Accepting that the hard budgetary medicine was the best course to take, the two legislative Appropriations Committees approved an executive order that will cut the 2008-09 budget by about $350 million. State officials said they hoped these cuts would be the last needed for the current fiscal year, but they could not offer a guarantee that cutting for 2008-09 is done.
By itself, the executive order cannot eliminate the estimated current year revenue shortfall of as much as $1.5 billion. Doing that will require the use of federal stimulus funds, Budget Director Bob Emerson told the House and Senate Appropriations Committees.
The Senate Appropriations Committee approved EO 2009-22 on a 15-2 vote. The House Appropriations Committee voted 27-4 to approve the EO.
With the executive order adopted, the state will have to shut down most of its functions for a period of six days during the remainder of the fiscal year. That shutdown will be required because virtually all workers will take six days of furloughs and the state wants to maximize the savings the furloughs offer by closing down state offices. When those days will be held has not yet been determined.
The order, in addition, calls for the layoff of some 300 state workers, including 100 State Police troopers. Most those troopers being laid off will be those who recently completed trooper training. The trooper layoffs raised some of the greatest concern among lawmakers, and as committee members came into the House Appropriations Room they were greeted by dozens of recently graduated troopers who stood in a silent protest.
"There is not much good news in the state of Michigan these days. This executive order reflects that," Mr. Emerson said as he presented EO 2009-22. He was not proud to offer the cuts, he said, but the cuts were made necessary by the unprecedented severity of the economic crisis.
The severity of that crisis was highlighted by Treasurer Bob Kleine, who said that revenues fell by 11 percent, when adjusted for inflation, in 1981, during the last cataclysmic economic recession the state endured. In 2009, revenues, adjusted for inflation, have fallen by 23.5 percent, he said.
The EO calls for total reductions of $349.3 million, but some of those reductions are double-counted through transfers.
The House Fiscal Agency noted the net general fund savings total $294.5 million, but that further legislative action will be required to transfer restricted funding to the state's main checkbook.
The Senate Fiscal Agency noted the general fund savings, after a negative supplemental is taken out, would total just over $200 million.
The remaining $127.4 million will come in cuts from federal and restricted funds.
The furlough reductions called for in the order, which will affect most state workers whose employment is not considered vital to state safety and health, though officials were uncertain how many actual workers that would be, should equate to general fund savings of about $21.7 million, according to the Senate Fiscal Agency.
The EO does not directly cut the budgets for the Legislature and the Judiciary (as co-equal branches of government, the Executive could not specifically cut those budgets), though both branches will make budgetary cuts. Also exempted from the cuts are higher education and community colleges, which Mr. Emerson said would threaten the availability of federal stimulus funds.
The Department of Human Services will take the largest cut, $120.9 million total with $97.5 million in general funds. And to criticisms from some Republican lawmakers that the EO does not enact changes to the structure of state government, Mr. Emerson said that the administration is cutting and eliminating as many as 30 state programs that provide aid to low-income residents.
"Our intent is not to restore these," Mr. Emerson said of the programs. That demonstrates the state's determination to make structural changes to the state's budget, he said.
But some lawmakers said while they felt they had to endorse the cuts, they intended to fight continuing those cuts as part of the 2009-10 budget.
Presuming no more budget cuts are required, with stimulus funds the state should end the 2008-09 fiscal year with about $160 million surplus. Mr. Emerson said while some may argue ending the year with a surplus means the state shouldn't be cutting as much as it is in the EO, with the ongoing crisis in the auto industry he isn't sure the surplus will in fact be enough at the end of the fiscal year.
But whether the state would need to cut the budget further was a top concern of committee members. The revenue estimating conference is scheduled for Friday, May 15, and members worried that at that time the state may find itself compelled to make more cuts.
Mr. Emerson and Mr. Kleine both said they did not think the state would have to make further cuts, but they stressed they could make no guarantee of that. Officials were estimating revenues very conservatively, though Mr. Kleine acknowledged that the state's estimates do not presume that Chrysler and General Motors liquidate.
