Forecast for 2010? More pain for Michigan

By Tim Martin

Associated Press Writer

LANSING (AP) -- Michigan has had the nation's highest jobless rate for nearly four straight years, sparking an economic chain reaction that's led to unprecedented budget problems for schools and state government programs.

Expect more of the same in 2010, unless Democratic Gov. Jennifer Granholm and the state Legislature break their pattern and do something dramatic to shake up the status quo.

Michigan's state government either needs more money or a thorough rethinking of how it spends the tax revenue it now receives.

Granholm, Democrats who run the House and Republicans who lead the Senate have settled on patchwork, temporary budget fixes in recent years -- mainly because they haven't been able to agree on longer-term solutions.

That leaves the budget mess unresolved entering a key election year when Michigan voters will pick a new governor and every one of the Legislature's 148 seats are up for grabs.

"We are going to have a very rough year coming into the next budget year," said Sen. Ron Jelinek, a Republican from Three Oaks and chairman of the Senate Appropriations Committee. "It's going to require a lot of cuts in spending, maybe revamps of some revenues. I don't know."

Michigan's budget problems mirror the fall of the state's economic fortunes, keyed by the decline in the domestic auto industry.

Michigan ranked 18th among the states in per capita personal income in 2000, wealth that led to relatively healthy state and local government spending. But Michigan ranked just 37th in per capita personal income in 2008, leaving programs with price tags that government can no longer afford.

"There needs to be a decision made about what to do with that problem," said Gary Olson, director of the nonpartisan Senate Fiscal Agency. "We're not a wealthy state. ... The numbers don't add up. The sooner people realize that, the better."

Revenue for the state's schools and general operations budgets has fallen from nearly $21 billion in the 2007-08 fiscal year to projections of just above $17 billion this budget year.

The shock waves are felt in schools, police and fire departments and other agencies across the state.

Michigan's public schools are receiving at least $165 less per student this academic year than in 2008-09.

Some districts plan to layoff teachers, counselors and other staffers in late January when the new semester begins.

But those cuts will be minor compared to what happens next summer if lawmakers don't find a way to raise more money for schools.

Districts across the state plan to close buildings, lay off staff and charge students more for extracurricular activities such as sports and marching band participation.

Lawmakers came together this month to pass sweeping school reforms -- allowing the expansion of charter schools and the academic takeover of poor-performing schools -- that could help the state win up to $400 million through the Obama administration's Race to the Top competition.

But there's no guarantee the state will get the cash, and even if it does, the one-time money would be spread too unevenly among districts to prevent widespread school spending cuts.

"What our Legislature is doing right now is selling out our kids," said Dee Lindeman, a Center Line mom who became so irritated with the lack of movement on state-level schools funding that she camped out on the state Capitol lawn for several days in early December. "I think it's just a lot of political posturing and gameplaying and it needs to stop. These are decisions that are going to affect the future of this state."

Michigan has lost more than 4,000 police and firefighters combined this decade.

More layoffs are likely unless the state finds a way to boost the tax revenue sharing formula that helps local governments pay for public safety services.

Michigan faced a budget deficit of nearly $3 billion entering the fiscal year that started in October, more than half of which was erased by money from the federal stimulus package.

But Recovery Act money is scheduled to run out in 2011, likely leaving Michigan with a nearly $2 billion hole in its budget year starting Oct. 1, 2010.

It's possible the stimulus package will be extended and states will again be bailed out with federal tax dollars.

But if the federal aid doesn't come through, Michigan will be left to its own devices.

Granholm already has ordered state departments to start planning deep spending cuts for the next fiscal year.

She says she would support a "grand bargain" to retool Michigan's tax structure -- possibly including a 2010 ballot measure for voters -- but only if both Democrats and Republicans from the Legislature get on board first.

The most commonly discussed options include lowering the state's 6 percent sales tax and expanding it to services or switching to a graduated income tax, along with some business tax changes.

"I want to make sure that if we put something out, it has some likelihood of success," Granholm said.


Associated Press Writer Kathy Hoffman contributed to this report.

Published: Thu, Jan 7, 2010


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