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Michigan will confront multibillion-dollar declines in tax revenue and record-high enrollment in government health insurance programs — a double whammy from the coronavirus pandemic that may lead to major cuts in services.
Legislative experts and top officials in Gov. Gretchen Whitmer’s administration agreed to revised budget estimates Friday after hearing economic forecasts. The steep downward revision from revenue estimates issued just four months ago — a combined drop of nearly $6.3 billion this fiscal year and next — was unprecedented.
Revenues in the school aid and general funds, the state’s two main accounts, are projected this fiscal year to fall nearly $3 billion, or 12%, from last year’s levels. The outlook is dire for the next budget, too, with revenues in the major funds coming in $2.2 billion, or 9%, below 2018-19 collections.
“These numbers are staggering,” said Mary Ann Cleary, director of the nonpartisan House Fiscal Agency.
Officials project that the economic downturn will result in an additional 500,000 people needing Medicaid, which covers health care for low-income residents. That would cost the state $569 million more in the next fiscal year, draining what already will be a smaller $9.3 billion general fund.
“This is potentially as bad if not worse than the Great Recession. We were only able to make it through that because the federal government provided us resources so we could backfill our losses,” said budget director Chris Kolb. “The bottom line is, if we’re going to save lives and provide critical services to Michiganders throughout this crisis, we’re going to need flexibility and support from the federal government.”
The state is getting $3 billion as part of the $3 trillion coronavirus relief bill, but it cannot be used to offset lost revenue. Congress and President Donald Trump are being pushed to send $500 billion more to states, though it is uncertain what will happen.
By law, the state must cut, or “prorate,” payments to K-12 schools, universities and community colleges if their allocated funding exceeds the amount available to be spent. That would be the equivalent of a $650 per-student cut for districts this fiscal year, 8% of the $8,111 base amount most schools receive, according to the state budget office. The Legislature, controlled by Republicans, would have 30 days to prevent or alter the per-pupil reduction by redirecting funds or tapping the state’s “rainy day” fund. A tax hike would be unlikely.
“None of us wants to cut our kids’ education as a result of COVID-19 — not one us,” said Whitmer, who urged Congress to act in the next few weeks.
The chairmen of the House and Senate budget committees called on the Democratic governor to issue a new budget proposal for the coming fiscal year, which starts in October, and to work with them to begin spending reductions “immediately” to balance the current budget.
“Every day she waits leaves us with fewer options and less money,” said Republican Sen. Jim Stamas, of Midland. He said the $3 billion revenue hole in the current fiscal year accounts for more than 30% of what is left in the school and general funds.
Kolb said even if the state emptied its $1.2 billion in savings, there would still be a roughly $2 billion shortfall.
“I can eliminate 12 departments, including if we did away with the budget for the Legislature and the judiciary branch, and we would not have $2 billion. That’s in a full year, let alone what we have left in this fiscal year,” he said.
GOP lawmakers said the picture would have been less grim if Whitmer had reopened parts of the state that have not been hit as hard by the virus, boosting tax revenues. The governor, who has let some business sectors restart in a state with the country’s fourth-highest reported death toll from COVID-19, defended the “slow reengagement” of the economy as a way to avoid a second surge in cases that would force her to reimpose restrictions. (AP)
