Michigan schools spared from cuts

Federal stimulus rules prevent state from slashing funds for colleges, public schools.

Mark Hornbeck / Detroit News Lansing Bureau

LANSING -- Michigan can't slash aid to public schools and universities, as proposed in Gov. Jennifer Granholm's budget plan for next year, because federal stimulus package rules won't allow it, lawmakers were told Wednesday.

Gary Olson, director of the Senate Fiscal Agency, said the legislation adopted by Congress and signed this week by President Barack Obama stipulates that funding for schools and colleges must be kept whole to be eligible for federal recovery money.

That means the 3.2 percent reduction in state spending for the 15 public universities and the $59-per-pupil reduction in public school aid proposed by Granholm for the budget year that begins Oct. 1 can't happen, Olson said.

"We're looking at two cuts in the governor's budget we can't make" that amount to $194 million, Olson told members of the Senate Appropriations Committee. The Fiscal Agency is an arm of the Senate and studies and advises it on state finances.

Olson said the state can use money from its general fund -- its main checking account -- to protect education funding. Or the state can tap stimulus cash to keep funding at current levels, he said. But the second option could leave a hole in the budget in 2011 when the federal money goes away, Olson said.

Granholm's proposed cuts in college financial aid and specific public school programs such as adult education can be made without endangering the federal windfall, he said.

Liz Boyd, spokeswoman for Granholm, said "it is not our interpretation" that federal recovery rules won't allow the higher ed and per-pupil cuts. But her comments indicate only shades of semantic difference.

"The federal economic recovery money is separate from the budget," she said. "We can make the budget decisions we need to make to balance our budget going forward, but certainly we will use the stimulus dollars to make them whole. We're talking about making them whole, not restoring cuts."

Michael Boulus, executive director of the Presidents Council, State Universities of Michigan, said he concurs with Olson's interpretation.

"She has to turn the money back," said Boulus, who added that it's also open to debate whether the governor can make receiving the stimulus money contingent on a freeze in tuition, as she has proposed.

Marcia Wilkinson, community relations director for the Birmingham School District in Oakland County, said her district will be in the red even at current funding levels. "So anything that would keep us from losing any funds is helpful. And hopefully there will be something that will address how we can come up with another way to fund schools in Michigan," she said.

Robert Davis, a school board member for the Highland Park district, said word that per-pupil aid can't be reduced "is definitely a savior."

"There are only so many cuts you can make. We are cut to the bone," he said. "Even if our per pupil funding was cut by $1, it would have sent us into an even deeper deficit and placed us in a situation where we'd be faced with making even deeper cuts."

Elizabeth Lenhard, vice president of the Warren Woods Board of Education, said she was pleased that per-pupil funding won't be cut. While her district is not facing a deficit this year, she said this news adds a sense of stability.

"This is fantastic," she said. "We will not have to worry about laying off teachers, shortening the day, not having enough materials for children to learn. I know these times are very difficult, but right now the children need stability in their lives."

The ailing district has laid off 36 teachers this year and plans to close its Career Academy in June.

Annie Carter, a board member for Detroit Public Schools, which now is struggling with a nearly $140 million deficit, said the ban on per-pupil cuts is "very beneficial" and could leave more funds available for transportation and accelerated programs.

Olson also said about state budget issues:

• Michigan's share of federal stimulus money for state and local governments totals $6.68 billion over two years.

• The governor wants to use $812 million to balance the state's books, $312 million this year and $500 million next year.

• The largest tax hike in Granholm's plan is a freeze on the personal exemption from state income tax. The exemption allowance is linked to inflation. Freezing the exemption at $3,500 would cost taxpayers $57 million next year.

• The Detroit Public Schools will get $566.1 million in federal stimulus money for at-risk students, special education and other purposes.

• Most of the responsibilities of the Department of History, Arts and Libraries, which Granholm wants to eliminate, would be parceled out to other departments. There would be some savings on administration, but most of the $9.3 million in savings would come from eliminating state grants to art programs.

• $293 million in federal stimulus money can be used any way the state wants to use it -- no strings attached.

• The state will get $1.5 billion from the federal government for local infrastructure projects, but lawmakers and the governor could decide to funnel some of the $2 billion intended for Medicaid to other purposes, including infrastructure.

The state launched a Web site Wednesday that includes an inventory of local requests for the federal dollars. Internet users can visit it at www.michigan.gov/recovery.

Detroit News Staff Writers Delores Flynn, Christine Ferretti, Candice Williams and Mark Hicks contributed to this report.