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Michigan’s deficit may top $1.8 billion

 

New projection suggests budget may require deep cuts, tax hikes

 

Derek Melot

• dmelot at lsj.com • December 29, 2010

List of 7 items

 

Governor-elect Rick Snyder says he wants not one, but two years' worth of state budgets finished by July 1, 2011. The latest report on state finances, though,

says the initial hurdle of the fiscal 2012 budget will be even higher than believed just two months ago.

 

The Senate Fiscal Agency now projects a 2012 budget deficit of more than $1.8 billion in the state's general fund, if current spending and revenue policies

remain in place. That's an increase of $400 million over projections made by the SFA in October.

 

"A look ahead at the issues facing Governor-elect Snyder and the newly elected members of the Legislature leads to the conclusion that, absent significant

tax increases, a very significant imbalance will exist," according to the report.

 

Snyder and the Legislature will not have official numbers to work from until the next Revenue Estimating Conference on Jan. 14, which uses calculations

from the SFA, the House Fiscal Agency and the State Budget Office.

 

"I believe the SFA is within the budget range of numbers the transition team's been seeing," said Snyder spokeswoman Geralyn Lasher. "Obviously, the governor-elect

has talked about putting our fiscal house in order," she added.

 

In remarks to the Michigan Booth Newspapers this week, Snyder said his administration would "comprehensively" address the costs of public employee compensation.

 

With more than 14,000 employees in the region, the state of Michigan tops a list of largest employers compiled by the Lansing Regional Chamber of Commerce.

 

"You cannot, as a state, cut your way out of this crisis," said Ray Holman, legislative liaison for UAW Local 6000, the largest of the state employee unions.

"(The budget) will be a real challenger if they do away with the Michigan Business Tax. That will take the deficit above $3 billion. You are going to talk

about losing some programs that will leave people out in the cold - literally," he said.

 

The SFA report is consistent with other recent projections that Michigan's economy is improving. However, that improvement will have a muted effect on the

state's public finances. For example, a cut in the state income tax rate from 4.35 percent to 4.25 percent on Oct. 1, 2011, will reduce income tax collections

by $162 million for fiscal year 2012, the report says.

(2 of 2)

 

SFA also warns that $200 million in money carried from the fiscal year 2011 budget might be lost due to a dispute with the federal government over payments

by Washington, D.C., to Michigan's Medicaid system. And it's unlikely that Michigan will get anywhere near the $900 million in federal assistance built

into this year's budget.

 

"This problem has been here, lurking behind the trees for two years. That the federal government isn't extending the stimulus reveals it," said Craig Thiel

of the nonpartisan Citizens Research Council of Michigan.

 

Michigan's budget woes are not unique. The Center for Budget and Policy Priorities, a Washington-based group, says at least 36 states are staring at budget

deficits for fiscal year 2012.

 

"We can't get by on gimmicks or games any longer," said Senate Minority Leader Gretchen Whitmer, D-East Lansing. "A long-term solution requires investment

in education and public safety," she added.

 

The trends are not all grim. SFA projects that the current state budget is holding up and the separate School Aid Fund for fiscal year 2012 would allow

for an increase in the per-pupil funding grant to local school districts.

http://www.lansingstatejournal.com/article/20101229/NEWS04/12290316/Michigan-s-deficit-may-top-1.8-billion