What forced the state to lower its estimates on revenues for 2008-09 was a disastrous April revenue picture, Mr. Kleine said, with sharp drops in income tax and Michigan Business Tax collections. April is a unique month, because 65 percent of all state revenues for the year have been collected by that time, so it should not face a monthly revenue decline as bad for the rest of the year, he said.
THE ORDER'S SPECIFICS: Cutting Michigan's state troopers is possibly the most visible of the cuts ordered, though Mr. Emerson said the Michigan State Police is not taking proportionately as large a cut as other departments.
In fact, Mr. Emerson told reporters State Police initially called for more layoffs, and state officials asked them to recalculate total cuts.
The department will take a total cut of $15.2 million, all of it in general funds.
The cut for troopers alone will amount nearly $4.8 million. State Police Director Peter Munoz issued a statement saying that all the trooper layoffs will occur no later than July 1 and under contractual rules those troopers with the lowest seniority will be affected. No post closures are anticipated because of the cuts, he said, though the layoffs may affect shifts at some posts.
The order also calls for savings of $3.8 million in laboratory operations though that cut should be supplemented with a transfer from the State Services Fee Fund.
Another $2.2 million will come in fleet leasing. While most of that will accrue from savings in fuel costs, Mr. Munoz said the state will institute mileage restrictions on vehicles that could affect some patrol activities.
The state did apply last month with the federal Department of Justice for a COPS grant to help finance as many as 200 state troopers. However, a spokesperson for the department said more departments nationwide have applied for the grants than there is funding, and the state might not hear about its application until September 30, so even if the state gets the grants it would likely not affect the current fiscal year.
Besides the cuts to the State Police, the other cuts that received the greatest attention were to revenue sharing and the Department of Community Health.
The state is cutting $41.5 million in revenue sharing. Under the cut, each locality will receive essentially the same revenue sharing payments they received in the 2007-08 fiscal year.
Mr. Emerson said the cut in revenue sharing could actually have a greater overall effect on public safety than the cuts to the State Police because of the effect it would have local police and fire services.
After Human Services, DCH will see the largest overall cut at $57.7 million, $53.1 million in general funds. Including the imposition of furlough days, the department will see 55 specific cuts.
The largest cut will be $10 million to community mental health non-Medicaid services.
Following that, the next largest series of cuts will affect 4 percent reductions in payments to Medicaid health care provides, which will total more than $5 million, as well as $7.6 million in an adjustment to the Medicaid Health Plan Services.
The cuts to providers have been blasted by the medical and hospital community, and Mr. Emerson said that the cuts do mean the state will lose out on some federal funds.
The Medicaid cuts also come at an exceedingly difficult time as the economy is forcing as many as 11,000 more families a month onto Medicaid, he said. But he said there is no way the state can continue to pay for all Medicaid services.
Under the federal stimulus, the state could not affect basic eligibility for Medicaid, but it could make cuts to optional services. Cuts to the optional services will total $3.3 million and include cuts the chiropractic services, podiatric services, non-emergency services, optometric services, hearing aids and dental services.
In addition, the EO cuts $3.8 million from the state's Healthy Michigan Fund, as well as cutting $2.1 million in the state's four single point of entry programs. Also cut is $1.1 million in health information technology initiatives funding, $1.5 million in local public health operations and $1.5 million in community substance abuse prevention programs.
In the Department of Human Services the largest total cut is $23.4 million to reflect the general fund reductions as part of overall federal program reductions.
Also cut is $16.7 million to reflect savings from the stimulus child support payments.
