Michigan state budget (2008-2009)

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State Information


Michigan faced a $1.7 billion budget deficit for fiscal year 2009 and an even larger budget gap of $1.6 billion for fiscal year 2010, according to the Center on Budget and Policy Priorities.[1][2] According to state officials, even with incoming federal stimulus dollars, the state expected to see a $300 million shortfall. The general fund alone was expected to see a total drop of 26 percent. In May 2009, Gov. Jennifer Granholm ordered a 4-percent reduction for spending in fiscal year 2009.[1] Despite continuing budget cuts, the governor announced in her spending plan for fiscal year 2010 that even though her budget proposal took the stimulus package into account, extra money would not be used to increase spending for ongoing programs.[3] In August 2009, Gov. Granholm offered a $685 million revenue plan to balance the 2010 budget that included many tax hikes on items like water bottles, cigarettes, beer and others.[4]

Impact of budget woes

See also: State budget crisis, 2009-2010
  • In April 2009, the seasonally unadjusted regional unemployment rates declined in 16 of Michigan's 17 major labor markets. However, despite the decline in some regions, the overall unemployment rate in Michigan had not declined. The lowest regional jobless rate in April was 7.8 percent in Ann Arbor and the highest rate was 16.4 percent in the northeast part of the Lower Peninsula, according to state officials.[5]
  • The statewide unemployment rate in April 2009 hit 12.9 percent, the highest since November 1983. According to the U.S. Labor Department, the manufacturing and construction sectors lost the most employees. Michigan experienced a total loss of 38,400 in the month of April.[6]
  • In light of a decrease in funding for the Michigan Department of Transportation, approximately 125 projects were threatened to be delayed should funding be unavailable. In order to increase funding the director of the department called to convert the gas tax to a percentage tax on the wholesale price of gas. Under the proposal the tax would rise at capped amounts as prices at the pump increased.[7]

Budget background

See also: Michigan state budget

The Michigan state budget is proposed to the governor on an annual basis. The Michigan Constitution requires the governor to propose an Executive Budget for state activities every February. By law the Executive Budget must be submitted to the legislature within 30 days after the legislature convenes in regular session on the second Wednesday in January.[8]

Budget figures

The following table shows total state spending in recent years.

Year Gross appropriations Federal revenue Difference – state spending from state sources
FY 2008-2009 $44,633,407,900 $14,917,594,200 $29,715,813,700[9] (Increased $108 million)
FY 2007-2008 $43,578,704,400 $13,970,996,300 $29,607,708,100[10] (Increased $402 million)
FY 2006-2007 $42,385,938,000 $13,180,056,000 $29,205,882,000[10] (Increased $1.079 billion)
FY 2005-2006 $40,904,128,000 $12,778,003,500 $28,126,124,500[10] (Increased $677 million)
FY 2004-2005 $39,923,663,500 $12,351,486,100 $27,448,662,539[10] (Decreased $247 million)
FY 2003-2004 $39,241,892,100 $11,546,223,200 $27,695,668,900[10]
  • On February 12, 2009, Gov. Granholm proposed a 2009-2010 budget that would spend $44.203 billion gross, of which $16.068 billion was federal money, and $28.135 represented state spending from state sources. However, passage of a 2009 federal "stimulus" bill was expected to boost the federal component and gross spending by many hundreds of millions of dollars.[11]

Ideas about why the crisis occurred

  • State tax revenues from February 2009 through April 2009 were down nearly 13 percent compared with the same period in 2008 - a $1.3 billion drop.[12]
  • Even with the nationwide recession that the US was experiencing, Michigan, officials said, would experience a sharper decline in light of General Motors Corp.'s financial woes. GM planned to eliminate 21,000 jobs at 14 plants, plus three warehouses, in eight states. Michigan's share of the total job loss was approximately 42 percent.[13]
  • David Littmann, economist for the Mackinac Center for Public Policy, said the auto industry's share of Michigan's tax base had shrunk from as much as 30 percent to as low as 10 percent.[12]

Proposed actions

Governor Jennifer Granholm

Gov. Jennifer Granholm's budget proposal calls for a combination of budget cuts and federal stimulus dollars to balance the state's budget. Granholm calculates the use of approximately $500 million from the federal government's stimulus and the elimination of 1,500 state workers and $59 per-pupil in K-12 education funding. Additionally, the governor asked for $28 million in concessions from state employees.[14]

