by Gongwer News Service
October 13, 2008

If, as Samuel Johnson said, nothing so concentrates the mind as the prospect of being hanged, then state treasury and budget officials must have headaches from all the concentrating they are doing.

Barely two weeks into the 2008-09 fiscal year, state officials who have endured nearly eight years of an economic flogging face the prospect of mounting the fiscal gallows as the national and international economies continue to collapse.

Top fiscal officials, such as House Fiscal Agency Director Mitch Bean, are on record as saying they expect that cuts to the state budget will be needed at some point this year.

The Senate Fiscal Agency put out a budget report saying that overall tax collections will likely be lower in this fiscal year.

And Business Week said that Michigan is expected to be one of 31 states that will have troubles this fiscal year keeping their budgets in check. The problems are expected from the smallest states, like Vermont which will struggle with budget problems of less than $100 million, to the largest of California and New York which could struggle with combined deficits of nearly $28 billion.

Officially, the state will and can do nothing to the budget until it has been notified by the revenue estimating conference that the state’s revenues will not meet expectations. That meeting will not come until January, though a special meeting could be called if considered necessary.

But if there was ever any doubt before, there can be none now that the economic calamity that has battered Michigan has fully and totally slammed the rest of the country. The only states that may be somewhat immune from the collapse are those that are the largest producers of oil, natural gas and coal. Every other state is likely to struggle with finding financing for projects as well as dealing with increased unemployment and lower tax revenues.

For Michigan, these factors have become a sad fact of life. And with the state’s economy still too tied to the automotive industry (and with new fears of the industry’s future) the state is likely to return to budget cutting as surely as it can expect the auto companies to continue to cut their payrolls and production schedules as well.

And with budget cuts will come the inevitable twin issue of taxes. After the titanic struggle of 2007 to reach legislative agreement to raise the income tax and add a surcharge to the Michigan Business Tax, Governor Jennifer Granholm said she would not seek another tax increase.

Not going for a tax increase, however, will not be enough for many politicians. Legislative Republicans are attempting to put pressure on House Democrats to come into session before the November 4 election to enact a measure repealing the surcharge on the MBT.

It’s not likely House Democrats will swallow the bait. But they, in turn, through Speaker Andy Dillon (D-Redford Twp.), are calling for discussions to revise the state’s total tax structure.

Meanwhile, state officials must endure the ongoing reality of collapsing pension funds even as they nervously wait for an opportunity to finance an estimated $1.4 billion in short-term borrowing.

With all this to concentrate on, state officials could be excused if they sought out a special appropriation for aspirin.

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