 |
 |
EMERGENCY GROUPS MEETS AS OFFICIALS SAY CURRENT DEFICIT AT LEAST $800M With House, Senate and administration officials effectively agreeing that the current year's budget deficit will be at least $800 million, the emergency financial advisory group that Governor Jennifer Granholm appointed held its first meeting on Friday. Meanwhile administration officials are working on proposed budget cuts for the current 2006-07 fiscal year, though whether those will be in the form of an executive order budget cut or as supplemental appropriation bills was uncertain. And while the question of whether Ms. Granholm will ask the Legislature to approve some form of a tax increase or tax shift (not including any proposal to replace the Single Business Tax which expires at the end of the year) looms as the largest pressing issue, lawmakers should expect that she will also ask the Legislature to enact some of the revenue changes she had proposed in the past, such as "loophole closings" for business taxes. But it was also still uncertain specifically which of the previous tax changes she had requested the administration would ask for. Ms. Granholm named the emergency financial 12-member group, chaired by former Governor William Milliken and former Governor James Blanchard, on Wednesday to provide some proposals by the end of January on dealing with the state's situation. The move was attacked by critics as a stalking horse for a proposed tax increase and the Detroit News editorially called Ms. Granholm "spineless" for naming the board. That editorial did not come up in the discussion at the first meeting of the group, except at the very end as individuals were leaving, according to sources who would not be identified. Mr. Milliken participated in the meeting by speakerphone from his home in Traverse City and the other 11 members were present at the meeting in downtown Lansing. Most of the meeting was spent going over the historical perspective of the state's finances, and a source said the members did more listening than talking. At the next meeting, members expected to begin drafting proposals, sources said. The news the group would have heard about the state's finances would have been grim. According to a variety of sources, the state budget office, the Senate Fiscal Agency and the House Fiscal Agency all expect the budget deficit for the current fiscal year to be at least $800 million, and that is just from reduced revenues. The state is also facing new spending pressures from a number of departments, including Corrections, Human Services and Community Health, sources said. In addition, some of the bonds for the 21st Century Jobs Fund will come due this year adding to spending pressures, officials said. SFA Director Gary Olson gave an overview of the state's current fiscal situation on Wednesday to Senate Democratic Appropriations Committee members. As one member said, coming after the glow of the swearing in ceremony, the overview was a hard slap to Senate members. Overall, Mr. Olson told the group that for the current year the state faces a general fund revenue reduction of an estimated $550 million. The School Aid Fund would likely see a drop of $300 million. That $300 million would necessitate a $218 per pupil pro rata cut to keep that budget in balance (See Gongwer Michigan Report, January 11, 2007). However, administration sources said they view the $218 as a worst-case scenario. While it may be impossible to avoid some sort of pro-rata cut in the K-12 School Aid budget, a top priority is to make any pro-rata cut as small as possible, sources said. Earlier, House Fiscal Agency Director Mitch Bean had indicated the current deficit would be at the $800 million level. On Friday, administration sources said they would probably concur with those numbers with a current year deficit between $800 million and $900 million. On Thursday, Mr. Olson, Mr. Bean and Treasurer Robert Kleine will meet for the state's revenue estimating conference. The fiscal situation does not improve for the next fiscal year as the state will face negotiated wage increases for state workers, officials said.