Republicans

Michigan Republican lawmakers said in early February 2009 that they would be looking at the state's looming budget deficit as if the federal stimulus money did not exist. "For us to accept the stimulus package and not address the problems that have gotten us to this place - a $1.6 billion deficit - is irresponsible," said Matt Marsden, spokesman for Senate Majority Leader Mike Bishop. Most Republican lawmakers agreed that in order to fix the state's budget gap structural reforms and budget cuts were necessary for the future of the state.[3] "We have no choice but to reduce spending," Senate Appropriations Committee Chairman Ron Jelinek said. "We will prioritize programs, but that doesn't mean they will be held harmless, it simply means they might take less of a hit than others. There is no dodging the bullet for anyone."[1]

Democrats

Michigan Democrats said that they agreed with the Gov. Granholm's budget proposal. Democratic Lieutenant Governor John D. Cherry said, "Michigan can no longer paper over our structural deficits." Cherry insisted that it's time for Michigan to restructure and cut unnecessary spending.[14]

Economic stimulus package

Michigan was expected to receive $7 billion from the $787 billion dollar economic stimulus.[15] All told, the federal stimulus plan would create or save 109,000 jobs in Michigan, based on White House estimates.[16]

According to preliminary reports, Michigan was expected to receive:

  • $2.27 billion for Medicaid[15]
  • $1.34 billion for fiscal stabilization in education[15]
  • $419 million for special education[15]
  • $211million for K-12 construction[15]
  • $501 million for community services grants[15]
  • $293 million for general state government[15]
  • $280 million for weatherization[15]
  • $2.6 million for health clinics[17]
  • $7.3 million for adoption and foster care programs[18]
  • $3.1 million for senior nutrition programs[19]
  • $1 billion to improve child support enforcement[20]
  • $873 million in road projects[21]
  • $50 million for modernization and development of public housing[22]

Budget transparency

As of 2009, no department of Michigan state government provided a comprehensive and searchable online checkbook register that gave a full and timely accounting for all expenditures. Spokespersons for the office of Michigan governor Jennifer Granholm had asserted that providing such a service for all of Michigan state government would cost in excess of $100 million, and was thus cost-prohibitive given the state's recurring inability to align desired spending with available revenue.[23]

News

  • Michigan Department of State provides first online expenditure report: On April 23, 2008, Michigan Secretary of State Terri Lynn Land announced that the Michigan Department of State would begin posting quarterly expenditure reports.[24] These reports would provide the names for most of the recipients of departmental funds, the general category for the expenditures and the total amount paid during the preceding quarter.[24] The MDOS made the decision to post this expenditure report after a request from the Mackinac Center for Public Policy's "Show Michigan the Money" transparency project.[25] The MDOS report was, as of 2009, the only regular accounting of expenditures provided by any department of state government. The MDOS report did have limitations. It was provided as a searchable PDF document, but did not provide check numbers nor was it subdivided by date for individual transactions. The reports also did not provide the names, titles and salaries paid to departmental employees (however, the names of employees and amounts paid to them for travel and other work-related reimbursements were included in the reports).
  • Governor's response to lack of online "check register": Democratic Governor Jennifer Granholm had responded to calls to put the state "check register" online by asserting that current information systems could not provide this information, and making them capable of doing so would be too costly. An April 9, 2008 report by the Michigan Information News Service (MIRS, subscription required) reported that a letter to House leaders from state Department of Information Technology (DIT) director Ken Theis said that the state's financial accounting mainframe computer system acquired in the in 1980s would require "extensive" upgrades costing between $100 million and $150 million to produce the kind of searchable spending database that Missouri had created. The point of the Mackinac Center request referred to above was merely to ask state departments to replicate the Secretary of State standard, leaving them to decide whether they wished to exceed it. As reported on the Mackinac Center's "Show Me the Money" website, using the same mainframe computer system, the Michigan Secretary of State department posted quarterly spending reports at an initial cost of $2,400, and $700 for each new quarterly report. If those figures were extended to the entire state government the initial cost to produce similar quarterly reports would be $516,000, and $129,000 per quarterly report, or 0.0012 percent and 0.00035 percent of the annual budget, respectively.[26] The reply to the Mackinac Center's request from the Office of the Governor also addressed employee salary information, stating that "this level of detail provides little value to the taxpayer."[27]
  • In February 2009, two freshmen Republican members of the Michigan House, Amash and McMillin], began posting detailed records of their own office spending, including itemized monthly expenditures by category, and the names and salaries of their legislative aides. The House Republican caucus had claimed that it was posting detailed spending data, but as of 2009 these two legislators were the only ones actually doing so.

