Lansing Update: August 20, 2010
Posted August 20, 2010
In this week’s Lansing Update:
As the Legislature continues to grapple with a budget deficit of approximately $484 million for the 2010–11 fiscal year that begins October 1, elected officials are also responsible for balancing a deficit of approximately $302 million for the current fiscal year that ends September 30.
The Legislature throughout the summer avoided budget deliberations due to the campaign season, but elected officials also stated they did not want to make budget decisions until Congress voted on legislation that was to grant the state some $700 million in federal funding for the coming fiscal year. In early August Congress went into special session to approve [Link no longer available —Ed.] such legislation—and Michigan has since received some $698 million to be used specifically for education funding and the state’s Medicaid program.
Following the allocation of the federal funding, Michigan is now carrying a $786 million combined deficit for the current 2009–10 fiscal year and the forthcoming 2010–11 fiscal year.
In order to address the shortfall, Governor Granholm and State Budget Director Bob Emerson pitched a budget deficit reduction plan [Link no longer available —Ed.] to key legislators on August 18. To balance the current fiscal year’s $302 million deficit, the governor has proposed transferring $208 million from a surplus in the state School Aid Fund, and shifting $94 million in federal Medicare pharmaceutical “clawback” funding from next fiscal year to this fiscal year. Transferring dollars from the School Aid Fund has agitated public school advocacy groups, but the proposal may find traction as the Republican Senate Majority Leader has stated he is open to the discussion [Link no longer available —Ed.].
To balance the $484 million fiscal year 2010–11 deficit, the governor has proposed:
- Requiring all state agencies to cut three percent from their budgets, saving the state some $220 million,
- Amending the state’s escheats program so that abandoned personal property and inactive bank accounts would escheat to the state after three years rather than the current five years, saving the state some $186 million,
- Refinancing state bonds at lower interest rates, saving some $77.3 million,
- Changing the state’s liquor control system so that the state could bid out for one or two distributors, then allowing the highest bidder or two to have exclusive operation of liquor distribution in Michigan, saving some $75 million,
- Enacting a tax amnesty program so that those who have failed to pay back taxes to the state could do so without penalty, saving some $61.8 million.
All told, the governor’s proposals would raise more than $600 million for the 2010–11 budget, which would allow the state to place more than $100 million into its rainy day fund.