknown, at this point, is from where the cuts would come.

The largest part of the negative supplemental was actually a $16.7-million swap of federal stimulus funds for child support incentive payments covered by general funds.

Other money came from programs that typically lapse extra funds over the years, as well as savings from not implementing a subsidized foster care guardianship program.

House Speaker Andy Dillon (D-Redford Twp.) said the cuts presented by the governor seemed as if they would get approval from all parties, but that officials are working on adding more cuts to the executive order.

“We’re all respectably working in our cubby holes to find extra money,” he said. Another meeting on that topic is scheduled for Tuesday.

Mr. Dillon said the way the stimulus is tied to certain programs prevents officials from cutting state dollars and would force reductions to discretionary spending by 50 percent. That’s impossible, which is why more federal stimulus dollars than originally anticipated will have to be used to keep the budget afloat.

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