Another $14 million is cut from the jobs, education and training plus program, $10.4 million in employment and training programs, $9.9 million in Supplemental Security Income payments, $5.7 million in child day care quality assurance savings, $4 million in the community protection and permanency program, almost $4 million in the subsidized guardianship program,. $3 million in the Bureau of Child and Adult Licensing, $2.3 million in reduced local office allocations, $2.2 million in before and after school grants, $2 million in the strong families/safe children, $1.8 million in family independence program incentives, $1.7 million in food stamp reinvestments, $1.65 million in a 1.25 percent child day care rates, $1.3 million in teenage parent counseling, $1.1 million in family preservation administration, slightly more than $1 million in indigent burials and cuts of $1 million in adoption support services.
In other cuts:
There were not many positive adjectives thrown around Tuesday to describe the budget cuts under the governor's executive order.
Faced with at least a $1.3 billion deficit in the current fiscal year, lawmakers on the Appropriations Committees said voting on the EO was one of the toughest they've taken - some said even worse than the budget stalemate of 2007 that led to a tax increase - but those who supported the measure countered it was a "necessary" step to take in order to balance the budget.
But anger over the move ranged from local governments upset over "11th hour" cuts to revenue sharing to lawmakers opposing the EO because it didn't make enough cuts and relied heavily on federal stimulus dollars.
The Michigan Municipal League started out the day by holding a press conference where local officials said the $41 million in revenue sharing cuts would further devastate communities trying to compete for residents and jobs.
There was no estimate as to how many layoffs would occur at the local level because of the revenue sharing reduction, but many officials said layoffs already are part of their budget balancing initiatives and the state cut would likely add to that.
Lansing Mayor Virg Bernero said the EO doesn't solve the budget problem, but simply kicks the issue down to the locals to clean up the mess. "We have been in the trenches," he said.
Mr. Bernero didn't have a prediction for how the city would handle its revenue sharing cut, but a Huntington Woods official said they would likely have to scale back their workforce another 5 percent to deal with the revenue sharing reduction, which would come on top of the 10 percent staff layoffs the city already expected.
Eric DeLong, interim city manager for Grand Rapids, said they expect a $925,000 cut under the executive order. He said the city already has cut 300 positions, including 65 police and about 20 firefighters, but with the EO there will likely be another 20 to 30 reductions in the city's labor force.
Kentwood Mayor Richard Root told reporters, "The next cut in my community should be the answering machine because nobody is going to be there to listen to it."
And Dan Gilmartin, executive director of the MML, said the executive order amounts to "more of the same" by managing the decline of the state and not implementing state reforms such as creating a 21st Century tax structure.
There seemed to be no popular cuts in the executive order, but while many lawmakers voiced concerns that they felt "backed into a corner" and forced to make the reductions, many said they knew the measure had to be enacted soon or the problem would only get worse.
Senate Appropriations Committee Chair Sen. Ron Jelinek (R-Three Oaks) said every day, Michigan residents are being forced to make "unpleasant decisions" and the Legislature is obligated to "set an example of trying to live within our means."
"All across the state, families are sitting down at the kitchen table to make tough decisions about the cuts they have to make to their household budget, and we're faced with the same tough decisions to make due with less in the state budget," said House Speaker Andy Dillon (D-Redford Township) said in a statement. "At the heart of Michigan's budget crisis is the economic downturn that is being felt worldwide. The answer to this crisis is to continue working hard to create jobs and revitalize Michigan's economy."
Convinced that the revenue numbers are that bad, House Appropriations Committee chair Rep. George Cushingberry Jr. (D-Detroit) said the cuts are necessary at this time, but he was keeping some options open by pushing forward a negative supplemental next week that could allow some EO cuts to be swapped out for other unknown reductions.
Most of the negative supplemental's focus would be on cuts made to the departments of Human Services and Community Health, although some were skeptical a cut swap would actually happen. State Budget Director Bob Emerson said the administration is willing to look at cuts both chambers agree on, but he warned that alternative reductions "won't be any easier" than what the administration proposed.
Mr. Cushingberry said health care cuts were wrong when that industry is growing jobs and the state is set to receive more than $2 billion over the next two years for health care programs through the federal stimulus program.
