Governor's Budget Recommendations Solve Deficit, Protect Critical Priorities

Contact: Tiffany Brown 517-335-6397

August 18, 2010

Job-creation efforts, schools, health care protected from cuts
LANSING - Governor Jennifer M. Granholm today detailed her latest recommendations to address the budget shortfalls for the current year and fiscal year 2011 budgets.  The governor's proposal provides fiscal stability while continuing to protect the state's critical priorities, including job-creation efforts, schools, and health care from additional devastating cuts.
"These budget recommendations build on the steps we have already taken to reduce spending, attack the state's structure deficit and reform government," said Granholm.  "In addition, these recommendations maintain our investment in job-creation, education, and the critical services citizens rely on during a time of economic transition."
For fiscal year 2010, the governor is recommending shifting funding for the state's 28 community colleges to the School Aid Fund where the surplus funds can cover the $208.4 million appropriation.  The state also will receive an additional $94 million in federal funding due to changes in the way the federal government funds prescription drug coverage for seniors eligible for both Medicare and Medicaid.  Together, these changes address the $302.7 million shortfall in the current year.
For fiscal year 2011, the governor is recommending a combination of additional spending cuts and one-time, non-tax revenue to address the existing shortfall resulting from increased spending pressures, legislative refusal to consider corrections reform and a physician-provider assessment, and lower-than-expected federal funding through the Federal Medical Assistance Percentage (FMAP).  Among the cuts recommended are a 3 percent administrative reduction for all state agencies, $50 million cuts in the Departments of Community Health, Human Services and Corrections, and restructuring of the state's long-term debt obligations, reducing spending by $77.3 million.  Combined with the cuts proposed in the executive budget recommendation in February, the governor has recommended more than $602 million in general fund spending reductions for the fiscal year.
"We must continue to make the tough decisions necessary to reduce spending," said Granholm.  "The cuts I've proposed help our state live within its means while continuing to provide critical services."
The governor's budget recommendations also include three one-time, non-tax revenue proposals to provide needed revenue in the wake of lower-than-expected federal funding.  The proposals - a tax amnesty period for Michigan taxpayers, reform of the state's abandoned property laws, and changes to the liquor regulation and distribution system - will provide $304.8 million for the fiscal year 2011 budget.
To further facilitate cost-cutting and service-sharing among the state's public school districts, the governor also is recommending $50 million of School Aid Fund revenue be used to incent additional service-sharing through a grant competition to be administered by the state Department of Education (MDE).  School districts would be able to use the one-time grant funds to reduce long-term costs by combining or consolidating services.  In fiscal year 2010, school districts were offered additional budget flexibility if they entered into a memorandum of understanding with MDE to develop a services consolidation plan.  Two hundred and twenty-four districts across the state are participating in the program.
"School districts facing tight budgets often can't afford the up-front costs of consolidation or service-sharing even though they recognize the long-term benefits," said Granholm.  "A competitive grant program would eliminate this barrier, reduce costs and allow districts to put more funding in the classroom where it belongs."
Finally, the governor's proposal recommends a $100 million deposit into the state's Budget Stabilization Fund to provide greater stability for future budgets.
# # #