The state will face relatively few pre-conditions in using federal
stimulus funds, which opens a wide array of options in terms of
balancing the budget, holding some sort of reserve or paying off debt,
members of the Senate Appropriations Committee were told Wednesday.

But the committee's chair, Sen. Ron Jelinek
(R-Three Oaks), charged the committee with creating a "legacy" of not
leaving debt to future legislators.   In other words, he said, the
committee should not move to expand the budget, leaving future
legislators with a hole it could not fill.   The stimulus money should
be focused on promoting jobs and the economy, he said.

In his review of Governor Jennifer Granholm
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proposed 2009-10 budget and the potential impact of the federal stimulus
package, Senate Fiscal Agency Executive Director Gary Olson essentially
repeated comments he had made three weeks before (See Gongwer Michigan
Report, January 28, 2009
d=480170101&newsedition_id=4801701&locid=1> ) that the state would have
wide ranging discretion on how to use the stimulus money.

To several questions, Mr. Olson said that one of the few requirements
will be to ensure that K-12 school aid and higher education funding is
not cut.   So in her supplemental budget for 2008-09 that will go soon
to the Legislature, Mr. Olson said the governor will include funding
that the schools will be able to use to offset the cuts she proposed in
the 2009-10 budget.

(Some of the money, such as the funding for transportation and road
construction, will be allocated according to existing federal/state
funding formulas).

And the proposed budget does include the most significant cuts that Ms.
Granholm had ever suggested, Mr. Olson said.   In outlining different
sections of the budget, especially in the departments of Corrections,
Community Health and Human Services, he repeated that the cuts proposed
and changes indicated were "very difficult."

The budget also has a number of conflicting issues that will make it
more complicated, Mr. Olson said.

For example, DHS will have to add a total of $113.4 million, $30.7
million in general funds, to meet the legal settlement with the
organization Children's Rights.   That provision also calls for hiring
another 850 workers, which comes on top of Ms. Granholm calling for a
net cut of 1,500 state workers in the budget.

The state may also face additional revenue pressures because of a major
increase the federal government made on cigarette and tobacco taxes.
Just in terms of cigarette sales, that could mean a loss of more than
$40 million in tobacco taxes, Mr. Olson said.

And the Legislature is in the middle of a 60-day period where it could
turn back the scheduled 1 percent pay increase for state workers, Mr.
Olson said.   Ms. Granholm is looking for $27.5 million in worker
concessions in the budget and eliminating the 

Most of the stimulus money will come to the state during the current
2008-09 fiscal year, Mr. Olson said.   But some funds will be included
in the 2009-10 budget and some will even be included in the 2010-11
budget, he said.