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Michigan state budget (2009-2010)

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The state faced a $300 million deficit in August 2010, with the fiscal year ending on September 30, 2010. Gov. Granholm proposed a plan on August 18, 2010 that would eliminate the shortfall.[1] With federal stimulus money drying up and Medicaid and prison costs swallowing half of the state’s general fund budget, the state’s tax base could not pay for all current services, even with a decade of spending cuts, analysts said. Tax cuts scheduled to kick over in the next two years meant even less money for the state, which took in $6 billion less in taxes than it gave out in tax credits to individuals and businesses.[2]

Education

The governor's August proposal closed the budget gap by moving $208 million from the K-12 school aid fund to fund community colleges, marking the first time that money from the school aid fund would be used for anything other than K-12 education.[1] The House and Senate both approved the transfer, which was made more feasible by the state's receipt of unexpected federal schools money.[3]

Sales tax revenue that was higher than anticipated generated a $348 million surplus in the School Aid Fund, which pays for most of what public schools spend.[4][5] Legislative discussions of the 2011 budget included suggestions of a $400-per-pupil cut in school funding, but the unexpected surplus made it likely that public school districts would not see reductions in the 2011 education budget. "Right now it's looking very positive that we'll be able to balance this budget without doing further cuts," said Rep. Terry Brown, chairman of the House K-12 Appropriations Subcommittee. The surplus did not, however, mean that districts would be reimbursed for the 2010 reduction of $165-per-pupil.[4]

Budget cuts

The legislature passed the budget with the assumption that the state would receive $500 million in extra Medicaid money from the ongoing federal stimulus plan. As of June 30, 2010, Congress had not approved those funds. Without approval of the $500 million, Michigan Senate Republicans planned to propose new budget cuts the first week of July, which would likely include up to a 35% reduction of reimbursement to physicians who treated the state's 1.6 million Medicaid patients. Gov. Granholm said that revenue-sharing and funding for higher education could also be cut.[5]

Gov. Granholm had made other proposals to lower the deficit. She called for reforms to cut prison costs, which Senate Republicans had spurned. She also proposed reducing or eliminating some tax exemptions. In addition, she requested that the legislature pass a money-saving retirement plan for state workers, similar to one recently enacted for school employees.[5]

2009-2010 budget crisis

In February 2010, Gov. Jennifer Granholm recommended a total budget of $47.1 billion for the FY 2011, with approximately $566 million in budget reductions. The governor's budget included a recommendation to restructure the state's tax system. The restructuring would include lowering tax rates from 6 percent to 5.5 percent, expanding sales and use taxes and eliminating the Michigan Business Tax (MBT) surcharge.[6] Budget cuts included requiring teachers to pay 3 percent toward their pensions and providing incentives for state workers and senior teachers to retire. The changes were estimated to save the state $450 million. The proposed budget additionally relied on $722 million in federal recovery assistance, of which about $500 million had yet to be approved.[7]

2008-2009 budget crisis

See also: Michigan state budget (2008-2009)

Budget background

See also: Michigan state budget

The Michigan Constitution requires the governor to propose an Executive Budget for state activities on an annual basis. By law the Executive Budget must be submitted to the legislature within thirty days after the legislature convenes in regular session on the second Wednesday in January. However, when a newly elected governor is inaugurated into office, sixty days are allowed to prepare the proposal. The Executive Budget is more than a statutory requirement. It represents a statement of priorities for the policy activities of state government. Therefore, a detailed budget preparation process is necessary to provide information that will help the governor and the legislature allocate state resources most effectively.[8]

According to the Michigan Constitution, no appropriation is a mandate to spend. The governor, by Executive Order and with the approval of the appropriations committees, can reduce expenditures whenever it appears that actual revenues for a fiscal period will fall below the revenue estimates on which the appropriations for that period were based. By statute, any recommendation for the reduction of expenditures must be approved or disapproved by both of the Appropriations Committees within ten days after the recommendation is made. A reduction cannot be made without approval from both committees; not later than thirty days after a proposed order is disapproved, the governor may submit alternative recommendations for expenditure reductions to the committees for their approval or disapproval.[9]


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[10] (increased $108 million)
FY 2007-2008 $43,578,704,400 $13,970,996,300 $29,607,708,100[11] (increased $402 million)
FY 2006-2007 $42,385,938,000 $13,180,056,000 $29,205,882,000[11] (increased $1.079 billion)
FY 2005-2006 $40,904,128,000 $12,778,003,500 $28,126,124,500[11] (increased $677 million)
FY 2004-2005 $39,923,663,500 $12,351,486,100 $27,448,662,539[11] (decreased $247 million)
FY 2003-2004 $39,241,892,100 $11,546,223,200 $27,695,668,900[11]

