Budget Crisis Looms AGAIN

Once again Michigan citizens are faced with a looming budget crisis and potential government shutdown. The frustration with the Governor's inability to get the legislative leaders to agree on a plan is growing. The frustration with the legislative leaders inability to reach agreement or even to propose sweeping alternative solutions to our $2.5 bilion dollar deficit is very, very disappointing to many.
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Detroit Free Press reports:

Maybe there has to be blood on the floor before anything can change.

That certainly seems where Michigan is headed, as the clock ticks down toward the beginning of a new budget year Oct. 1. Two years ago, recalcitrant lawmakers allowed the state to shut down before they came to terms with their budget differences. A disaster at least as big looms again.
With just 30 days left before a new budget must be in place, only the Republican-led state Senate has passed a balanced budget that accepts the fact that broad, deep cuts must be made throughout state government.
Gov. Jennifer Granholm's plan, which combined cuts with some small tax increases when she presented it in February, is outdated, because state revenues have dropped more than had been estimated at that point. In fact, revenues have continued to drop since the last official estimate, which was made in May.
The Democratic-majority House has passed all the appropriate budget bills largely by scarfing up every cent of stimulus money to maintain state programs -- and the House won't even say how much it will cost to keep the departments of Human Services and State Police running.
So going forward, the Senate plan -- which relies on dreadful cuts but is the most intellectually honest option on the table -- represents the only public blueprint for a fiscally responsible budget.
That's not good news for cities, college students, preschoolers, doctors and nursing homes with Medicaid patients, or anyone whose economic difficulties have left them reliant on the state's welfare system. But it reflects reality, given the state's terrible financial situation, the need to avoid blowing all the remaining federal stimulus money to balance one year's budget, and the likelihood that the state's revenue picture will get worse next year.
If Granholm and the House want to do something other than what the Senate is proposing -- which is highly likely, considering how harsh the Senate plan is -- now's the time to come forward with real plans that protect both the state's citizens and its longer-term financial outlook.
Keep education promise
School funding provides the clearest example of how the Senate budgeted with an eye to the future.
Without use of stimulus money, the $7,316 per-pupil foundation grant for schools would have to be cut about $510 (or 7%), according to calculations from the Citizens Research Council of Michigan. Granholm recommended a $59 cut per pupil in February; the Senate passed a cut of $110 per pupil, combined with $238-million worth of cuts in other school-related budget categories.
Using all of the remaining stimulus money allocated for education might allow the grant to be kept nearly steady next year, but that means school districts could face the full $510 cut -- or more, if tax revenues continue to decline -- all at once a year from now.
It makes far more sense to ease into cutbacks, while saving a little to cushion the blow in the following year. Similar calculations should hold for most other state operations.
Unfortunately, Michigan has no major programs that it can simply drop. Universities, prisons, health care and services for the poor make up almost the entirety of the general fund budget. The School Aid Fund, which is even bigger, supports K-12 education.
Two of the newest major program expansions, both of which are Granholm initiatives that the Senate budget kills, are Michigan Promise grants to help high school graduates cover the first two years of higher education and expanded preschool.
Agree or disagree with Granholm's priorities -- and she has the right instincts on education -- it is dishonorable to abandon the commitment made to college students. Lawmakers should look elsewhere for cuts, in order to sustain the Promise "promise." Changes in the program, if deemed essential to Michigan's long-term solvency, should be done with enough lead time so that the state isn't breaking its word to students.
But to survive and thrive in the 21st Century, the state needs to maintain this kind of investment in human capital -- the rising generations on whose continuing education the state depends for economic progress. Abandoning preschoolers will just as surely jeopardize the drive to make this a smarter, better-off state.
Nickels and dimes won't do
There's no doubt most other government services will have to take cuts, whether it's paring welfare benefits, hacking at revenue sharing with cities and townships, continuing to downsize the state's overbuilt prisons and pruning rates paid to anyone who treats Medicaid patients, as Granholm did in May with an executive order that sliced payments to doctors and nursing homes by 4%.
Some cuts, however, do fall into the penny-ante category and will do more harm than good. Returning wetlands regulation to the federal government and scattering the state archives, as part of the breakup of the Department of History, Arts and Libraries, for example, each get the state less than 0.1% closer to closing the budget gap. Yet diminishing the state's history and ignoring Michigan's singularly keen need to protect wetlands will cause indisputable harm and inconvenience for years to come.
Granholm, in particular, seems to prefer such minor actions -- including tax increases in many nearly invisible areas -- to sweeping change. Some are reasonable, such as her proposal to increase liquor license fees and to end some tax exemptions. But Michigan's overall problems are beyond most nickel-and-dime remedies.
Somehow, the governor and the legislative leaders must patch together a budget for the coming year. Yes, there will be blood. And maybe that's what it will take for everyone to realize that what the state most needs is a long-term restructuring -- in taxes, in health care, in incarceration policy, and more -- if the state is to have a long-term future.

Written by Detroit Free Press on Sunday, August 30, 2009