Michigan must deal with its budget deficit - now

4/24/2009

LANSING - Usually, if you are on a railroad track and a large freight train is coming right at you, moving quickly would seem to be a good idea. Unless, that is, you are in Michigan government.

Michigan indeed has a huge deadly force moving swiftly toward it: the current state budget deficit, which is getting bigger by more than $3 million a day, and has to be balanced, soon.

Only a few months ago, the lawmakers had made a few minor cuts to what they thought was a fairly austere budget.

They thought they were in pretty good shape for the rest of the fiscal year, which in Michigan ends on Sept. 30.

But then the recession deepened. Every month, revenues have been coming in more than $100 million below projections.

The urgency of the problem is this: Michigan's Constitution requires the state to balance its budget every year. The fiscal year is more than half gone, and state government is still spending like nothing has changed.

The longer the state waits to make cuts (tax increases seem to be politically impossible), the more unbalanced those cuts will have to be.

Traditionally, late-in-the-year budget cuts mean draconian layoffs and heavy cuts to education, the one area most lawmakers in both parties agree they ought not to cut.

So how bad is the problem? State officials in both parties say they need to make total "adjustments" now of about $780 million.

My guess is that the final deficit will be worse than that, but that's bad enough. You might expect that the governor and the legislature would be feverishly working to make these cuts as quickly, as intelligently, and with as little pain as possible.

You might even expect they would want to draw the citizens into the process, to explain to them what they are doing. But, alas, you'd be wrong.

Though her office won't confirm this, Gov. Jennifer Granholm met with legislative leaders last week and proposed an executive order that would cut some $80 million in spending.

That's only about a tenth of the total needed. The lawmakers reportedly told her they were working on a list of spending cuts of their own, which they hoped to discuss this week.

But so far, nothing has happened. What's really going on, of course, is that Democrats want to cover as much of the budget gap as possible with President Obama's federal stimulus money.

Even they know, however, that won't be enough. "We could use every dime of the recovery money, and we would still have to cut more," the governor said last week.

Her Republican foes know that some of the stimulus money will have to be used. But they want the state to first commit to cut at least $780 million from the current budget before touching the stimulus.

Whether this will be resolved in time to avoid a partial government shutdown at the end of September is anyone's guess. It's likely that the deficit will grow even more if General Motors declares bankruptcy in June.

What is certain, however, is that the stimulus money will eventually run out. And the problem for the next fiscal year will be much, much worse, with lawmakers facing a deficit that could easily be more than $2 billion.

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What was she thinking?

The small community of Highland Park, a little enclave surrounded entirely by Detroit, is perhaps the state's most poverty-stricken and ravaged city.

Chronically unable to pay its bills, Highland Park has for years been under the supervision of a state-appointed Emergency Financial Manager.

Four years ago, Governor Granholm raised eyebrows when she dismissed the nonpolitical accountant who had been running the city's affairs and appointed Art Blackwell II, a man with a long record of questionable financial dealings.

He had often been in the news for improper management of government funds, including hiding consulting fees, improperly using campaign money to fix up his home, racking up $27,000 in unexplained "travel expenses" as head of the port authority, and never showing up for a government job that paid him $42,000 a year.

Last week Mr. Blackwell was fired for, as state Treasurer Robert Kleine said, paying himself an unauthorized $264,000.

This in a town that can't afford a police force.

"We need to hold financial managers to very high standards," state Budget Director Robert Emerson said.

Nice theory.

So why did they appoint this one in the first place?

Jack Lessenberry, a member of the journalism faculty at Wayne State University in Detroit and The Blade's ombudsman, writes on issues and people in Michigan.

Contact him at: omblade@aol.com