Legislation

See also: Michigan Freedom of Information Act
  • In 2009, Republican legislators introduced several bills that called for a searchable online state "check register." This continued a pattern begun in 2008, when GOP members of the Democratically-controlled House sought to attach amendments to state department budget bills requiring the departments to post on a website all their expenditures during a fiscal year, and the purpose of each. These were defeated in voice votes or through parliamentary maneuver. These amendments were introduced after the Democratic governor's response described below to calls to produce an online "check register," and were generally viewed as political gamesmanship, especially since the Republican-controlled Senate chose not to back up the demand.
  • In February 2009, legislation passed in the state Senate that would require detailed reporting by the Department of Treasury and the Michigan Economic Development Corporation on subsidies and targeted tax breaks granted to particular businesses selected by bureaucrats, or identified by thinly disguised statutes (Senate Bills 70, 71 and 72). The future of the legislation in the Democratic-controlled House was uncertain.

Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

State database Searchability Grants Contracts Line item expenditures Dept./agency budgets Public employee salary
None n/a n/a n/a n/a n/a n/a

Public employee salary information

See also: Michigan state government salary

Economic stimulus transparency

  • The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[28]
  • Michigan was expected to receive an estimated $4,925,282,005.[29]

See also

External links

Additional reading

References

  1. 1.0 1.1 1.2 Associated Press, "More Michigan budget cuts planned for 2009-10," May 15,2009 (dead link)
  2. Center on Budget and Policy Priorities, "State budget troubles worse," May 18,2009
  3. 3.0 3.1 Associated Press, "Michigan budget proposal to address $1.6 billion shortfall," February 11,2009
  4. "Gov. Jennifer Granholm proposes budget with tax hikes, including extension of sales tax to sports, entertainment tickets," mlive.com, August 13, 2009
  5. Associated Press, "April jobless rates decline in Michigan regions," May 28,2009 (dead link)
  6. WSJM, "Michigan Unemployment Highest In US Again," May 22,2009
  7. Associated Press, "Mich. agency: Drivers can afford gasoline tax hike," June 3,2009 (dead link)
  8. Michigan Office of Budget, Budget Process
  9. House Fiscal Agency, "Appropriations: Summary and Analysis, FY 2008-09," October, 2008
  10. 10.0 10.1 10.2 10.3 10.4 House Fiscal Agency, "Appropriations: Summary and Analysis, FY 2007-08," December, 2007
  11. House Fiscal Agency, "Preliminary Review of the FY 2008-09 Executive Budget Recommendation," Feb. 17, 2009
  12. 12.0 12.1 Free Press Lansing, "Michigan tax revenues fall nearly 13%," May 13,2009
  13. The Detroit News, "Michigan feels brunt of GM's bankruptcy," June 2,2009
  14. 14.0 14.1 Kalamazoo Gazette, "Lt. Gov. John Cherry calls for long-term fixes to Michigan's budget problems," February 13,2009
  15. 15.0 15.1 15.2 15.3 15.4 15.5 15.6 15.7 Associated Press, "Report: Stimulus had $7B for Michigan," February 18,2009 (dead link)
  16. American Recovery and Reinvestment Act, "Impact," accessed June 3,2009
  17. Michigan Recovery and Reinvestment Act, "Michigan Receives $2.6 Million for Health Clinics, Creating 105 Jobs," accessed June 3,2009
  18. Michigan Recovery and Reinvestment Act, "HHS releases $7.3 Million in Recovery and Reinvestment Funds for Adoption and Foster Care Programs in Michigan," accessed June 3,2009
  19. Michigan Recovery and Reinvestment Act, "Michigan to receive more than $3.1 Million in Recovery Act funding for senior nutrition programs," accessed June 3,2009
  20. U.S. Department of Health and Human Services, "HHS Makes Estimated $1 Billion in Recovery Act Funds Available to Improve Child Support Enforcement," March 26,2009
  21. Michigan Recovery and Reinvestment Act, "Governor Granholm Signs Legislation Authorizing $873 Million in Road Projects," March 31,2009
  22. Michigan Recovery and Reinvestment Act, "64 Michigan communities to receive more than $50 million for modernization and development of public housing," accessed June 3,2009
  23. Mackinac Center for Public Policy, State Checkbook Still Missing from Internet, Oct 2008
  24. 24.0 24.1 Michigan Department of State, Land publishes FY07 spending, April 23, 2008
  25. Mackinac Center for Public Policy, Mackinac Center’s “Show Michigan the Money” Project Prompts Michigan Department of State to Post Unprecedented Detail in Department Spending, April 23, 2008
  26. Mackinac Center for Public Policy, "State Checkbook Still Missing from Internet," Oct. 6, 2008
  27. Mackinac Center for Public Policy, Governor response, July 17,2008
  28. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  29. Wall Street Journal, "Stimulus Spending by State," April 23,2009