Rep. Dudley Spade (D-Franklin Twp.), who heads the DHS budget, said there were some cuts discussed in EO negotiations that did not ultimately make it into the budget cutting measure and he would push for those to be part of a negative supplemental. While he would not name specific cuts, he said the changes would take care of some of the reductions to DHS that were part of the EO.
And some lawmakers such as Sen. Deborah Cherry (D-Burton) said they would be fighting to bring back eliminated programs in the upcoming fiscal year budget.
"I don't know that I have any easy answers. I'm worried we are getting rid of a safety net. I understand we don't have lots of choices but we have to try to address those issues as best we can with what we have," Ms. Cherry said.
Medical officials repeated Tuesday what they had said Monday: the cuts to Medicaid will mean less access to health care for not only the poor but for all residents.
"The condition of Michigan's economy forces our elected officials to make difficult choices, but the health of our citizens should always come first," said Dennis Paradis, executive director of the Michigan Osteopathic Association. "Not only will all citizens find it more difficult to access health care, but the physician shortage in our state will be exacerbated."
"More physicians will be forced to limit the number of Medicaid patients they can treat in order to keep their doors open to all patients," said Richard Smith, president of the Michigan State Medical Society. "Medicaid cuts will make it harder for many Michigan children, the elderly, and the disabled to access health care, and that is unacceptable."
Spencer Johnson, president of the Michigan Health and Hospital Association, said hospitals would continue to accept all patients but that many would have to lay off staff to make up the state funding losses.
"Patients who need to relieve oral pain will be left with no options to receive care. When a Medicaid patient visits the emergency room for oral health care, the cause of the problem is not treated," said William Wright, president of the Michigan Dental Association.
Rep. Richard Hammel (D-Flushing), one of the first Democrats to speak up in support of the EO said every lawmaker has their favorite programs and that it's not easy to cut any of those, but the "pain" is being shared pretty equally across the board, an argument that was disputed by various interest groups.
"I hope we can get folks to understand this is not a simple thing (that) we have time to work on. The longer we wait the more the deficit piles up," he said.
Rep. Richard LeBlanc (D-Westland) said he hoped the serious reductions in both State Police and local law enforcement spur a movement toward identifying a dedicated revenue stream to pay for public safety.
"This is worst vote I've taken during our time here. I shook every hand over the weekend hoping to get swine flu and avoid this," he said.
And Rep. Shanelle Jackson (D-Detroit), who was one of four House members to oppose the EO and one of three lawmakers from Detroit to dissent, said she hoped the measure would be a catalyst for a serious discussion about raising more state revenue.
Ms. Jackson said she opposed the move because of the $7 million in revenue sharing cuts to the city of Detroit, as well as the cuts to health departments and police. She argued when the "bleeding begins" from the EO then there will be the political will to move on tax increases.
The Michigan Chamber of Commerce said the order appeared to be the precursor to a push for a tax increase, though Governor Jennifer Granholm has said she would not approve any tax increases for the current or coming budget years because of expected opposition.
"It is extremely irresponsible for the Governor and Legislature to rely so heavily on one-time federal monies to fund ongoing operations of state government instead of making the dramatic changes that are needed. Everyday across Michigan job providers are forced to tighten their belts to keep their businesses afloat and they expect elected officials to also make the tough choices. The Executive Order approved today does not go nearly far enough or fast enough to right size our government. It is disheartening that the action taken today is more appropriately viewed as a marketing plan for a tax increase and not a blueprint for economic recovery," the group said in a statement.
But Sharon Parks, president of the Michigan League for Human Services, said the executive order would not be the last of the cuts to safety net programs unless the state revises its tax structure to keep up with the need for services.
"There was a lot of talk today about the reluctance to make these tough cuts, but this is our future unless we address the underlying problems. We can't keep cutting programs and services and expect to be a vibrant and competitive state,'' Ms. Parks said.