General fund[12]

Category FY 2009 amount in millions actual FY 2010 amount in millions estimated
Beginning balance 458 177
Revenues 7,161 6,891
Adjustments 1,014 1,075
Total resources 8,633 8,143
Expenditures 8,456 8,108
Adjustments 0 0
Ending balance 177 34
Budget stabilization Fund 2 2

Accounting principles

See also: Michigan government accounting principles

The Michigan Office of the Auditor General has the responsibility, as stated in Article 4, Section 53 of the State Constitution, to conduct post financial and performance audits of state government operations. In addition, certain sections of the Michigan Compiled Laws contain specific audit requirements in conformance with the constitutional mandate. As of 2009, Thomas H. McTavish had served as Michigan Auditor General since 1989. Michigan's audit reports are published online.[13]

The Institute for Truth in Accounting (IFTA) rated Michigan “timely” in filing the state’s Comprehensive Annual Financial Report (CAFR), the annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA did not consider Michigan's CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis did not include significant liabilities for the pension plans and for other post employment benefits, such as health care.[14] Michigan's CAFRs are published online by the Michigan Office of State Budget, Office of Financial Management. As of 2009, Michael J. Moody was the Director Office of Financial Management. Bob Emerson was the Director of the Office of State Budget.[15]

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 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.[16]

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

  • Michigan would receive approximately $705 million from the federal government under H.R. 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010.[17]
  • Michigan received an estimated $4,925,282,005 from the first stimulus.[18]

Three Michigan projects were noted in Senator Coburn's and Senator McCain's "Summertime Blues, 100 stimulus projects that give taxpayers the blues" report. In one project, the U.S. Department of Health and Human Services gave researchers at the University of Michigan a grant to study population processes and the environment in the foothills of the Nepalese Himalayas.[19] Another project awarded a $60,000 terrorism prevention grant to a ferry boat company serving an island of 600.[19]

Error in ARRP

According to Recovery.gov, federal stimulus funds would go to 884 congressional districts, though there are only 435.[20][21]

The ARRP website created 10 non-existing districts in Michigan, as well, awarding them $5,387,945 to "create/save" 49.5 jobs.[22]

The ARRP website listed the Michigan capital, Lansing, ZIP code as receiving $1,217,275,548 and creating 17,966.9 jobs. The website credited Michigan with “creating/saving” 22,514 total jobs, meaning Lansing accounted for almost 80 percent of the jobs “created” statewide.

See also

External links

Additional reading

References

  1. Cite error: Invalid <ref> tag; no text was provided for refs named new
  2. The Detroit Free Press "Budget experts predict economic dire straits" May 17, 2010
  3. Cite error: Invalid <ref> tag; no text was provided for refs named retirement
  4. 4.0 4.1 EducationReport.org "School aid fund had unexpected surplus" May 20, 2010
  5. 5.0 5.1 5.2 The Detroit Free Press "Michigan budget cuts readied as a $500-million hit was expected" June 26, 2010
  6. Michigan Live, "Gov. Jennifer Granholm presents 2011 state budget recommendations," February 11, 2010
  7. Associated Press, "Gov pitches expanding sales tax, cutting biz taxes," February 11, 2010 (dead link)
  8. Michigan Office of the State Budget Web site, accessed October 26, 2009
  9. Michigan Office of the State Budget Web site, accessed October 26, 2009
  10. House Fiscal Agency, "Appropriations: Summary and Analysis, FY 2008-09," October, 2008
  11. 11.0 11.1 11.2 11.3 11.4 House Fiscal Agency, "Appropriations: Summary and Analysis, FY 2007-08," December, 2007
  12. National Governors Association and National Association of State Budget Officers Fiscal Survey of States June 2010 (dead link)
  13. Michigan Office of the Auditor General Web site, accessed October 26, 2009
  14. Institute for Truth in Accounting, “The Truth About Balanced Budgets—A Fifty State Study,” Page 35
  15. Michigan Office of State Budget Web site, accessed October 26, 2009
  16. Mackinac Center for Public Policy, State Checkbook Still Missing from Internet, Oct 2008
  17. Federal Fund Information for States “ARRA FMAP Extension & Education Jobs Fund Totals” Aug. 11, 2010
  18. Wall Street Journal, "Stimulus Spending by State," April 23,2009
  19. 19.0 19.1 "Summertime Blues, 100 stimulus projects that give taxpayers the blues" August 2010
  20. $6.4 Billion Stimulus goes to Phantom Districts, Watchdog.org, November 17, 2009
  21. Stimulus Creates Jobs in Non-Existent Congressional Districts, Watchdog.org, November 16, 2009
  22. Michigan stimulus dollars