Tuesday, May 05, 2009

$349M in Cuts? Just The Beginning

Let's go back to February of this year...

Bishop said Michigan's first objective should be to balance its budget - without the stimulus money.

Granted, Bishop didn't know it would be this bad, but we had a pretty good idea even back then that we were looking at a massive shortfall in this year's budget. Turns out the Republicans don't really want to make all those cuts, they just like mouthing the words to please the base. When Bob Emerson approached the Legislature about who, what and where we were going to cut to make up the $1.3B for this fiscal year, $304 million was all they could come up with - and the rest will be plugged with the stimulus.

"Some would argue that we ought not to use the stimulus. But after meeting with members of the Legislature, I think this $304 million was as much as anyone could swallow" in general fund cuts, he said.

"Clearly there are cuts here that I took no pride in making, and you take no pride in voting for," Emerson said. "The cuts here are devastating. ... While these are harmful cuts, even tougher decisions are being made every day by your constituents."

$304 million from the general fund. "Harmful". "Devastating". And it looks like this: 100 state cops gone, no cuts to prisons or education yet... but health care and revenue sharing, as well as government operations, will take the brunt of this blow.

The executive order also includes furlough days for state employees, but leaves it up to the departments on how to reach the savings needed. Most union contracts allow the state to furlough employees for up to six days without reopening contracts. The state hopes to have each department take its furlough days together so it can shut down for those days and save money.

The doctors, hospitals, nursing homes and other health care services that treat Medicaid patients will see a 4 percent cut, and representatives of those industries have warned that will force cuts in services and further destabilize the state's health care industry.

The state would save $16 million from the cuts, but it also would lose tens of millions in federal matching dollars that go toward reimbursing those serving Medicaid patients.

The plan also includes $40 million in cuts to local governments, much of which is used to pay for police and fire protection. And it cuts money for community mental health boards that provide mental health and substance abuse treatment.

Mayors, city managers and other local officials warned Tuesday that the revenue-sharing cuts will mean deep cuts in money used for law enforcement, water treatment, road repairs and other essential services.

Already public service providers are howling, as you expected, as it should be. We have already cut these people to the bone. $6B worth was the last total I heard.

Problem is, we ain't seen nothing yet. If the following numbers are correct, and perhaps a low estimate at this point...

Emerson warned that more bad news could plunge the state into an even bigger hole. The state has seen a 21 percent drop in its general fund revenues this year over last, which could cost the state around $1.8 billion by the end of the fiscal year. But revenues could fall even farther if General Motors Corp. heads into bankruptcy as Chrysler LLC did last week.

... and we have now used all the stimulus money that we could...

The state will tap about $1 billion in federal stimulus money to fill the revenue gap. But that will leave it in an even more precarious situation heading into the budget year that starts Oct. 1 since it won't have any more stimulus money to draw on.

Just exactly what, then, are we going to do about next year? Because from where I'm sitting, it's looking like a roughly $2B hole, and no stimulus to alleviate it, if what KB Hoffman is saying is correct.

Republicans might get to make the "all cuts" budget that they have been dreaming about after all.

Emerson did say that some of this will play forward; the cuts made now also will be in effect for 2010, I believe, which will be to say that we've already put a dent in that deficit to some extent. We also have prison reform to look at, and if they can come to agreement on exactly what that will be, it should help. But just how they can even do a revenue estimating conference in May is beyond me, because we have no idea just how the Chrysler/GM/auto suppliers layoffs and shutdowns are going to affect the bottom line, and it's probably going to be worse than they expected.

They warned us it would be bad, didn't they? Well, ten days from now we will get some more "official" numbers on just how bad it is currently, and that might be about the time that Speaker Dillon might want to spring his grand new idea about funding this government.

If not, "devastating" is going to take on a whole new meaning, and $349 million will seem like pocket change.