In addition to physicians choosing not to see Medicaid patients and those recipients losing some of their benefits, Ms. Parks said the proposed furlough days would also make it difficult for recipients to have questions or concerns about their cases addressed in a timely manner.
Sen. Irma Clark-Coleman (D-Detroit), another opposing vote on the EO, said, "After learning the depth of the cuts and their impact on Detroit I could not, in good conscience, approve Governor Granholm's EO. I support the Governor and appreciate the hard task before her; however, the impact on Detroit, the nation's poorest city, will be grave."
Using $1 billion in federal stimulus dollars was a blessing or a curse depending on which lawmaker was speaking.
"It's obvious we have to make an adjustment. Thank God we have the stimulus package to backfill some of that," said Rep. Michael Lahti (D-Hancock).
Rep. Gary McDowell (D-Rudyard) said the stimulus dollars are available because the world is in an economic downturn and the money will "give us the time to see how we want to fund the state. Let's use this opportunity."
The Grand Rapids Area Chamber of Commerce said the plan relies too much on the federal stimulus. "Using one-time money to plug the budget hole is not the answer," said Chamber President Jeanne Englehart. "We are exacerbating the problem for next fiscal year."
"The Granholm/Cherry Administration continues to let the people of this state down," said Michigan Republican Party Chair Ron Weiser. "Instead of taking responsibility for failed policies and inaction, the Granholm/Cherry Administration opts to cut services that impact the health and safety of our families and is not making necessary structural cuts to the government bureaucracy. Instead the administration is depending on the federal government to bail us out."
House Minority Floor Leader Dave Hildenbrand (R-Lowell) said while it's tempting to pick apart the EO and find cuts that each lawmaker doesn't like, the larger problem is the "precedent that we are using one-time money to pay for ongoing expenses is dangerous."
Mr. Hildebrand said there is no long-term plan for getting the budget back on track when the stimulus money runs out.
"We're going to be right back at this year after year," he said.
While he supported the EO, Mr. Spade also argued that if the state knows there will be a budget problem down the road, then it should just deal with the whole problem now.
Rep. Bob Genetski II (R-Saugatuck) and Rep. Kevin Green (R-Wyoming), both of whom opposed the EO, said its reliance on federal stimulus was wrong. Mr. Green said the federal funding was meant to spur economic growth, not to plug state operations.
The two legislators also had other reasons for opposing the measure: Mr. Genetski said he couldn't support cuts to public safety when a political State Police headquarters in downtown Lansing is still moving forward and Mr. Green said the cuts to health care providers would shift more problems to those providers and worsen the uninsured crisis in the state.
Rep. Rick Jones (R-Grand Ledge), a long-time opponent of the new State Police headquarters, said he wanted construction on the facility to halt in the wake of 100 troopers losing their jobs.
In addition to state layoffs, Wayne Wood, president of the Michigan Farm Bureau, said the cuts would mean program, and potential farm job, losses in the state.
"The latest round of budget cuts erodes Right to Farm program funding, effectively eliminating the ability of (Department of Agriculture) staff to continue the on-farm inspections essential to the program. The Michigan Farm Bureau finds this unacceptable and will work to restore this funding in some shape or form," he said.
When asked about the cut by legislators, Mr. Emerson said the night before the department had come up with other ideas to make the needed budget cuts without affecting Right to Farm programs, so those proposals could be put into the mix.
There was some debate over whether it will take a separate act for the federal stimulus money to indeed plug the remaining hole in the current fiscal year budget. Sen. Cameron Brown (R-Fawn River Twp.) questioned whether the Legislature would in fact have to pass a supplemental for the stimulus.
But Mr. Emerson said most of the flexible money being used comes from enhanced Medicaid rates that is freeing up general fund dollars that already have been appropriated. He said the administration believes most of the stimulus can therefore be spent through departmental transfers as opposed to a supplemental. Transfers are approved by the Appropriations Committees.