With revenues down 21%, state officials announce $304 million in cuts

LANSING — State Budget Director Robert Emerson, in a sober presentation to a joint meeting of the state Senate and House Appropriations committees, detailed an executive order issued this morning by Gov. Jennifer Granholm designed to address a $1.3 billion shortfall in state revenues which includes furloughs for state workers and deep cuts for law enforcement, Medicaid reimbursements and revenue sharing with local governments.

The order provides $304 million in cuts to state agency budgets, and uses some unrestricted stimulus funds money to complete the balancing of the budget, required by the state constitution.

Emerson told the joint hearing that the state faced a decline of 21 percent in general fund revenues, saying the current recession was the worst the state has faced since the 1930s.

State Treasurer Robert Kleine put the budget crisis this way: “In 1980 the state revenues were down 11.5 percent, they are down 23.5 percent today. We didn’t think we would be twice as bad as the 1980s” recession.

Kleine said the state saw revenues drop 26 percent in income taxes, “about” $500 million on the Michigan Business Tax, eight percent in sales tax revenues.

“I can’t guarantee these numbers can’t go any lower,” he said.

Emerson told the committee the struggling auto industry had a significant impact on this budget crisis.

“We are down two out of three jobs in the auto industry,” Emerson said. “We don’t have estimates on what happens if General Motors goes into full-blown bankruptcy. We don’t know what that would look like.”

“There are cuts here I take no pride in presenting,” said Emerson, a former state lawmaker. “I’m not here to tell you there is any good news in this executive order.”

Among the cuts proposed are cuts to Michigan State Police, likely resulting in the lay off of 83 brand new troopers; $41 million cut from local revenue sharing, which will impact the ability of local governments to provide law enforcement; and a reduction in Medicaid reimbursements, which will impact hospitals and health care providers.

In addition to those cuts, the order also provides for six days of furlough for state employees consider “non-essential,” something that other states have implemented to cut the budget without eliminating jobs. Organized labor negotiated the furloughs into contracts for state workers over the last couple of years, and Emerson said the state was looking at doing two furloughs per pay period. He said doing more than that in a row would cost the state in unemployment benefits, plus, he said, the governor wanted to impact no more than 10 percent of state employees pay in any given pay period.

The state has eliminated nearly $3 billion in revenue sharing with local governments since 2001. With those entities facing similar, and in some cases more drastic, budget issues the planned cut is not likely to be well received from groups like the Michigan Municipal League, which has already issued an action alert to members to call legislators and oppose the cuts.

The cuts do not go into effect until both chambers of the state legislature approve the executive order. The Senate and House Appropriations committees both approved the order and sent it to the respective floors for quick action early this afternoon.

FOR FULL COVERAGE on the specifics of today’s budget cuts, see the following stories:

» With revenues down 21%, state officials announce $304 million in cuts

» Actual budget cut is $304 million, not $349 million

» Senate Appropriations Committee moves Executive Order 2009-22 out of committee for floor vote

» DEQ to weather today’s cuts without reducing services

» Arts groups brace for cuts

» Michigan State Police union looking at ways to soften blow of governor’s budget cuts